Meier says most appraisal friction comes down to the same misunderstandings, but they are fixable
Appraisers, brokers and lenders all have important roles in a mortgage transaction, and their work together is what allows a transaction to get across the finish line.
That doesn’t mean everything is smooth all the time in this relationship. The time an appraisal takes, and the eventual valuation assigned to the property, can cause some friction in the mortgage process.
One veteran appraiser said the cause of some of the friction involved in the process can have to do with misunderstandings regarding the process. His goal is to try to help all parties in a mortgage transaction understand the appraisal process better, potentially reducing some of the friction involved.
Noah Meier (pictured top), chief appraiser at SingleSource Property Solutions, said the same friction points have surfaced throughout his nearly two-decade career.
"You know, it's such a collaborative effort between the appraisers and the lenders that I think they're generally on the same page for the most part," Meier told Mortgage Professional America. "Sometimes there can be confusion over the timing and complexity of an appraisal assignment."
Each transaction is unique
The most common version of the turnaround problem comes from treating every single-family assignment as standard, Meier said. Each Uniform Residential Appraisal Report, or 1004, can be very different from the next.
"Not all 1004s are created equal," he said. "Just because it's a single-family somewhere doesn't mean you go out there, inspect the property, you pull three comps, you slap together and get it out the door. There's complexity involved that can change it from a two-day turnaround to a five, 10, 20-day turnaround time, depending on what needs to be verified, who needs to be spoken to, and the due diligence needed to complete an assignment."
The same logic applies to revision requests, Meier said. A request to fix a clerical error can be back in hours, but a reconsideration of value (ROV) is a different matter entirely.
"Not all revisions are created equal," he said. "If you're sending an ROV, that's almost equivalent to a new assignment where you've got to research data that you maybe weren't aware of or just needs to be analyzed and see how it fits in with the data that you did use. Whether it's to be included in the report or not, it still requires all the analysis. So that might not be a couple-hour turnaround. That might be a day or two."
Meier said the easiest solution to these challenges is better communication. When an appraiser identifies that an assignment is more complex than the initial order suggested, both sides need to reset expectations, he said.
"What it boils down to is communication," Meier said. "As soon as the appraiser finds out that it's more complicated than a standard 1004 or more complicated than changing a couple of words around in the report, they communicate that. As long as the communication is good between the two parties, that can alleviate some of the problems that would happen. But the expectation from the lender sometimes feels like a 1004 can turn around in 24 hours when it's not necessarily always the case."
Alternative valuations and high-pressure deals
The second area of confusion is how alternative valuation products differ from a traditional appraisal, Meier said. This category covers broker price opinions (BPOs), automated valuations, and waiver-eligible transactions.
"While these products do have their place, it's a different level of analysis and experience from the professional that goes into the process," he said. "If it's a BPO or something like that, that's someone who's in the field selling properties, and they're coming at it from a different point of view."
The third misconception tends to surface when deals are under pressure, Meier said. An appraisal is built to evaluate the risk on the loan, not to produce a particular number, and that distinction can get lost in the heat of trying to make something work.
"We're just evaluating their risk," he said. "It's not our job to hit a value or not hit a value. We're offering our opinion of what the risk is on the loan. So it's important to realize that we're just partners in this situation. We're not trying to produce something for you or against you. We're just trying to evaluate your risk by providing you with a market value. And sometimes that can be lost in the attempt to make the deal work."
Meier said he does not expect the collaborative nature of the relationship to change regardless of the changes upcoming with the new appraisal form, which starts November 2.
"Even with all the changes, it's still the same collaborative relationship between the lenders, the AMCs, and the appraisers," he said. "It's still the same goal in the end, and that’s to provide quality products to the brokers and get quality products that they can use. There's just more to it now, or different parts to it, that we're all adapting to together."
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