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Navigating the New Appraisal Landscape and Beyond - Brian Coester
- 1. Navigating the New Appraisal Landscape and Beyond Brian C. Coester, Founder and CEO BCoester@coester.com
- 2. The State of Appraisals ▪ The general consensus within the valuation space is that it’s going through an evolution and revitalization. Current market expectations are looking for a faster and less expensive product that meets the secondary market guidelines. ▪ Appraiser licensing is overcomplicated and has caused a continual decline of new talent in the business. Licensing and trainee complications have contributed to delays in certain market areas. ▪ Lenders, Investors, and AMC’s are looking for creative ways to use the appraisal data to enhance current offerings to borrowers and consumers.
- 3. The State of Appraisals ▪ Lenders and Investors are looking for a fast, accurate valuation that meets the secondary market requirements, provides consumer and investor protection, and is priced within the market. ▪ Lenders are looking for ways to use the appraisal process to create a better experience for the consumer and realtor as we move into a digital lending environment. ▪ The MBA, ABA, Appraisal Institute, REVAA and other trade group organizations are all pushing for changes and technology adoptions. ▪ The changes over the last few years have been centered around reducing cost and reducing the time to which appraisals are completed, and looking for an automated solution.
- 4. Timeline of Appraisal Industry 1994 - Interagency Appraisal and Evaluation Guidelines established consistent criteria for appraisal independence (revised in 2010). 2008 – Home Valuation Code of Conduct – Fortified existing rules into current lending environment. 2008 – GSE’s and major investors remove the ability for trainees to inspect without a supervisor present. 2010 - Dodd‐Frank Appraisal Independence Regulations take over and sunset HVCC. 2012 – Uniform Collateral Data Portal – Collateral Underwriter launched to score and asses appraisals completed to GSE’s 2017 – Appraisal Threshold – Use of Evaluations $250,000 to $500,000 on commercial ($500,000 on 1-4)
- 5. Timeline of Appraisal Industry 2017 - The FDIC approved a final rule to raise the appraisal thresholds for commercial real estate transactions from $250,000 to $500,000. The threshold for loans secured by 1-to-4 family residential properties will remain at $250,000; however, residential construction loans secured by multiple 1-to-4 residential properties would be considered CRE transactions. 2017– Appraisal Waivers – Day 1 Certainty (Implementation of the CU Alternative Valuation Produce) 2017 – GSE’s post bulletin clarifying trainees ability to inspect 2018 - The Appraiser Qualifications Board (AQB) adopted revisions to the Real Property Appraiser Qualification Criteria. These changes, effective on May 1, 2018, will serve to reduce or eliminate unnecessary barriers to entry into the real estate appraisal profession in the US.
- 6. Decreasing Appraisal Population ▪ Addressing the decreasing appraiser population is a priority. ▪ Need for easier access to licensing is being worked on. ▪ Alternative valuations with current technology will enhance speed and overall experience. ▪ Alternatives to the 1004 are being worked on to get more specific to the property.
- 7. Why are appraisals so problematic?
- 8. Learning from Other Countries Australia - $185 for equivalent to a 1004 with a 2-3 day turn time. – Difference: •Consistent Underwriting criteria (no overlays) •Consistent scope of work – Standardized •Minimal to no revisions by lenders or underwriters •Use of tablets and data feeds to deliver report
- 9. Current Issues ▪ Defining what a FTR is (Federally Related Transaction) ▪ Use of Alternative Valuation Products – Day1 Certainty, Desktop Appraisals, AVMs + Inspection + Reconciliations, Alternative to the 1004 – Turbo Tax Type form ▪ Lenders Questioning to keep the process “In House” or use an Appraisal Management company (AMC) ▪ Dealing with appraisal fee disclosures inaccuracies ▪ Management of appraisal turn times and customer experience ▪ Consumer Experience in a digital mortgage world – Appraisal Scheduling, Payment Collection, Delivery, Data, Accuracy
- 10. Overall Objectives: ▪ The objective of these changes: –Reducing Turn Times on Appraisals •Aiming for a 2-3 day overall turn time and 24 hour alternative product. –Use of technology and mass data for valuations. 1,500 data points and over 30 photos of the property. –Use of trainee appraisers or alternative inspector for scalability.
- 11. Current Appraisal Eco-system Day 1: Order Entry Day 2: Appraiser Schedules Appraisal Day 3 – 4: Inspection Takes Place - Data Collection Day 4 – 5: Data Research – Comparable Data Day 6: Delivery of the report Day 7: Underwriting and Review of report Day 8: Corrections and Revisions – Delivery • Days are added to the process by scheduling issues, scope of work complexity and undefined underwriting criteria.
- 12. Appraising 2019 Day 1: Order Entered Day 1: Appraisal Pre-scheduled Day 2 – 3: Inspection Takes Place - Data Set Delivered to Appraiser in field. Day 3: Appraiser Reconciles Report and Data on Site Day 4: Underwriting Department accepts or requests modifications from the desktop or tablet directly Day 4: Appraisal report delivered
- 13. Man vs Machine Appraiser Machine • Verify Transactions • Report Seller Concessions • Observe and Report age/condition • Reconcile Conflicts of data • Measure property • Identify non-arms lengths transactions • Analyze Big Data • Identify trends • Help Assemble Data • Review Report for consistently • Schedule Appraisal
- 14. Consumer Direct Education Educational Material On: • The Art of Home Appraisals • Reverse Mortgage Appraisals • Home Maintenance • Seasonal Trends • Home Values
- 15. Thank You Brian Coester, Certified Residential Appraiser BCoester@CoesterVMS.com Cell Phone: 240-277-2900 Thank you very much for the opportunity to serve you.