The risks and benefits of non-traditional appraisal methods

The risks and benefits of non-traditional appraisal methods
Last year’s record-high origination volumes impacted every aspect of the mortgage cycle, and appraisals were no exception. In light of that, HousingWire recently sat down with ValueLink SVP of Operations Aqil Ahmed to discuss today’s appraisal landscape.

HW: What is the No. 1 challenge housing professionals are facing today regarding appraisals?

Aqil Ahmed: The year 2020 was an unprecedented one, with the global pandemic and economic uncertainty impacting each of us in one way or another. Fortunately for the housing industry, the record-low rates fueled a surge in origination volumes and a record-breaking year for the industry overall.

The surge also highlighted the biggest challenge that the appraisal industry is facing is of capacity constraints due to ever declining number of professional appraisers. Over the years the real estate appraisal workforce has experienced a shortage and has fallen behind to attract new entrants to replace those retiring due to high barriers of entry such as training, cost, and licensure regulations.

This scarcity catapulted appraisal costs and cycle-times running into three to four weeks in many cases and highlighted the growing need for appraisal modernization, including technological and data-driven solutions and other appraisal alternatives.

HW: How and why has appraisal management technology evolved over the past year?

AA: The past year saw a rapid evolution in appraisal management technology. With the onset of the pandemic, the GSEs introduced temporary flexibilities to the appraisal process which enabled the path for major advancements in 3D scanning, guided inspection applications and data-driven solutions.

This expanded the use of non-traditional valuation products that leverage existing data e.g., the use of hybrid valuation products with a modified scope of work, allows appraisers to focus on the analysis rather than the data collection. Use of an automated valuation model (AVM) paired with a property inspection has alleviated some of the capacity constraints in the workforce while saving time and costs for consumers.

The renewed focus on updating UAD (Uniform Appraisal Dataset) forms, making them more data-driven rather than subjective has been at the forefront of technology-driven valuation discussion.

HW: What are some of the risks and benefits of non-traditional appraisal methodologies?

AA: The rapid adaption of non-traditional appraisals has brought its own risks and benefits. The main benefit for non-traditional appraisals is that it makes the valuation process expedient while avoiding unnecessary borrowing costs for low-risk applications.

Allowing appraisers to focus on the analysis rather than the data collection also creates an excellent opportunity for supervisory appraisers to advance a trainee’s path to licensing, reduce barriers to entry and attract more professionals into the industry.

However, there are risks to methods applied in bifurcating the appraisal assignments. Many lenders are concerned that the data received is inaccurate due to lack of standardization which can result in a poor understanding of the property’s condition and hence inaccurate value determination.

Smart innovation and prudent risk management tools are needed to assess the risk profile of the loan and the property. It is imperative to develop standards for these methodologies to ensure that the data is objective, accurate and free from inherent biases.

HW: How does ValueLink technology modernize the appraisal practices?

AA: ValueLink is the only platform in the market the offers a one-platform solution enabling Lenders and AMCs to order and manage traditional and non-traditional valuation products with cascading approaches based on individual property’s risk profile.

ValueLink is at the forefront of innovation and in response to the COVID pandemic, we launched HomeView, an advanced remote property inspection tool, which takes an intuitive data-driven approach to implement social distancing guidelines while helping deliver reports faster.

Our solutions focus heavily on putting data at the fingertips of our customers by offering in-depth panel analytics along with a powerful report builder tool, enabling them to make data-driven decisions in real-time. Our partnerships with over 40 third-party providers, including the leading LOS and POS platforms enable us to offer customized solutions that streamline valuations and benefit every stakeholder involved in the process.
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