Appraisal turn times have historically been a pain point in the mortgage process and in boom times, when transaction volumes soar, turn times tend to be one of the first casualties. In 2020 and 2021, for example, some markets saw appraisals take as long as three to six weeks.
Now that the market is less frenzied, turn times are improving. Depending on the region, people are able to get appraisals done in under 10 days for the most part, according to Reggora CEO Brian Zitin.
“I’d say that the best and most efficient lenders are in the five-to-seven-day category, and the average lenders are in the seven to 14-day range for appraisals today,” Zitin said.
It’s often been difficult for appraisals to keep pace as the rest of the process becomes more streamlined and efficient. But that’s starting to change, and it’s not just the result of less volume. What’s going on?
New products speeding up the process
One reason appraisals are taking less time is the adoption of different appraisal models.
“They give you the ability to scale the amount of appraisals you can do with the current appraiser population that you have, and that’s an important part of all the modernization initiatives that have been going on,” said Scot Rose, chief innovation officer at Class Valuation.
For instance, desktop appraisals became a permanent option for certain loans in March 2022, and along with hybrid appraisals, they’re reducing cycle times significantly.
“We are completing purchase appraisals today in two to three days on a regular basis using that product, but it has to be supplemented with technology and data collection in today’s environment,” Rose said. “We’re having really high success using these products to expedite the purchase appraisal transactions compared to a traditional process.”
Another appraisal innovation is Freddie Mac’s ACE+ PDR product (automated collateral evaluation plus property data report) solution, which involves an inspection-based waiver and has been in effect since July. While the GSE requires users to go out and collect property data, there’s no appraisal needed in most circumstances after that data has been collected, cutting down on cycle time.
There are only about 40,000 active, licensed appraisers right now, a limited number when compared to the number of transactions that are taking place. Alternative valuation models and products enable better use of the appraisers that are available.
“We are effectively increasing the supply of people who can go and facilitate inspections in the industry,” Zitin said. “And whenever you increase the supply, you’re going to make the logistics more efficient. So that’s how it’s going to translate into faster turn times holistically.”
But what if we want to close even faster?
Technology is helping every step of the mortgage process become more efficient, to the point where some are estimating that closings could take place in as little as 10 days in the future. Can appraisals keep pace?
“Talking about 10-day closings, you need a really fast appraisal process, and that’s where we’re focused on getting purchase appraisals done in 48 hours so that that can happen, utilizing these tools that are now available to us through the policy of the GSEs and others,” Rose said.
Low volume can make it appear that we’ve solved the problem of long appraisal turn times, but the industry can’t become complacent only to be hit with a nasty surprise once volume picks up again.
“I think if you surveyed right now, you’d probably see less people complaining about appraisals being that blocker for them,” Rose said. “They can be very quickly again.”
Best practices
With that in mind, what are the best practices to speed up appraisals and keep them moving quickly even when volume booms again?
The No. 1 tip is to take advantage of the new appraisal products that are available.
“Know where the future is going,” Rose said. “Be prepared to leverage it and to leverage these tools.”
Secondly, make sure you have the right technology in place. This will not only help you effectively use those new products, but manage the appraisal process overall.
“If you don’t manage the pipeline of appraisals well, you’re not going to be able to respond effectively,” Zitin said.
And finally – perhaps most importantly – be sure that you’re working with the right partners and vendors. Your partners should also have the technology in place to support these new products and processes.
“If you’re working with the right people who apply the right processes and technology to those products, you can actually achieve extremely fast turn times,” Rose said.
If we want to continue to see faster turn times regardless of market volumes, the industry has to embrace change and work to adopt new products now, before things heat up again.
“It’s important for the industry to understand not to shy away from these solutions, because they can make a real, positive impact for all of us if people lean into it,” Rose said. “You’ve just got to lean into it in the right way with the right partners.”