State of the Appraisal Industry (August 26, 2020)
In the spirit of open and timely communication, Value Connect is pleased to share the latest news about what's happening in the real estate appraisal industry.
August 26, 2020 (Update)
What have we learned?
Countries went into lock-down when COVID-19 started escalating around the world. Essential services (and products) had to figure out new ways of delivery. The appraisal industry was no exception. I recently hosted a panel of appraisers via webinar with one of Canada's leading lenders and we asked the panel what lessons they learned that can be applied again, should their be a second wave of COVID. Here's what they had to say:
- The new Modified Full Inspection appraisal report, while not ideal, does work. This is the type of full appraisal report where the homeowner or listing agent supplies interior pictures of the property to the appraiser. The general concern among appraisers and lenders is that homeowners don't disclose shortcomings of the property.
- Having protocols for the use of protective clothing is important. Wearing rubber gloves, face mask (or a shield), and having homeowners turn on all lights and open doors prior to the appraiser arriving will become standard procedure.
- A screening questionnaire should be asked of the borrowers or sellers to ensure they don't show symptoms of COVID.
- Communication is extremely important. Mortgage representatives and lenders need to communicate the new appraisal process to customers, including the screening questionnaire.
Scientists tell is a second wave is a certainty. While we're hopeful that we don't go into a full lock-down again, we can't recommend strongly enough that everyone take steps needed to prepare in case it happens again.
August 5, 2020 (Update)
State of Appraisal Industry
Appraisals are mostly back to "business as usual" in most markets across Canada. There are a few things to remind your customers about in order to ensure timely completion of reports:
- The appraiser will ask questions related to COVID-19 prior to booking the inspection;
- They'll ask similar questions when they arrive at the property if someone is present;
- They'll ask that all doors be opened and lights turned on so they can limit contact with surfaces at the home;
- Be sure the borrower or listing agent sends medium quality pictures of every room in the property they need to be sent to the appraiser because of health / COVID-19 concerns.
July 9, 2020 (Update)
Question Mark (?) on the Horizon
Most regions that have relaxed social distancing measures or re-opened non-essential businesses are seeing an increase in COVID-19 cases. The US, for example, has recently reported the highest number of daily cases numerous times in the past 2 weeks. This leaves many of us to wonder what the near future will look like, from an "open for business" standpoint.
We urge all business owners, including our valued partners and customers, to take steps now to ensure business continuity in the event of another mandatory lock-down. This includes putting tools in place to work remotely, having systems to provide timely services to customers in a safe manner, and a financial and business strategy in case revenue drops off.
The recent resurgence of COVID cases leads many to believe strict social-distancing practices will return. While we hope this isn't the case, being prepared for this possibility is in everyone's best interest.
June 30, 2020 (Update)
The Show Must Go On
It appears that real estate is going to end the month on a strong note. We're seeing a fair bit of activity in most areas across Canada. Appraisers are rising to meet the increased demand.
Appraisers continue to update us - with greater numbers of them telling us they're going into properties to complete physical interior inspections. This is good news for lenders who prefer this type of inspection over ones completed remotely by video.
It's important for everyone that's part of the lending "value chain" to take a step back and look at what worked and didn't work during the lock-down. Taking away those lessons will make everyone better prepared for a similar event should one come in the future. (Some scientists are talking about the strong possibility of a 2nd wave, and return to lock-down measures.)
As always, please stay in touch with us. We appreciate updates on what's happening in your area. Lastly, happy Canada Day. Enjoy the holiday!
June 23, 2020 (Update)
More Appraisers "Go In"
We continue to receive messages from additional appraisers updating us on their status. More and more appraisers are going into properties for physical interior inspections. Most ask the listing agent or homeowner a few questions to learn if it's a low-risk situation. Be sure to tell your customers to respond promptly to appraisers requesting that information.
There are small coverage gaps in a few across Canada. On the whole, things are returning to normal at a gradual pace.
June 11, 2020 (Update)
Some Appraisers "Going In"
Some appraisers started to complete Full Appraisals with an on-site interior inspection. Expect this trend to continue as provincial governments allow businesses to open.
Most appraisers we've spoken with prefer this method of appraising, although it isn't yet possible in all cases. They've cited a number of challenges with relying on others for interior pictures, including the difficulty some borrowers and listing agents have with getting providing good quality pictures in a reasonable time-frame. Essentially, they felt "held-up" by others.
Smart social-distancing practices are used in these cases and we expect more and more appraisers to complete on-site interior inspections in the coming weeks.
MAY 20, 2020 (Update)
Modified Full-Inspection (ModFI) Reports
ModFI reports have become the general practice for appraisers with the industry practicing social-distancing recommendations from various public health organizations. It will be interesting to see how quickly the industry reverts back to Full reports with on-site interior inspections of properties now that social-distancing requirements are being relaxed.
Appraisers looking to get a jump on the competition and start offering Full reports with an on-site interior inspection should follow health and safety recommendations and protocols set out by public health agencies. These include the use of face-shields, non-medical masks, disposable gloves, protective exterior clothing, and the like.
Mobile mortgage sales forces and brokers are feeling the pinch of a diminished spring housing market. They're looking for some light at the end of the tunnel in the form of relaxed public distancing requirements so homebuyers can view homes. With unit resales down approximately 55%, there's a long way to go to get back to "normal." I suspect many tenured mortgage professionals will need to shift their marketing strategy towards refinances.
March 28, 2020 (Update)
If you prefer to watch, not read, please refer to our video published in conjunction with this article. WATCH IT HERE
Real estate appraisal is considered an essential service because it supports the financial services industry. Mortgage financial and related real estate transactions depend on property valuations to keep things moving. That's why governments deem appraisers as essential service providers.
Health & Safety
Value Connect's primary concern is for the health and safety of all industry stakeholders. That means everyone: Appraisers, Consumers, Lawyers, Lenders, and Mortgage Brokers / Specialists. All participants should take precautions to ensure their safety given how contagious COVID-19 is. Ask questions and meet virtually whenever possible.
There's some miscommunication about what an appraiser can and cannot do. Some people think that appraisers are not allowed to complete an interior on-site inspection of a property. THAT IS NOT TRUE. Appraisal associations have NOT placed restrictions on what an appraiser can and cannot do, rather, they strongly recommend against on-site inspections and ask appraisers to follow local health authority guidelines.
Some innovative companies like ours have found ways to help appraisers complete reports without going into properties when that is the best course of action. Value Connect created the Modified Full-Inspection Report that is the next best thing to a Full Report. The main difference is appraisers conduct an interview with the borrower or listing agent via phone or on-line, and obtain current (dated) photos by email, etc. The appraiser visits the house to do an exterior inspection.
Setting Expectations, Know What You Want
It's our experience that the appraised value of a home is most accurate when someone does a full on-site inspection (inside and out). The lack of interior inspection makes it difficult for any professional to assume the interior condition is anything better than average. Many above-average homes may well appraise under their true value as a result.
If speed is the key for a transaction, Modified Full-Inspection Reports are a better choice compared to full reports. There's been a significant drop in the number of appraisers completing full reports, and the turnaround time has increased as a result. If the most accurate value is important, you're better off with a Full Report and waiting the extra time. Be sure to set proper turnaround expectations with your clients and stakeholders.
LENDERS: Be sure to set clear expectations with stakeholders to minimize rework and delays.
We're Open, Coast-Coast-Coast
Value Connect is offering appraisal services across the country. That includes Full , Modified Full-Inspection , Drive-by, and Desktop reports. We ask our appraisers to ask pertinent questions when setting up inspections and to decline assignments when they believe they safety is at risk.
Please contact us if you're a lender and want to add Value Connect as an approved supplier.
Keeping Communications Open
As things change quickly, and it's possible things will get worse before they get better, it's important for us to keep the lines of communication open. Please contact me if you'd like more information about anything in this blog/video or want to provide an update.
CEO, Value Connect Inc.