I recently had the opportunity to facilitate a panel discussion for the Collateral Risk Network on the topic of Appraisal Modernization. I posed a series of questions to panelists Jared Priesler (DataMaster), Jeff Bradford (Bradford Technologies), and Penny Reed (Wells Fargo) who addressed them from the vantage point of three key demographics in our industry: the appraiser, the AMC, and the Lender. Each of these groups were surveyed in research conducted by the Allterra Group (appraisers) and the Collateral Risk Network (Lenders & AMCs) for this purpose. In this article, I will share some of the survey’s key findings and provide you a link where you can obtain a copy of the survey summary reports.
I want to set the stage by providing a definition of Appraisal Modernization that was used for the purposes of the panel discussion. It can mean different things to different people. For example, Fannie Mae and Freddie Mac have adopted the term as the name of their new initiatives outside of traditional appraisal. However, for our purposes, we are using the term more broadly as a concept versus an initiative. It also does not mean the elimination of appraisers. In fact, trends in modern society are changing not only how appraisers provide expertise, but also how appraisers, lenders, AMCs and consumers can work together to define new and improved opportunities to engage and mutually benefit from appraiser expertise.
The following is a summary of the panel discussion from the October 1st Collateral Risk Network virtual quarterly meeting.
What Does Appraisal Modernization Mean To You?
Jared – Appraiser – New opportunities to apply different tools, better data, gain efficiency, and offer other product types and services.
Penny – Lender – Appraisals are used beyond just loan origination. Lenders calibrate valuation product to risk (e.g. hybrids, waivers) to full appraisal depending upon the loan circumstance and their need to evaluate the risk.
Jeff – AMCs – The ability to offer other services such as hybrids or branch into other verticals besides mortgage (e.g. cash transactions from realtors) to improve appraiser and client communications.
Outlook for the future
The takeaways from the session are encouraging!
Jared – Appraiser – Look for ways to add value in the partnership with lenders and AMCs, as well as other business opportunities such as appraisals on cash sales. Key themes critical to your analysis are:
- Fit to neighborhood
- Market analysis
- Resale potential
Jeff – AMCs – All participants need to understand market data usage and new technologies that help you visualize the data is plentiful.
Penny – Lender – Tell me more! Understand your customer. Lenders look at everything from the perspective of what happens if the borrower doesn’t pay (will the value hold) and need to know anything that may impact the severity of the loss. What is the quantifiable risk if I have to buy back the loan for this property/market?
- Pre/post adjustment analysis – to reduce outcome risk to lender
- Is the property good for the transaction?
- Appraiser expertise
- Repurchase and Default (risk around appraisal)
The future belongs to those who adapt and thrive with new opportunities and its rewards! I believe it is imperative that appraisers take a lead role in crafting the future of the profession.
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