How is low inventory affecting how appraisers do their jobs?
This article was produced in partnership with PCV Murcor.
Desmond Devoy, of Mortgage Professional America, sat down with David Schiffmayer, senior vice president of operations at PCV Murcor, to discuss technological change and the current appraisal market.
Nationwide appraisal management company PCV Murcor is using AI technology to catch red flags in appraisal reports.
The company, founded in 1981, “has a long-standing track record in the industry of providing valuation products and services,” said David Schiffmayer, senior vice president of operations. “We offer a full suite of products that can be customized to meet our clients’ needs.”
The company acts as a middleman between lenders and independent appraisers.
“We assign orders from the lenders to an independent panel of nationwide appraisers,” said Schiffmayer. They serve as a type of “firewall” between the sales force at the lender and the appraiser in the field, “so that we can ensure a homebuyer is getting an independent valuation,” he said.
The company also performs an array of compliance functions for lenders, as well as broker products and proprietary products “which we’ve designed in-house,” he said.
They take client guidelines and underwriting requirements and “tailor the reviews specifically to them. We try to have a personal approach.”
They utilize technology to create a scannable process to ensure compliant routines are followed.
“But we’re not so tech-heavy that we lose the personal touch when it comes to actually communicating with the client,” he said, as the company places a high premium on customer service.
The search for red flags
They have also branched out into using AI to scan a report to identify red flags.
Schiffmayer described the appraisal form as the densest in the industry. With a robust rules engine, PCV uses AI to look for various combinations to identify red flags. That makes the company’s review time much faster internally, he said, as well as removing the potential for headaches down the road – ensuring that a “well-supported opinion of value” goes out.
The company’s founder, president & CEO Keith Murray likes to remind employees that while lenders are their clients, they should be mindful that “there’s a family at the end of this transaction, who’s making one of the largest decisions of their life – buying a home. We always try to keep that mentality at the forefront of our thoughts.”
They are headquartered in Pomona, CA, just outside of Los Angeles, licensed in all 50 states and Washington D.C., with a nationwide panel of independent appraisers serving every state, as well as Guam, Puerto Rico, and the US Virgin Islands.
Since the start of the pandemic, house prices have surged dramatically, and Schiffmayer agrees that market conditions are an important driver of valuation – but so too is location. It is important to know what the comparables are, he said.
“Appraisers don’t always have that context of the lifecycle of a loan throughout the industry,” he said. “We can help them understand that it’s not that they have done anything wrong, but that a more detailed explanation is needed due to those factors. Really, our job is to partner with appraisers.”
The company also takes into consideration what the appraiser is looking for, he said, so the report is as well-supported as possible when delivered, protecting both the lender and appraiser from risk.
An appraisal can take many forms, from the traditional appraisal, the primary product across the industry, to evaluations. There are even “desktop appraisals” and “hybrid appraisals” available too, though the ultimate end goal is always to ensure that an informed purchase decision can be made.
Challenges in the industry
While the industry is currently facing many challenges, Schiffmayer feels his company is doing a great job of navigating them. What does have him concerned is contending with fair lending requirements, over-evaluation, and under-evaluation risk internally.
“Anytime those kinds of things go on, we’re taking extra steps to scrutinize the appraisal,” he said.
One major challenge is the low-inventory environment, which can make for challenging appraisals, “because you don’t have a lot of sales necessarily nearby.” Therefore, an appraiser may have to go to a nearby market to compare the property in question. However, another location is in a different market.
“So you try and find proximate sales,” he said. “If there are no recent proximate sales, you’re trying to find sales that sold a bit further back in time. And then you have to make adjustments for the changes in the market over time.”
This can require some out-of-the-box thinking to fill in the blanks.
“It’s much more challenging when the market slows down because you have a lot less data to work with,” he said.
Still, another challenge is the fact that interest rates have risen, meaning refinance activity has effectively vanished – a stark change from the low-rate environment of the pandemic, which spurred a lot of activity in a short frame of time.
“So we’ve entered this timeframe where everything is very stable, and therefore the volumes are low,” he said. Even lowering the interest rate would not suddenly ignite the market again.
Schiffmayer gives a lot of credit to Murray, whom he calls “a very hands-on owner,” for leading the company through these challenges. Murray started in the industry as an appraiser himself back in the early 1980s.
“He works with all levels of the organization on a personal level. Quality is his hallmark,” he said. “A lot of our routines, especially around quality and risk and industry practices, are just part of who we are and our DNA. We take our role in the process very seriously, and our job is to provide high-quality products while mitigating risk.”