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   ARTICLE   |   From Scotsman Guide Residential Edition   |   October 2016

Transforming Residential Property Valuation

Modern appraisals should be current, complete and connected

Technology has shifted many life activities from less-than-ideal processes to more satisfying experiences. Consider buying a car, for example. Years ago, the process entailed driving around town from one dealership to another — but not on Sunday when some dealerships were closed — to test-drive cars and haggle about pricing and financing.

In those days, research consisted of asking friends or family what cars they liked, thumbing through Consumer Reports and, if you were ambitious, perhaps calling a few banks to get auto-loan rates. Many people dreaded the process, and they were often left with a gnawing feeling that, despite their best efforts, they had probably made a sub-optimal decision.

Fast forward to today: Car buyers now have online ratings, virtual test drives, searchable vehicle-history reports, and various 24/7 marketplaces to get competitive prices and financing. Technology has not only improved the buying process, it also has improved the driving and ownership experience. Today cars tell you when it’s time for an oil change, show your insurance company that you are a safe driver, and play audiobooks while routing you around traffic to your destination.

Technology has the same potential to transform residential property valuation from a disconnected, transactional process — similar to the car-shopping experience of old — to a safer, more information-based experience for all participants, including loan originators. Modernization is within reach, and it requires a move toward solutions that are current, complete and connected.

Current

A current property-valuation experience would leverage technology to incorporate new data sources and support appraisers in the field with mobile access to the most up-to-date and relevant property and Multiple Listing Service information. This, in turn, would enable appraisers to adapt in real time to any nuances they find when inspecting a property.

When appraisers make judgments about properties, loan processors can provide immediate feedback, including questions that originators and downstream participants may ask. Giving appraisers the ability to answer these anticipated questions — and provide supporting detail where appropriate — before delivering the appraisal streamlines the process by reducing the amount of post-delivery follow-up.

Complete

The information in an appraisal report is an accurate summary of the appraiser’s research, but far from a complete view of the property. Information on natural hazard risks, market volatility and market trends is also relevant to a complete understanding of property values. Similarly, capturing the questions that have been asked and answered regarding the appraisal by reviewers and underwriters and the steps that have been taken along the way reduces the need to duplicate these efforts.

A complete experience also would integrate information from homeowners and buyers. As an example, a heavily toured property with six offers the week it goes on the market carries less risk of overvaluation than a property with a single offer that arrives six months after listing.

Connected

A connected experience recognizes the interdependence of multiple market participants. Online appraisal scheduling coordinated between the appraiser, homeowner, borrower and real estate professional could move everyone involved past phone tag and speed up overall turn times.

Appraisal-status tracking could inform all parties of the estimated delivery date for the appraisal and support timely resolution of issues that might cause a delay in loan processing. In addition, other service providers, such as insurance companies, could provide more accurate and timely quotes armed with more valuation details.

A connected residential-borrower valuation experience would support homeowners beyond the transaction by providing timely, actionable information that is relevant to their ongoing investment. It would monitor the value of their home on an ongoing basis and help them make informed decisions about refinancing, home improvement, relocation and renting.

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The key to transforming residential property valuation is using technology and big data to break down silos and responsibly transfer relevant and timely data to stakeholders. Several initiatives in the past few years have started us down the path. On the big data side, Fannie Mae and Freddie Mac standardized appraisal data. The appraisal industry followed suit with the creation of various appraisal-review solutions that are commonly used among appraisal-management companies, lenders and investors.

In addition, the increasing adoption of consortium solutions and benchmark reporting for property valuation, appraisal production and risk management is improving the industry’s understanding of operational and loss risk. For example, knowing that 2 percent of a lender’s appraisals have been flagged as “high risk” for overvaluation is not nearly as helpful as knowing that a lender has two times the industry average for overvaluation risk. Benchmarking based on contributed data is a huge win for all participants, because more accurate and timely solutions benefit all stakeholders.

On the technology side, platforms and portals are expanding the ability to connect industry participants throughout the real estate and mortgage-application process. Those solutions, however, are just a start. The mortgage industry can and must do more. A complete, current and connected valuation experience is within our reach, but transformation requires all stakeholders to consider new approaches and data-sharing protocols. We must all work together toward this future.

 


 


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