By Ian McKendry
The housing market is starting to stabilize and has actually been one of the few bright spots for the US economy over the past few months, but structural challenges and tight lending standards have been holding back some sales.
One issue in particular that agents have been confronted with is appraisals that come in below what a home is actually worth.
Problems with Appraisals
“The general complaint appears to be now that prices are actually rising faster than people thought, appraisal is lagging behind, so the appraisals are coming in lower than say cash buyers are willing to purchase for,” National Association of Realtors Chief Economist Lawrence Yun said during a press conference announcing the August existing-home sales numbers.
Robert Denk, assistant vice president for forecasting and analysis at the National Association of Home Builders after the September NAHB home builder sentiment index was released noted that “”there are still ongoing difficulties with appraisals,” adding that when deeply discounted foreclosed homes are used in the appraisal process for a new home, it causes the appraisal to come in below what the true value of the home is worth.
New Appraisal Software From FNC and Bradford Technologies
Some of the companies that provide appraisal software to mortgage servicers and lenders are working to develop new technology to speed up and improve the appraisal process. For instance, FNC Inc., a company that provides appraisal software, announced this month that it received a patent for its appraisal review tool, Appraisal Score. This tool identifies appraisals that might need further review versus ones that are safer by assigning an appraisal a score between 0 to 1,000. Using that score, a lender can decide whether an appraisal will be automatically approved or will require a manual review.
Bradford Technologies, another appraisal technology company, announced in July it was going to start providing enhanced appraisal reports that included more charts and statistics to enhance the reliability and accuracy of valuations. Mortgage technology firm SharperLending announced this month that it would enhance offerings with an interactive map to help lenders make sure they have quality appraisers and determine where they might need to bulk up their coverage.
There are quality borrowers who have not been able to get a loan because of a low or delayed appraisal, but hopefully as the technology improves, hopefully, more borrowers will be able to get the loans they need.