FHFA and desktop appraisals in 2022
Desktop appraisals were introduced in March of 2020 in response to the global pandemic, which allowed appraisers to complete the appraisal without entering the subject property.
During the Mortgage Bankers Association Annual Conference and Expo in San Diego earlier this year, Sandra Thompson, the acting director of FHFA, announced that Desktop Appraisals would be brought back as a permanent solution in early 2022 for purchase transactions and would shortly make their way into refinance transactions.
The problem within the appraisal industry has been a shortage of appraisers, which has been a hot topic over the last decade. I believe new appraisers would benefit our profession greatly but it’s not the ultimate solution which we will cover shortly.
In 2016 we experienced a heavy spike in mortgage originations and demand for appraisals was at an all-time high. During this time, I would estimate that the PIW (Property Inspections Waivers) did not exceed 10%. Data from the MBA shows that origination volume in 2016 was 2,052 Bil, while 2020 doubled to 4,108 Bil. In 2020 PIW’s were estimated to have increased to approximately 40% of all transactions and the demand was still very high for the appraisal industry to keep pace.
Is the shortage of appraisers the real issue? Will permanent desktop appraisals be the solution? Yes, a shortage of appraisers is indeed a factor but not everywhere. Keep in mind that some areas of the US have a heavy saturation of appraisers while others have a sparse number of appraisers for multiple counties. Typically, more rural markets will have a shortage of appraisers and longer turn times which result in price increases. The permanent desktop appraisal solution in early 2022 will help in these areas as the distance that the appraiser travels to reach the subject property can exceed 100 miles. Most appraisers are selective of certain areas when they have multiple inspections because they want to make it worth their time. This impacts the customer because they will have to wait 2-4 weeks for the appraiser to simply inspect the subject property.
Although the desktop appraisal serves as a solution for the shortage of appraisers in rural areas of the country, it will have much development to undergo in terms of technology to ensure that it can assist the appraiser and dramatically speed up the appraisal process. Today, we have technology providers that can assist in collecting real-time photos such as ProxyPics and we have data providers that can import data right into the appraisal report with companies like ACI, PropMix, Spark, Appraiser Genie, and DataMaster to name a few.
In conclusion, firms and appraisers that take advantage of the new flexibilities and technology that are available, will have the ability to increase their efficiency in completing more appraisal reports within the evolving industry.