3 Alternatives to On-Site Inspections for Appraisal Reports
In our previous article, we mentioned that the two Federal rate cuts in March are a boon for real estate appraisers everywhere. These cuts have heavily reduced the interest rates for short-term borrowing, a development that will surely drive up the demand for reverse mortgage loans. In their desire to take advantage of these rates, many homeowners and people dreaming of owning a home would be looking for appraisers to produce appraisal reports of the properties they wanted to apply a mortgage for.
For appraisers, the federal cuts aren’t the only opportunities for growth available to them in this time of social distancing and remote work arrangements. Here are three more opportunities that a real estate appraisal business can take advantage of at this time:
1. Make use of desktop and exterior-only appraisals to your advantage.
Most properties listed on a multiple listing service have images and videos of the listed property. Unlike listing aggregators like Zillow and Realtor.com, an MLS can provide extraordinary information about the property, such as the following:
Agent Remarks: These are notes written by the listing agent in the MLS listing that are visible only to other real estate professionals. For example, preferred showing times and offer procedures are often mentioned. If the seller is offering any additional incentives to buyers’ agents, that can also be included.
Relevant Documents: MLS listings often have important files attached to them. These can include things like seller disclosures and HOA documents, which can be important when it comes time to apply for a mortgage.
Sensitive Information: MLS listings contain some information of a sensitive or confidential nature, such as alarm and gate access codes.
Exterior-only photos or videos are often provided since these are acceptable sources of information for appraisers.
How is it acceptable as a good business practice?
The process of writing up an appraisal report typically involves exterior and interior inspections, which allow the appraiser to determine the characteristics of the subject property. Usually, the appraiser visits the subject property as well as comparable properties with similar characteristics.
However, this practice of doing on-site inspections and comparable research isn’t restricted to the appraiser. The USPAP guidelines provide some allowance for a real estate appraisal assistant to perform non-significant work or even a third-party inspector to provide significant assistance to the appraiser.
Moreover, if an interior inspection isn’t “relevant to the type and definition of value and intended use of the appraisal,” then it’s not required. This is only possible when an appraiser feels confident that he or she can produce credible results based only on the subject property’s physical characteristics, and its legal and economic attributes.
This flexibility is temporarily institutionalized by the GSE Appraisal Letters due to the COVID-19 crisis. The GSEs will allow a desktop appraisal or an exterior-only appraisal if an interior inspection is not feasible due to COVID-19 concerns. Desktop appraisals are preferred for purchase transactions while exterior-only appraisals are acceptable for refinance loans.
2. Integrate virtual property inspections into your appraisal process.
Now that you know you have more freedom in acquiring information about the subject property and its comparables, it’s time to consider adopting a strategy that includes virtual property inspections.
You have two options: ask the owner to take photos or make a video tour of the property or hire an experienced appraisal assistant to produce or find the most recent images, maps, and descriptions relevant to the subject.
With the rules becoming lenient, appraisers can continue to inspect properties and provide credible valuations without breaking the social distancing rules. Use any video conference app, like Zoom or Skype, to connect with your property contact. That person can act as your virtual guide throughout the property.
3. Use a drone to take aerial photos and exterior shots of the subject property.
Technology is your greatest friend. Aside from the video calling apps at your disposal, you can gather property information by flying a drone all over the site. The owner of the subject property can assist you in allowing the drone to fly over their property and directing you where to go. That person can give you a virtual tour of the site while the drone follows him or her around.
Grow Your Appraisal Business While Social Distancing
We know it’s not easy to keep your business open at a time when people have to retreat into their homes and minimize their contact with others. An appraiser’s job often involves going into people’s properties and going around the community to see comparable properties. And yet, we have no choice but to abide by the policy changes and adapt to what’s being touted as the “new normal” for everyone.
While remote work arrangements are feasible for office-based workers, such as your appraisal assistant, appraisers have to be present in client meetings. Otherwise, it may seem unprofessional and will leave a negative impression on your client.
Find a way to compromise by considering other methods of delegating the work. Hiring an appraisal assistant is one thing; paying the services of a third-party inspector is another. But, a third option, which is more cost-efficient than the other two, is to outsource the less significant work, such as research and compilation of data.
Outsourcing cuts down your overhead costs and help you manage your finances better in these trying times. Set up a call with an outsourcing consultant today!