Inflation, high interest rates, declining home sales and global economic uncertainty continue to be top-of-mind for real estate lenders and consumers in 2023. The past few years have been full of unexpected challenges for real estate lenders so now is the perfect time to reflect, reprioritize and set business resolutions for the rest of the year.
To help guide your 2023 resolutions, we organized the Real Estate Lenders 2023 Playbook: Appraisal Management Edition, which focuses on ways lenders can drive more value from the appraisal management function.
1. Embrace appraisal modernization and technology to streamline operations. For most lenders, the appraisal process is an afterthought – a mostly behind-the-scenes function that is considered necessary but is often inefficient and costly. Legacy appraisal management technology lacks the flexibility, scalability and ease of use required to optimize appraisal processes. So, it is no surprise that appraisal modernization is one of the biggest priorities for lenders this year. A March 2022 study from Fannie Mae found that 94% of lenders say appraisal modernization efforts are valuable to the industry. Appraisal modernization helps shorten loan cycle time, enhance appraiser capacity and lower consumer/borrower cost. The study goes on to state that appraisal modernization “helps lenders, appraisers, and risk investors assess and manage collateral risk more effectively, while also benefiting consumers via greater appraisal accuracy, lower costs, and increased velocity of loan decisioning.” We believe appraisal modernization allows appraisers to take on more work without sacrificing the quality of an appraisal. This is largely due to the capabilities modern appraisal management technology platforms deliver. Appraisal management technology allows appraisers to eliminate most of the manual work involved in fulfilling an appraisal order – like scheduling times for home inspections or driving from location to location to collect property data – because that information can be gathered digitally. Digital floor plans, public property data and interior and exterior photos of the property can be combined with an appraiser’s market knowledge and expertise to conduct a home valuation. The result? Appraisers can process a higher number of appraisals (and earn more income), and lenders can dramatically reduce turn times and increase the number of appraisals they can manage simultaneously.
2. Find strategic ways to cut costs. Finding ways to reduce costs will always be top-of-mind for businesses. According to Fannie Mae, “[in 2022,] cost-cutting became lenders’ top priority for the first time since 2017.” Getting lean and reducing high costs continues to carry over into 2023 – especially as inflation and mortgage interest rates continue to rise. However, there is a big difference between universally slashing budgets, eliminating redundancies and asking employees to do more with less, versus taking a more strategic approach to improving operational efficiency via process automation and optimization. Strategic appraisal process automation and optimization enables lenders to reduce overhead and lower costs without sacrificing quality and compliance. Appraisal management technology can be configured to take the burden off individual team members managing the lifecycle of an appraisal order – including appraiser selection, appraisal status tracking, appraiser and borrower communication, compliance safeguards and invoicing. This frees up your team to spend more time delivering an incredible consumer experience and driving new business.
3. Prioritize consumer confidence and customer experience throughout the appraisal process. Consumer confidence is at an all-time low. Fannie Mae released November 2022 survey findings saying “only 16% of respondents indicated that now is a good time to buy a home – a new survey low – while the percentage who believe now is a good time to sell a home decreased sharply from 59% to 51% in October.” The study also calls out “persistently high home prices and unfavorable mortgage rates” as two of the biggest concerns. As a real estate lender, you do not have control over market inventory, housing prices or interest rates. But you do have control over how consumers perceive you. Continuing to establish trust and put customer’s interests first is one of the most critical priorities for lenders in 2023. Appraisal management technology serves as an extension of the trust you have already built with your borrowers. The technology adds a layer of transparency to the appraisal process that gives concerned consumers the assurance they need to know their loan process is going smoothly. A single view into appraisal order status across all loans can deliver lenders a strategic advantage in multiple areas, including efficiency, borrower experience and compliance.
4. Tap into data and analytics for more informed decision making and strategy planning. Leveraging data and analytics to not just report on past performance but to model future trends and strategies is top-of-mind for the tech-savvy lenders. With the right appraisal management technology in place, you gain instant access to a wide array of valuable appraisal data – including appraisal turn times, appraisal revision rates, appraiser skill sets, geographic trends and more. With this information, you can strategically plan the appraiser skillsets and locations needed to support your 2023 business model and potentially identify opportunities to expand into new markets or geographies. For even greater benefit, lenders can leverage A.I. to evolve slower performing processes and appraisal assignments for optimal efficiency and accuracy. Finally, going beyond traditional reports, lenders can leverage dashboards and modeling tools to enable better visualization across the entire appraisal management function, supporting better, more informed decisions.
5. Ensure your workforce and extended team of appraisers are happy and engaged. Gallup’s most recent poll of employee engagement tells us that only 36% of the workforce is actively engaged… and 17% is actively disengaged. Everyone else falls somewhere in-between. While the survey measures responses from all industries across the U.S., real estate lenders should still take note. The most successful businesses are invested in employee career growth and experience – and real estate lenders should be too. Everything we have covered in this playbook revolves around embracing appraisal modernization, technology and process automation. By leveraging modern appraisal technology to achieve lower costs, faster turn times and greater transparency – your teams will benefit from real-time communication, on-demand access to appraisal information and complete transparency and control over the appraisal process. Plainly stated: your internal team will have more resources, feel better supported, learn new skills, expand their expertise and feel empowered at work. Your appraisers will have the tools necessary to complete more appraisals and earn more revenue without having to double down on time spent working.
The real estate appraisal industry will always be dynamic, and keeping up with the pace of change should always be a priority. But 2023 will be a defining year for real estate lenders looking to accelerate growth amidst unprecedented market, economic and buyer uncertainty.
If these priorities resonate with you and you are thinking about improving and modernizing your appraisal management function, let us know. AppraisalWorks appraisal management technology platform can help you deliver on your appraisal modernization goals and drive greater efficiency, profitability and growth in 2023 and beyond.