Desktop appraisals – a temporary pandemic policy now made permanent – is less than a full on-site appraisal yet more than just software used for quick online estimates.
WASHINGTON – The Federal Housing Finance Agency (FHFA) Acting Director Sandra Thompson announced at the Mortgage Bankers Association (MBA) conference in San Diego that it will allow lenders to use desktop appraisals for conventional loans. These alternative valuation products will improve the homebuying process for many borrowers.
During the COVID-19 pandemic, the FHFA began allowing more flexibilities, such as desktop appraisals, which means an appraiser can perform the appraisal valuation from their desktop without a physical inspection of the property. But what began as a temporary alternative during stay-at-home orders is now a permanent option.
“When it comes to ‘alternative appraisal methods,’ the spectrum of products really varies by the level of expertise of the person involved in the valuation, as well as the level of scrutiny in the inspection/analysis process,” said Brian Zitin, CEO of Reggora, a tech company providing services to lenders and appraisers. “On one end of the spectrum is an AVM, or automated valuation model, where no human is involved and there is no inspection of the property. On the other end of the spectrum is a full appraisal which requires a licensed appraiser to do a complete onsite inspection and full report.
“A desktop appraisal is somewhere in the middle where, although there is no onsite inspection being done, there is a licensed appraiser doing the actual analysis of a valuation,” Zitin said. “This makes a desktop appraisal a more robust solution compared to AVM, as it involves human intelligence to manage additional complexities.”
How do desktop appraisals help homeowners & homebuyers?
Desktop appraisals are changing the homebuying and refinance process as technology infiltrates the real estate industry. And this latest update provides several benefits to homebuyers and homeowners looking to refinance their homes.
It takes less time to close
Currently, closing a mortgage typically takes between 30 to 45 days as lenders go through the process to give homebuyers or homeowners the new loan. Mortgage experts say many closing delays stem from appraisals. However, regulatory changes and technology improvements could reduce the time it takes to close a home loan.
Desktop appraisals save money
The current average appraisal can cost anywhere between $200 and $600. This depends on the size of the home, the type of home, location, property condition and how much time is required to appraise it. Since desktop appraisals eliminate the need to visit the site and reduces the work needed from the appraiser, it also decreases cost to consumers, Zitin said.
Appraisers cautious about new FHFA rule
Technology companies and lenders are optimistic about the new rule allowing desktop appraisals, saying it is a “positive development that should hopefully continue to lead to more transformational modernization of the appraisal process,” Zitin said.
However, some appraisers are not as excited about the change, fearing the increase of technology will eliminate the need for a human appraiser and increase the risk in the housing market.
“Appraisers, however, may feel threatened that technology will continue to erode away at their profession, and so there has been a more skeptical response from appraisers that this could lead to poorer quality valuations for the industry and create more systemic risk akin to the previous housing crisis,” Zitin said.
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