Monday’s announcement by the Federal Housing Finance Agency (FHFA) directing Fannie Mae and Freddie Mac to begin offering alternative flexibilities to satisfy appraisal requirements and employment verification requirements was presented as a temporary policy to address social distancing and health-related concerns raised by the COVID-19 pandemic. And while the policy is scheduled to remain in effect through May 17, one prominent executive in the appraisal management company sector is speculating this temporary policy could transition into a new federal guideline.
“This is something that's been kind of a long time coming when it comes to the appraisals,” observed Brian Coester, CEO of Real Estate Connection in Rockville, Maryland. Coester noted that the alternative flexibilities outlined by the FHFA is not a new idea, but a concept backed by “years of testing” that showed their viability as an appraisal strategy.
“Look at the difference between an appraisal with a full inspection and an appraisal with the alternative evaluation when they send out somebody just look at the exterior and have the homeowner take interior pictures,” he continued. “They're found to be just as accurate. So, it's not like the outside is a disaster or you need to have somebody physically inspect the property because of some known issue. Normally, that is not that necessary.”
Coester noted the uptick in virtual tours of properties as a result of the abrupt decline in open houses and individual property tours due to the COVID-19 pandemic. And while the pandemic will eventually go away, Coester added, this approach to the appraisal process will not.
“Is there a need for the for the full-blown appraisal, with all the automation and all the information that Fannie and Freddie have been collecting?” he continued, noting the alternative approach would also help the ongoing shortage of appraisers in many markets. “One of the issues with the appraisal industry is they don't have scalability. And unlike some industries, where they can just like manufacture more, appraisers can't manufacture more appraisers.”