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Desktop Appraisal to Become the New Norm
by Isaac Peck, Editor
Sandra Thompson, Acting Director at the Federal Housing Finance Agency, indicated that desktop appraisals will become a permanent part of Fannie Mae and Freddie Mac’s (the GSEs) valuation product offering as early as 2022.
A desktop appraisal is a valuation where an appraiser completes the assignment from, you guessed it, their desk—and doesn’t personally inspect the subject property.
Desktop appraisals were first introduced into the mainstream mortgage process as part of the COVID-19 appraisal flexibilities offered by the GSEs from March 2020 until the early summer of 2021, when the flexibilities were discontinued.
However, at the October 2021 Mortgage Bankers Association Annual Convention and Expo in San Diego, Thompson announced to a room of cheering and applauding lenders that desktop appraisals were going to become a permanent fixture of GSE valuation strategy going forward.
The crowd’s response is indicative of the growing frustration amongst lenders around longer appraisal turn times over the last two years—as appraisers nationwide have struggled to keep up with the exploding transaction volume brought on by record low interest rates.
Thompson acknowledged this frustration in her comments, citing “friction” in the appraisal process that slows down mortgage transactions. By allowing desktop appraisals, FHFA is hoping it will alleviate some of the volume bottlenecking that traditional appraisals are creating by allowing more valuations to be completed by the same number of appraisers. FHFA is also hoping it will provide some relief in rural communities where appraisers can spend a good part of their day “driving from property to property.”
“This will help each appraiser complete more loans in a day, and also help rural communities more readily obtain a necessary appraisal when the borrower is purchasing a property,” says Thompson.
When the flexibilities were first adopted back in March 2020, many lenders did not integrate either Desktop or Exterior Only “drive-by” appraisal products into their valuation processes. Or if they did, it was only in cases where it was absolutely necessary, i.e. a borrower who didn’t want to allow an appraiser inside the premises, etc.
Part of this aversion to adopt new appraisal products came, in part, from the lenders’ uncertainty surrounding how long these “alternative” appraisal products would be accepted by the GSEs. Some lenders were obviously more nimble than others—but for those with large, clumsy, and inflexible IT infrastructure, making a quick switch over to a new valuation process (and then the prospects of switching back at a moment’s notice) was simply not in the cards.
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Thompson acknowledged this concern as well, saying that the permanent integration of desktop appraisals will provide the stability the market needs. “This certainty should allow lenders, borrowers, and appraisers alike to take advantage of the efficiency gains that desktop appraisals can provide,” Thompson says.
Following the announcement, a Senior Executive at Better.com, commented in a LinkedIn post that FHFA’s rule change will likely be “far less exciting” than what people are predicting.
“My guess is a small percent will be eligible. And an even smaller portion will actually be able to take advantage. Fannie and Freddie need to provide more detail. The devil will be in the details,” wrote the executive.
Sketch vs. Floor Plan
One notable requirement that is expected of the Desktop assignments is that they will require a floor plan instead of just a sketch. A floor plan takes the sketch a step further by including interior walls and room labeling, in most cases
The obvious question is how are appraisers going to get these floor plans?
At the Appraisal Summit in November 2021, some senior industry stakeholders suggested that floor plans will likely be available on most new construction assignments, where the builder could theoretically provide the floor plan to the real estate agents and appraiser to be used for a desktop appraisal assignment. It is also possible that in some jurisdictions, the local tax assessor or other municipal authority may have a floor plan that the appraiser could rely upon, although this is likely to be the exception rather than the rule.
Ultimately, the requirement for a floor plan in the desktop appraisal strongly suggests that appraisers will be required to work with real estate agents and/or the home seller and have them use a third-party tool to walk through the house, take pictures, and use advanced mobile app to generate a floor plan based on the agent or seller walking through the house.
For example, Incenter Appraisal Management has developed RemoteVal, a tool that uniquely allows appraisers to control the inspection using the agent or homeowner’s smartphone. The appraiser directs the individual around both the exterior and interior, conversing with them while snapping geo-verified, time-stamped photos of all the rooms. In addition to photos, RemoteVal also has a built-in digital measuring tape that incorporates 3D scanning technology and video recording, which allows the appraiser to get gross living area measurements of the interior the home, produce an exterior sketch, “revisit” and review the layout, and create a floorplan with the built-in tools or their own software—all without ever driving to the property! Given the GSEs floorplan requirement for desktop appraisals, appraisers interested these assignments will no doubt begin exploring RemoteVal in 2022.
A number of questions remain regarding how the GSEs will establish the eligibility criteria for what types of loans, transactions, and loan-to-value (LTV) ratios will qualify for these desktop valuations. For example, Thompson’s comments that such a move will provide relief on rural appraisals runs contrary to most conventional appraisal experience in the industry where appraisal waivers, hybrid appraisals, and other “alternative” valuation products have primarily been used in cookie-cutter, tract home neighborhoods where model-match comps are more readily available. In fact, over the years many senior executives at the GSEs and at major lending institutions have acknowledged the need for traditional appraisals on rural properties—which are much more likely to have unique features and require more complex analysis.
There is also the question of whether the introduction of desktop appraisals will potentially lead to a broader range of alternative appraisal products into the mix. Given that some senior executives at Fannie Mae were predicting that hybrid appraisals would become mainstream by 2022, it is actually a little surprising that desktop appraisal assignments are the first alternative product to get a permanent place on the GSE’s valuation roster. Appraisers will just have to wait to see what the future holds!
Lastly, as part of the COVID-19 appraisal flexibilities introduced by the GSEs, appraisers had a unique set of assumptions and limiting conditions that they were adding to their reports. They were also required to gather information from all available sources, including interviewing the homeowner, in order to produce credible results. Some appraisers ran into trouble with their use of “Extraordinary Assumptions” in lieu of actually conducting interviews of the stakeholders involved (Visit WorkingRE.com, search Fannie Mae Issues Warning Letters). How this new integration of desktop appraisals will modify or adopt these requirements also remains to be seen.
Desktop appraisals as a new normal is a rapidly evolving issue. Make sure you subscribe to WorkingRE.com for the latest appraisal news and information. (Visit WorkingRE.com to subscribe!).
About the Author
Isaac Peck is the Editor of Working RE magazine and the President of OREP, a leading provider of E&O insurance for real estate professionals. OREP serves over 10,000 appraisers with comprehensive E&O coverage, competitive rates, and 14 hours of free CE for OREP Members (CE not approved in IL, MN, GA). Visit www.OREP.org to learn more. Reach Isaac at firstname.lastname@example.org or (888) 347-5273. CA License #4116465.
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Send your story submission/idea to the Editor:
If the main goal is to decrease the costs of appraisals for the consumer, then focus on removing AMC’s. I personally don’t work with AMC’s but the overcharging to the consumer without being completely transparent should not be allowed. To believe this product will increase efficiency is laughable. With the average age of an experience appraiser in my state being 60+, many appraisers will retire, just as they did when management companies became mainstream. Great job Fannie Mae, we will sit and watch this play out and refuse to complete this product for an unacceptable fee with high liability.-
JUST SAY NO STRENGTH IN NUMBERS-
by JD Mccloud
How much will we be allowed to charge for this work?-
by Mark Roberts
I have been contacted by several AMC’s stating they intend to pay $50 for these desktop appraisals. There will be MORE processing time at the desk then if I did a full appraisal due to the additional research involved. I have pushed my fees higher and higher over the years. After 23 years of appraising, and a holder of 3 degrees, I will not do desktop appraisals. What is the industry going to do when large numbers of appraisers quit or retire, and the others refused these products?-
After 40 years appraising, I will not put up with this. WE NEED A CENTRAL POINT OF ACTION AND REFUSE TO ACCEPT APPRAISALS AS A GROUP FOR A PERIOD OF TIME. Is anyone else tired of being stepped on, disrespected, and treated like an ugly stepchild? I am withholding about 1,000 F-bombs in an effort to remain professional!-
by Tom Taylor, MAI, SRA
I agree with all of the comments. I’ve been in the appraisal world since 1974 and this is about the stupidist idea I’ve ever heard!! Great question about “driving the comps.” Will we still be expected to do that but we don’t have to go see the subject property??-
by Joseph Stachow Jr
Another really stupid idea by the powers that be. What is the toothless Appraisal Institute saying about all this? Nothing, they have no power except to rewrite the USPAP every 2 years, or should I call it the USPOOP? The only people that have to follow this ungodly cumbersome document collection are appraisers, agents, lenders, loan officers don’t give a rip about USPAP. I agree that if I’m signing it I’m seeing it…I can’t wait until an 80 year old widow who can barely walk has to carry around her new smartphone so that an appraiser can see the inside of her home, what a stupid idea, or have a dipstick real estate agent who doesn’t know how to count bedrooms above grade do the measuring; thjs is just another nail in the coffin of the honest appraiser who wants to put a true value on the property no matter what the agent, seller, buyer or loan officer want it to come in at.-
by Gary Belt
I’m trying really hard not to be negative about this but there are just so many reasons not to be positive here. Personally liability will rise while incomes will undoubtedly fall because they aren’t going to want to pay the same fee if we aren’t personally inspecting the subject & comps. However, his won’t be a quicker product and only someone who has never worked in the field as an appraiser would think it would be. This is really not a very well thought out idea for the industry and if implemented, it could end it once and for all. I think the people who are in a position to make these types of decisions for the industry need to ask themselves what they are going to do when there are even fewer experienced appraisers in the field because this will certainly force a lot of us out. It’s probably exactly what they want though. smh-
by Joanne Whiting
If I have to work with a property owner or realtor to use an app to generate a sketch with walls I might as well inspect it myself because I will be able to do it faster.-
My thoughts exactly.-
by Douglas Peek
Looks like 1 month until retirement. This is one of the stupidest ideas I have ever heard.-
by Paul M
It gets more comical by the day. Desktops take as long as a 1004. This isn’t going to speed up anything.-
by Wes Hasty
My past experience in performing desk top appraisals resulted in the lender/ client still expecting all of the subject property details of a full appraisal. Depending on the client underwriter I could spend as much time reasearching past 3rd party property details as I would had I just went the house and inspected it. Common requests include something like; There are no comments about the roof condition and 3rd party photos do not show the roof in detail. Please add comments about the roof condition.
These clearly show the lack of understanding of the desktop appraisal limitations. I became exasperated by the number pages of commentary, and unanswerable questions underwriters required because they did not know what to expect of a desk top. Thus I quit doing them.-
by Pat Keenan
This is all about “faster & cheaper alternatives” The potential liability of the Appraiser is never considered- Soon they will eliminate the need for any Appraiser--
The constant now is ” Bidding Opportunity”- So the AMCs can select the cheapest & quickest turn time- You can bet the “appraisal Fee” charged to the home owner is not discounted- i will not sign off on anything I have not seen with my own eyes- Which will be the demise of most of this profession
by Robert Jones
They are talking out of both sides of their mouth. Two weeks ago they move in a direction that says we want ANSI measurements. This week they want us to rely on a third party to supply basically page one and a sketch? It’s quite confusing and disrespectful.-
Having been in the business for almost 30 years, this whole situation makes me so angry; I can’t even fathom what other profession would allow the powers that be to come in and completely pick it up and turn it over without major input and concern for the professionals to whom it’s being done. For 30 years I have dealt with an industry that is so far behind in compensation compared to others it’s unbelievable. Think about it… If you work for lenders or still being offered in some cases the same fees we were 20 and 30 years ago!-
All of the comments so far are right on. The big picture is the government comes in and totally changes a whole profession not just once but multiple times. The costs now in the software and training and education are going to be astronomical for us. Not to mention USPAP changes and everything else that none of those powers are responsible for, but only appraisers as we sign on the bottom line and put our livelihoods and professions on the line.
We have just been sitting ducks over and over again, our heads turning round and round as those changes have been made without our input or consent. While the people who push the buttons just rake the money in. Just like everything else that is happening in his culture we just say OK, how much will it “cost” me and go on.
We think they AMC‘s and lenders ride us now like clerical people who are just another cog in the wheel? Wait till we have 25 or 30 of these deals sitting in our queue and we are just paper pushers. Just wait.
Sorry for the rant.
by Wendy K. Fowler
Don’t apologize for your rant – I love it and agree with it 100% and then some. To steal a bit from a Van Morrison song, “rant on, rant on, rant on , , , , “! Ultimately, they are increasing the risk factor at the same time they expect not only for us to discount our prices but want other information totally beyond the scope of a “desktop appraisal”, and, last but not least, want super short turn times. They just want to close more loans, rake in more borrower money for their coffers while paying us less, and reduce the credibility of the appraisal industry at the same time. I’m not inclined to accept any such assignments and if I were crazy enough to agree, they won’t give it to me anyway because I will not discount my fee. One last rant – so when bad loans pile up after these “innovations”, are they going come back and blame us? They always find a way.-
by Douglas Perrin
A sketch with a floor plan should not be required as part of a Desk Top appraisal. The Desk Top product is clearly designed to require less scope of work than a URAR, not more. Sketches are not readily available “at our desk” for all properties and we are not “on-site” to measure the dwelling. If the goal is to produce an appraisal faster, do not increase the scope of work . Doug P.-
This is all about removing the “human element” and thus, reasonable compensation. They won’t let a trainee with four years full-time experience & tons of appraisal classes do the inspection, but they will have a rookie real estate agent who only took two RE pre-license courses. Another industry to be taken over by robots, drones, algorithms, etc.-
50% wrong via computer generated modalities in my county’s last mass tax appeal calculations.
by Merv Norwood
I would LOL but this is even a stupider idea than FHA requiring original pics for comps…let’s see if I have this right…don’t go to the property in person BUT require a detailed interior/exterior sketch not just with rooms but interior wall dimensions??? I’m sure the typical homeowner/borrower will love the detailed painstaking amount of time this will require. I’m sure all homeowners especially older ones will love the technology required to do this. In the end we appraisers brought this kinda stupidity on ourselves by not having a united organization created years ago to stand up to this BS.-
by Everett T Clark
I’m still sticking with my position (for now). If I’m signing it, I’m seeing it. It’s my license and livelihood on the line, not the agent’s or the homeowner’s. And as I have yet to do one of these desktop 1004 reports, are we still required to drive the comps? If so, I’m still trekking to the area.-