REQUIRED READING: Mortgage valuations are an exercise in judgment and definitely not something that can be defined in absolute terms. While the exercise of determining a property's value is subject to a thoughtful analysis of factors, it is more of an art than a science.
To bring out more of the color in some of the gray areas in the valuation process, successful appraisers and appraisal management companies should apply these 10 best valuation practices to ensure the accuracy, integrity and quality of appraisals and valuation reviews.
1. Issue assignments the same day as received unless it is after normal business hours, and confirmation of an accepted assignment is expected within 24 hours of placement. It is best to use a system that automatically assigns orders to a state-licensed appraiser within 24 hours, taking into account the distance of the property to that appraiser, the quality of that appraiser and turnaround times. In terms of distance, select an appraiser that is within 15 miles from the subject property because the lender will perceive the appraiser as more of an expert in that particular market area based on proximity and familiarity of the property's surrounding areas.
Any time appraisers exceed the 15-mile radius limit, with the exception of rural areas, lenders question the validity of the report and the appraiser's knowledge of the property's market area. In terms of the quality of the appraiser, orders should automatically be assigned the day of receipt to the best appraiser based on past performance working with that appraiser, so that you already know their work product, expertise and average turnaround time. An unreasonable turnaround time can negatively impact the accuracy of the appraisal, not to mention the loss of a deal for the client.
2. Gather and analyze data in such a manner as to identify potential problems, develop appropriate solutions and present to the lender in an understandable format. In order to present a realistic time frame to the lender, the property must be carefully researched to make sure there is nothing that would prevent the appraiser from meeting deadlines. This research should be conducted within 24 hours of assignment. Also, make sure there are no inconsistencies in the maps used to identify the location of the property, appraisal photos, and in the appraiser's signature/license and report dates.
3. Communicate sufficiently to inform the lender about deadlines, delays or any other issues that prevent meeting deadlines. Communication is one of the most important aspects of the valuation process. Follow up regularly with lenders to ensure every order is on track and that there are no surprises. Make ‘due today’ and ‘due tomorrow’ phone calls on every single order – if there are any hiccups or delays in the process, you can give the lender notice as soon as possible and explain the reasons for the setback and what you intend to do to mitigate the issue.
4. Ensure that all requirements are met in their entirety prior to delivery to the lender. For the onboarding of any new client, it is imperative to get all the requirements up front so there is no mistaking what is expected.
5. Ensure any and all necessary revisions are completed within 24 hours of request. If there is an underwriting condition or a special request from a lender on a specific file that was completed, assign a team of experts to specifically meet those underwriting conditions and track the order to meet the designated time frame.
6. Protect the company through effective and efficient processing of vendor applicants to ensure proper licensing, insurance and area coverage. Servicers must conduct thorough due diligence on every appraiser partner, gathering all the necessary background information to ensure they are experienced and qualified.
When reviewing applications, check against state registries and check for disciplinary action, as well as valid and current licensing. It is vital to make sure that you are partnering with the right appraiser that does not have a past history that would adversely affect performance.
7. Answer and respond to all inquiries the same day as received unless received after normal business hours, in which case they will be responded to the next day. This business necessitates quality customer service. Never keep lenders waiting on the status of a file – a good rule of thumb would be to respond to lenders within two business hours. Even if you do not know the answer, acknowledge their inquiry and let them know you will get back to them within a reasonable time frame.
8. Professionally interface with borrowers, vendors and associates through excellent customer service skills. Again, it is essential to respond to partners in a timely manner, keeping everyone abreast of the current status of the file. Update lenders and partners through your website, so that everyone has access to status updates 24/7. On top of that, send regular emails indicating any status change. This business is about being proactive as opposed to reactive.
9. Search for and recommend state-of-the-art technology, which allows for growth in production levels with minimal growth in staffing levels. In today's tech-savvy world, it is paramount to utilize a robust valuation system that interfaces with multiple parties to consistently push for efficiencies. This enables more in-depth communication with partners through technology (using screen scrape, FTP sites, etc.). Also, using automated valuation model technology as part of your quality control process can help detect fraud and objectively measure the integrity of the appraisal.
10. Create and maintain matrices that effectively reflect performance requirements within the service level agreement. Schedule monthly calls with lenders and provide them with a detailed performance report reflecting all the activities completed in the previous month and all the pending activities to expect to be completed in the next month. Constantly keep lenders fully informed throughout the process, and strive to improve performance levels on a monthly basis.
The implementation of these 10 best practices will enhance the quality of the appraisals and bring order and a more thoughtful analysis to the valuation process. When dealing with appraisals, every day is judgment day.
Roger Beane is CEO of LRES, based in Orange, Calif. He can be reached at (714) 520-5737.
