Q&A with Mark Walser
Streamlining Real Estate Appraisals in an Active Market
In today’s active real estate investment market, the evolution of the appraisal industry is having a direct effect on the speed and ease of transactions. To help investors capitalize on new developments, REI INK interviewed Mark Walser, President, Incenter Appraisal Management, a major national provider of valuations, inspections and data products.
As the President of a national appraisal management company, what is keeping you up at night these days?
The pace of change in the real estate investment industry, and the importance of helping investors, lenders, and appraisers to immediately seize new opportunities, are top of mind.
As Ron Burgundy in the movie Anchorman says, “Well, that escalated quickly.” The recent rapid rise in mortgage rates accompanied by inflation is rocking the mortgage lending profession. At the same time, lenders and investors stand to benefit from the creation of new pathways to wealth creation, such as single-family rentals. Sellers in this environment are looking for fast, easy transactions that allow them to obtain the best price and move on. Investors are able to get great deals on properties and fix them up to sell or rent, benefiting the community and the buyers looking for homes in markets where scarcity of inventory is a real issue.
The appraisal management industry plays a critical role in ensuring that transactions proceed seamlessly in this environment. Many lenders are experiencing two-week valuation backlogs, which factor into final closing dates. Appraisal leaders have innovated new approaches to reduce those backlogs and help investors and lenders pick up the transaction pace.
Where are backlogs coming from?
The industry has been dealing with a talent shortage at a time of stepped-up demand
for appraisers’ services. According to the Appraisal Institute, there were roughly 73,000 active appraisers in the industry in the U.S. in 2021, down from a peak of 85,000 in 2010. Freddie Mac/Fannie Mae released similar studies showing that in 2014, the number of unique active appraisers that handled all of the GSE volume was approximately 43,000, and that in 2020-2021 that number declined to 40,230. They also anticipate a decrease of 800 appraisers per year given the age range and projected retirements after factoring new appraiser entrants into the profession, with the average age being 59 years old.
A wave of retirements over the next five to ten years, accompanied by a lag in the number of new trainees, illustrates why costs and turn times have been rising.
How is the industry solving the problem?
The movement toward the digital mortgage, which advanced during the pandemic, is helping to address this. The introduction of remote/desktop appraisal inspections is part of this evolution. These technology-enabled processes are in use for everything from disaster inspections to appraisal inspections for Non-QM/Non-Agency loans.
The big “watershed event” happened when Fannie Mae and Freddie Mac approved them for many mortgages last March. That has spurred a new wave of appraisers to sign up for remote appraisal training and begin using different solutions to fulfill assignments.
This kind of technology empowers appraisers to conduct appraisal inspections from their desks, rather than onsite. Up to 50% of an appraiser’s workday involves driving from property to property to perform appraisal inspections. Now, they are able to spend their days inspecting and analyzing, rather than driving, and delivering reports much faster.
These are solutions that keep them in control of the process from start to finish, even when they are offsite. That is important to professional appraisers, whose training and reputations are on the line with each report. They must be able to trust the integrity of the data that the technologies are delivering.
Some solutions make this especially easy — enabling appraisers to look through a property contact’s (e.g., homeowners’ or realtors’) smartphone camera, capture and upload time-stamped and geographically verified photos, videos and closeups as the contacts walk around, and provide a detailed floor plan with walls, along with the functional layout of a home.
When lenders work with appraisers who are capitalizing on these technological capabilities, they are able to stream-line service for their investor clients.
What other challenges are remote/desktop appraisal inspections helping to solve?
One major goal that mortgage lenders and appraisers share is fostering diversity. Incenter Appraisal Management is proud that its parent company, Incenter LLC, is a Diamond Sponsor of the National Association of Minority Mortgage Bankers of America (NAMMBA), which is focused on bringing more women and minorities into the profession and ensuring that everyone has equal access to the American Dream of homeownership.
Technologies like remote appraisals support the goal of putting everyone on a level playing field when it comes to homebuying. These tools can help eliminate any inadvertent perceptions/misperceptions of bias. That is because during a remote appraisal inspection, appraisers and property contacts (homeowners or realtors) never have to see one another.
The appraiser looks at the property, and not the person.
Moreover, in underrepresented neighborhoods, where it is difficult to find a nearby appraiser, in-person inspections can be costly, and lenders often pass the extra expenses on to prospective homebuyers. That problem is eliminated, too, with remote appraisals.
What about inflation? Do remote appraisals help ease some of that pain?
Definitely. Those rising costs impact appraisals as well. A great current example is the rising cost of gas—which affects appraisers driving far from the city into rural areas or navigating bumper-to-bumper traffic in cities like Los Angeles. These drive appraiser fees higher, and the additional costs are then passed on to the borrower/real estate investor.
Speaking of inflation, with skyrocketing home sale prices, what happens when an appraisal comes in lower than expected?
Rapidly appreciating home prices have this happening much more frequently than usual – and until appraisers can see comparable property sales hit the MLS that help support those values, it is a possibility that every buyer/real estate investor needs to consider. When an appraisal does not reach the expected value, investors must first understand that this could indeed be a legitimate valuation.
Before disputing it, they should be aware that the appraiser must be able to derive value from the most appropriate comps, versus the closest properties that seem similar from the outside.
What if they still want to dispute a valuation?
The best practice is to select properties that they think will make their case, keeping the number between three and six. A lower number of carefully selected comps is actually better because it shows the appraiser they are more selective and thoughtful in their approach. Sometimes including a large number of comps in an appraisal reconsideration can backfire.
Do you have any other guidance?
Today’s investors and lenders can make the process smoother by understanding the current landscape and circumventing preventable obstacles. They should start by making calls to their local appraisers to get to know them and ask about turnaround times. They should also inquire with their lenders and appraisal management companies about what alternatives exist for the use of a technology-enabled or remote appraisal process to potentially condense these timelines. This is the time to rethink every process and make the most of an active market.
Mark Walser is President of Incenter Appraisal Management, providing professional appraisal services and RemoteVal™ mobile appraisal technology to streamline the appraisal process. The firm is a member of the NPLA. More information is available at incenteram.com or 866-222-6205. Walser can be contacted at mark.walser@incenterms.com.
