Reverse mortgage originators have expressed concern recently over the number of loans that do not close due to home appraisals coming in too low. Often, they say, the value is not near where it was to be expected, or the borrower has different ideas about what the home is worth.
The housing market having plummeted is clearly the main driver, but there are some shifts that have taken place recently in the appraisal world that lend themselves to changes in approach to the appraisal. The approach may not change the outcome, but it might change the expectations of the borrower to the point where the appraisal comes in at a much more expected value.
There are fewer appraisers today than in recent memory due to a number of factors including increased regulation and an aging population of professionals. Because appraisers are doing the same work in a shorter period of time, scheduling is one place to look in the process, says Erik Richard, CEO of Sherman Oaks, Calif.-based Landmark Reverse.
“Historically, lenders and AMCs have pressed appraisers to accommodate the borrower’s schedule. They are, after all, the customer. However, we are trying to educate borrowers who have schedule flexibility to do the best they can to accommodate the appraiser’s schedule.”
Recent comments by the National Association of Realtors cited a delay in appraisal turn times as one current hurdle for the housing market, noting that the turn times for both appraisers and banks can be slow, which delays closings, NAR said.
The work will ultimately get done faster, with more sensible time management, Richard says.
“Appraisers are as busy as ever, and if the appraiser can stack their inspections and comp photo trips efficiently, they can get the work done faster,” he says.
When surveyed in September, 11% of Realtors said they had a contract fall through due to low valuations.
When it comes to managing expectations to prevent this, originators can look to online tools, but a more comprehensive approach is more advisable, says Brian Coester, CEO of Rockville, Maryland-based Coester VMS.
“The hard part is that originators want to know a ball park of the value before having the borrower fork out $450 for a full appraisal, but at the same time the only way to really know is to get the full appraisal,” Coester says. “So because of this they are stuck using tools like Zillow.com, our Valuesafe Desktop appraisal program, AVMs and other things which help, but don’t provide the clarity that a full appraisal would provide.”
In addition to information available from third party sources, originators and borrowers can look to tax records and always err on the side of caution.
“My suggestion would be to use a common sense approach and look at the information available online, have the borrower look at the tax records and recent assessment and always be on the conservative side,” says Coester. “Letting the borrower know that there’s a chance that it might not come in at value before hand is the best tempo setter that I have seen and seems to work well.”
Written by Elizabeth Ecker
