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Question:

What are some questions to ask my vendor when using desktop appraisals and the best practice answers I should expect?

Answer:

COVID-19 presented many challenges to the mortgage industry and forced us to adopt new processes. As a result, more lenders are leveraging desktop appraisals to reduce costs, increase efficiencies and reduce biased opinions/views. 

• Who are you sending into the borrower's home to collect the data? What kind of background checks are you conducting?
• Best practice dictates that property data collectors are real estate professionals. What is a real estate professional? Real Estate Agents, Brokers, Appraisers, Appraiser Trainees, and Home Inspectors. This type of real estate professional is typically licensed at the state level and is held to a minimum professional standard. They should have the requisite competency and training before being sent out on their first assignment, and each file should go through a QC process to maintain quality and integrity. It is also a good business practice to ensure these professionals undergo a background check for interior assignments.   

• Where is the (Desktop) Appraiser located in terms of proximity to the property? 
• Appraisers are required to be geographically competent to complete an appraisal assignment per USPAP, and Appraisers performing Desktop Appraisals are no different in that regard. It is easy to see how an appraiser or their client might be willing to stretch the boundaries on geographic competency since the Appraiser does not leave his/her office to complete the appraisal. Still, it is more important than ever to ensure the Appraiser has a good grasp of the neighborhood since they are not driving the area to complete the assignment. A good practice to follow is that appraisers should only perform desktop appraisals in the same areas they would accept a traditional appraisal assignment. 

• What type of data do you provide to the Appraiser?
• While some companies incorporate the Appraiser's MLS into their platform, providing any additional data to the appraisers besides public record data, the MLS feed, and the Property Data Collection report is not a good idea. A best practice is to allow the Appraiser full autonomy to select his/her comparable properties and to maintain full control over the data within their reports. One challenge as big data, artificial intelligence, and other advancements come into play within our industry is ensuring appraisers can still complete assignments independently while taking full advantage of technological advancements. 
  
  

Both GSEs have plans to expand hybrid appraisals in the near term. For example, beginning July 17, Freddie Mac will accept some mortgages with hybrid appraisals — but the list of caveats is lengthy. See page 6 on the Freddie Mac Bulletin.

Fannie Mae also plans to use hybrid appraisals more often in 2022 as part of its equity plan, intended to "reduce costs to the borrower and reduce the potential risk of bias by creating greater separation between the appraiser and borrower." For more information from Fannie Mae and Freddie Mac, check out Hybrid and Desktop Appraisal Forms - February 2022.

In summary, appraisers across the country are adapting to keep up with the demand. This whole process is faster, more efficient, and utilizes an appraiser’s expertise– to diligently keep the US mortgage market moving.  

**Thank you to Axis Appraisal Management for contributing to this week’s FAQ.

For more equally insightful FAQs, go to our blog page and for our recent webinar, click here. Schedule time with our team to learn more about the services MQMR offers.