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Appraiser Shortage Makes 14 Day Close Impossible; “Exterior Only” And “Desktop” Does Not Help

A new home for sale waits for an appraisal during the appraiser shortage for an exterior or desktop only appraisal.

The shortage of qualified appraisers is worse than ever for several reasons:

  1. Demand exceeds supply. The continued surge in both refinance and purchase transactions has created a situation where the demand for appraisers far exceeds the supply.
  2. COVID concerns. B/c of COVID concerns, many appraisers are justifiably reluctant to accept orders requiring physical (interior) inspections. This is exacerbated by the fact that many appraisers are older and at higher risk when it comes to COVID.
  3. More stringent investor requirements. Some jumbo investors that buy loans from mortgage banks have very stringent requirements for appraisers now, such as 10 years of experience, “certified” level only, and “lives within 20 miles” of subject property.
  4. Too few new appraisers entering the field. This has been an issue for years. Even though many appraisers love their jobs, they often do not encourage others to enter the field b/c of the risks associated with it. These risks include increased automation that could diminish appraiser roles significantly (although this concern has been around since the 1990s and has yet to come to anything) and the cyclicality of the business (as soon as this refi boom ends, the demand/supply equilibrium will flip and there will again be far more appraisers than transactions).

RUSH FEES NOT ENOUGH

Even though we pay substantial “rush fees” (that we do not pass on to borrowers), we still have great difficulty finding available appraisers in many areas. In addition, no matter how much we pay, we often can’t get appraisals back in less than ten calendar days.

CAN’T CLOSE IN 14 DAYS (NEED 17 DAYS NOW)

In order to close in 14 days, we need appraisals back in about eight calendar days. This gives us enough time to submit the appraisal to underwriting for review, to chase appraisal conditions if necessary, and then to get CDs issued and loan docs drawn. Eight-calendar-day turn-times are not even close to an issue in “normal times,” but right now, we simply can’t guarantee it.

Hence, in light of the appraisal shortage, we are quoting 17 days for our fastest closes.

DRIVE-BY’S, EXTERIOR ONLY AND DESKTOP APPRAISALS DO NOT SOLVE THE PROBLEM

The COVID crisis forced lenders and investors to lighten up on physical inspection requirements, and our Appraisal Manager has tremendous discretion when it comes to deciding on whether to order a full appraisal (with a physical property inspection) or to just order an exterior-only (“drive-by”) or even a desktop (no field inspection at all) appraisal.

This does not solve the appraisal problem though for two reasons: (1) appraisers are so backed up that even exterior-only and desktop appraisals are taking much longer; and (2) appraisers often need to do physical inspections in order to see and photograph the upgraded improvements and amenities that are necessary to support the contract price.

With buyers bidding so aggressively, appraisers need all of the evidence they can get in order to support many purchase prices. Appraisers, however, are sometimes reluctant to rely only on MLS descriptions and photos when appraising without a full inspection, as the MLS and other data sources can be misleading at times. Appraisers rightfully don’t want to risk their licenses by relying on data they cannot verify.

WHAT IS JVM DOING TO ALLEVIATE APPRAISAL PROBLEMS

We are very aggressively addressing this problem and expect to have it resolved within the next 30 days (so we can again offer 14 Day Closes).

  1. Higher Rush Fees: Even though many appraisers are simply too busy to take more appraisals irrespective of the fee, we are nonetheless increasing our rush fee substantially in an effort to capture the few appraisers who are available.
  2. Revamped Appraisal Pool/Process: We are frantically adding more qualified appraisers to our stable and we are revamping our appraisal process overall in order to increase efficiencies in other ways (better software, faster order placements, better tracking, etc.).

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167