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   ARTICLE   |   From Scotsman Guide Residential Edition   |   December 2016

Modernizing Property Inspections

Mobile appraisal and inspection apps improve speed, efficiency and consistency

Modernizing Property Inspections

Financing or refinancing a residential property boils down to one fundamental question: What is it worth? It’s a simple question that is complicated to address because the answer is based on a variety of factors.

The two most important factors are the value of comparable properties and the general condition of the property. Determining these two items can be a lengthy and contentious process, based largely on subjective criteria that often create discrepancies and differences of opinion between the borrower, the lender and the appraiser.

A multitude of questions must be answered to accurately assess the true value of a property. Are the comps current and accurate, providing an apples-to-apples comparison? Does a property require maintenance or repairs? If so, what impact will that have on the value? What will those repairs cost, and how long will they take? Will repairs delay the closing? Has there been any structural damage to the property and has that been corrected properly? Is that sawdust around the doorframe a sign of fresh termite infestation or residual debris from a problem fixed years ago?

Any disagreement on the answers to the above questions can add weeks or even months to the mortgage-approval process. A recent survey by the National Association of Realtors noted that problems with inspections and appraisals cause more than a third of all closing delays.

The problem is not with the lenders or borrowers, or even the professionals collecting and analyzing inspection information. Often, the problem is how the data gets collected, collated and shared. Typically the starting point is a pen-and-paper process, occasionally supplemented with photos.

Once that information has been collected, it is either maintained and shared in its paper form, or must be manually entered into computer spreadsheets. This is a time-consuming, inefficient, inconsistent and poorly structured process that makes sharing and comparing data difficult.

Tim Li, chief information officer of RealityMogul.com, once observed, “The name of the game is gaining access to data and analytics and using it to make real estate-related transactions faster, better and cheaper.” That is difficult to do, however, when the process relies on manual tools.

How can this process be moved into the 21st century, ensuring that property data is captured in a manner that’s uniform, shareable and searchable? The first step is moving it off the clipboard and onto a modern device like a tablet or smartphone. These devices are ubiquitous and make collecting, storing and sharing inspection information fast, efficient and consistent.

Key attributes

As the transition to a modernized approach occurs, there are some key attributes that new inspection technology should incorporate. These should include:

  • Extensive, customizable forms. Any modern solution should include an exhaustive selection of inspection forms that are fully customizable to meet each mortgage company’s requirements and cover the key criteria for a property inspection prior to mortgage approval. The forms should allow companies to set property type (single-family home, condo, townhouse); general conditions; finishes and fixtures; and manufacturers and other options for interiors, exteriors, amenities and landscaping.
    These forms also should allow the users to choose input features like checkboxes, radio buttons and drop-down menus for rating asset attributes, as well as customizable rating labels, values, symbols and colors, and the ability to add a score or cost for each item or attribute inspected.
  • Fully functional offline. It would be nice if we had reliable internet connectivity wherever we went. Yes, it would be nice, but we don’t. So no solution for taking inspections into the digital age should be built on the assumption that any property to be inspected will have a fast, reliable cellular or WiFi connection.
    That means the application should operate offline and be fully native on a variety of standard mobile devices using the iOS or Android operating systems. Then, when the inspector returns to the office, the application should automatically connect, sync and share the information digitally.
  • Inline photos and comments. “A picture is worth a thousand words” is not merely an expression when it comes to documenting actual property conditions during an inspection. Photographic evidence is fundamental to resolving disagreements and disputes. How big is that crack in the foundation? Well, here’s a photo of it right in the record, showing the crack with a yardstick next to it.
    Digitizing this information visually also means no more printing and stapling photos to paper forms, or uploading them from a digital camera or camera phone. Digital photos should be integral to the inspection app. They also should be time-stamped and dated and incorporated in the inspection report along with detailed comments from the inspector.
  • Common terms. Providing consistent inspection reports in a timely fashion requires standardization of the data collected. That means different inspectors working for the same mortgage company need to use the same terms and descriptions. Otherwise you end up with the Tower of Babel, with reports filled with inconsistent, unintelligible and unsearchable data.
    If one inspector calls a small bathroom a “half-bath,” but the next describes it as a “powder room” and a third says it’s a “water closet,” that makes searching the data problematic. How can one property be compared against another to determine relative value if the same attributes are described inconsistently? Any inspection solution should include standardized comments and terms, as defined by the mortgage company. These terms also should be selectable by menu to ensure the uniformity and consistency necessary to search and analyze the data.

Long-lasting benefits

Applying these guidelines to the adoption of technology for modernizing inspections will have immediate benefits. These include greater consistency in the reporting process, faster and easier collection and sharing of inspection information, faster dispute resolution and, ultimately, a shorter financing-approval process that satisfies both lenders and borrowers.

More broadly, if lenders and mortgage companies have access to uniform data across hundreds and even thousands of inspections, they can begin to apply deeper data analytics that will allow them to gain keen insights for improving their overall business processes and making better lending decisions. In addition, they may identify an ongoing and consistent set of problems with certain properties or locations, allowing them to avoid approving risky loans.

The benefits of modernizing the property-inspection process are clear, and the tools for doing it exist today. The fundamental question is not whether mortgage professionals should adopt these new technologies. Instead, we should be asking why they haven’t done so already.


 
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