It’s a different world now, and we’re all trying to find ways to make our jobs safer for us, as well as the markets we serve. COVID-19 has taken its toll on the mortgage industry, but there’s few places the pandemic has caused more long-lasting change than in the appraisal business. How has the appraisal industry dealt with the pandemic, and what are lenders’ appraisal options going forward?
Realizing that safely conducting traditional appraisals would become near impossible, Fannie Mae issued a lender letter on March 23rd allowing new flexibilities on appraisals for GSE loans. Among these were the ability for lenders to use “desktop” or “exterior only” inspections when full appraisals aren’t feasible due to COVID-19 concerns.
What Are These Options?
The Uniform Standards of Professional Appraisal Practice (USPAP) allows appraisers to report their findings in most any format from oral to fully documented. This flexibility means appraisers can utilize most any GSE approved format as long as the appraisal process is fully disclosed and any assumptions are disclosed as “Limiting Conditions”.
So lenders do have a few new options if COVID-19 virus issues prevent the typical GSE 1004 form report from being used. These include:
A desktop appraisal performed when an appraiser obtains subject information from public records, pulls comparable sales info and does market research to determine the value of the property. With this option, they “never leave their desk”, so to speak. One new twist on this desktop option involves the use of GPS based, interior photo and condition data reports like the Data Facts Verisite Photo Report, which gives the desktop appraiser a wealth of knowledge about interior age, style, design and condition.
Or, an exterior-only appraisal, also known as a drive-by, where an appraiser observes the exterior of the property and collects data from other sources such as assessor records and aerial imagery.
Interestingly, The GSEs have clarified that using a more detailed desktop appraisal is actually preferred over an exterior-only report format.
A Rise in Technology
Although automated valuation technology has existed for decades, its application has gained new favor in 2020’s COVID-19 risk environment. With the relaxation of standards for full appraisals, AVM technology has been reconsidered as sufficient for lower LTV loans in more homogeneous real estate markets.
Of course, the worry for appraisers is that this could have future implications for diminishing appraisers’ workloads. But, as we saw after the housing market crash of 2008, AVMS are not the solution for most loan underwriting needs when collateral recovery on delinquent loans becomes more critical. With social distancing guidelines at top of mind, it’s important to keep your borrowers safe, while obtaining the appraisal data you need. The experts at Data Facts’ Appraisal Team are always enthusiastic to help our clients navigate the changing rules and report options. One of the ways we’ve been doing this is by offering the cutting-edge mobile technology of Verisite, which enables you to obtain interior photos directly from the borrower, without the need for an appraiser on-site. Learn more about the Data Facts Verisite Photo Report here.