One of my roles at the company is to look for clues about what is going to happen to the industry in the future. There’s a great scene in the movie "Margin Call" where Jeremy Irons tells a staff member that his job “… is to guess what the music might do in a week, a month, and a year’s time. That’s it, nothing more.” 

All business owners, small and large, should take enough time to slow down and assess where the market is going. It’ll give them direction about changes they should make in their business. Better to be proactive than reactive. Here’s what my research is telling me:

• We are a year away from experiencing the true economic impacts of COVID-19. Mortgage defaults will almost certainly rise dramatically in 12-18 months;
• Real estate values will likely drop in 12 months. Supply is already starting to outpace demand, which generally puts downward pressure on values. We’re in a balanced market today. Prices will fall if supply continues to rise faster than demand. A significant increase in defaults will lead to more supply;
• Some people think that we’re through the worst of COVID-19, and we’ve already entered the “second wave.” I believe we’ve not made it through the first wave, and that the 2^nd wave is coming. Research says as much ~ watch this news clip from The National HERE.

So what to do?

One key is to take proactive steps to prepare your business for a potential shift. The lock-down we recently experienced may end up being a practice round for a potential second wave. Some ideas include:

• Shift to virtual service delivery. Some companies already had a significant portion of their workforce working from home. Some required staff to work from an office. Being able to provide a great virtual experience to customers is a must.
• Completing all business in a virtual environment requires enhanced security and privacy protection measures, and training. Be sure to train staff about email phishing scams and safe document transmission tools.
• Marketing and sales in a virtual world is different than in person and belly-to-belly sales techniques. Get in front of this. Social currency is the new currency. Watch the following video if you don’t know much about the currency of social trust: https://www.ted.com/talks/rachel_botsman_the_currency_of_the_new_economy_is_trust

The future of appraisals and appraisal management is an interesting one. Many players in this space have been quick to build out massive networks of appraisers to deliver services across the country. While this strategy has its benefits, I believe the future of appraisals doesn’t hinge on providing lenders with a massive army of appraisers.

Think about it this way: the top 20% of the industry complete 80% of the work. Does it matter that you’ve got thousands of appraisers in your network when a fifth of them provide 80% of the reports? If given the opportunity, they could likely handle 95% of the assignments.

Take it a step further: Wouldn’t you rather deal with the 20% of appraisers that deliver high quality reports in a reasonable time-frame, every single time? Those same appraisers are looking for good customers that they can focus on, as opposed to working for multiple appraisal management companies (dozens of lenders) and being pressured about turnaround, fees and quality.

The next 12-18 months will be interesting. I see a shift away from appraisal management companies to platforms that give lenders the ability to be their own AMC, adhere to regulatory requirements, and embed quality control in every step of the appraisal process.

Onward ...