For appraisers, safety today is very relevant with one industry veteran saying appraisers are being put in unfair positions faced with what really isn’t a choice at all.
Tom Reed, 74, owner of Washington Appraisal Reviews, Inc., works near Seattle and lives 40 miles north of the city. The Washington county he resides in is Snohomish, which is where the coronavirus initially struck.
“On March 15, our state’s governor issued the stay-at-home order and I was doing full interior appraisals up until that point,” Reed told Valuation Review. “We had those initial guidelines of staying at least 6 feet apart from people. I had to call up the homeowners to make sure they were not sick, and to ensure them that I wasn’t sick. If the owner allowed me to come into the home and I felt comfortable doing that, I’d go out.”
Reed would start inspecting outside and then come inside making sure the people inside were in one room and that the lights were on and the doors were open while he was elsewhere doing his appraisal inspection. He wouldn’t stay very long, and did this up until March 22.
Reed gets about 80 percent of his work from AMCs. In one instance, the AMC called to let him know the owner was sick but wanted him to come out and appraise in 14 days, which is the designated quarantine period for the state of Washington. Reed told the AMC he wasn’t comfortable with that and the appointment should be cancelled. He figured the owner had the coronavirus, and said he made the decision right there to stop doing interior appraisals.
Another key factor in Reed’s decision is that his wife has an underlying health condition, and he was not about to risk contracting the virus after an interior home inspection.
“The Fannie Mae and Freddie Mac guidelines making provisions for exterior appraisals under certain situations are what I started to look at,” Reed said. “The interior work was just too risky, especially in my state. I called up some of my clients letting them know what I would do. I would do drive-by appraisals, and desktop appraisals, but not interior inspections. I figured doing a drive-by was the perfect alternative solution because the appraiser is safe in the car and the homeowner doesn’t need to be scared. I don’t mind doing drive-by appraisals, I’ve done enough of them, and per FNMA, I can put desktop appraisals on the 1004 report form and the exterior appraisal on the 2055 drive-by report. I figured all the lenders had gotten this update.
“In our state, what the lenders are saying is that it’s pretty much left up to appraisers to continue doing those interior assignments,” Reed added. “That is a terrible position to put appraisers in. I thought lenders would all start doing/assigning drive by exterior appraisals and desktop appraisals, but since March 23, I haven’t done a drive by or gotten any work since.”
In Washington, appraisers are considered essential, or to be more precise, they are “essential critical infrastructure workers,” according to Reed, and are placed in the essential financial sector category.
“For appraisers, I would tell them it’s not worth it to do interiors, because for whatever fee you’re getting right now – especially to do them during this critical time when the virus numbers are supposed to hit the peak – it’s just not worth it. Again, I’m upset that appraisers have been put in this position.”
Reed said that put appraisers in a position of a “take it or leave it” option, which he believes is no choice at all.
“Adapting to the guidelines in place by Fannie and Freddie will allow appraisers to do some refinance exterior appraisals from the 2055 report form. Certain refis and purchases, as I understand it, could possibly have the lender taking on more risk if something did go wrong regarding a drive by or desktop appraisal. In my opinion, with all of the information we have pertaining to the MLSs, pictures, and the fact that we can do interviews with the homeowners to get information about any remodeling or updates of the interiors, the risk to lenders is minimal.
“In nine times out of 10, if it doesn’t look that great from the outside, it probably doesn’t look that great inside,” Reed said. “Some lenders still say the drive-bys are too risky but I don’t believe so, and they are putting the risk on the appraiser’s shoulders. It’s not right.”
When he was still doing a few interior assignments, Reed admitted it was awkward going into homes. Homeowners look at you like you have the plague, and you think they might have it, he said.
Reed said that he never had an owner feel hesitant about appraisers doing a drive-by; the problem lies with the lender.
“The owners want to get the loan and are not really privy to the process,” he told us. “They know they need an appraisal and whether it is a drive-by method over an interior inspection, they typically don’t care. Owners that might make an issue would relate to any major remodeling they did on the inside, and fear a drive-by would not ensure them getting credit for such indoor improvements.
“The owner in that regard has a point,” Reed added. “Still, on a drive-by, you’re supposedly able to call up the owner for all of the necessary information and to have the necessary information from other credible sources to give a credible opinion of market value. On a purchase, you get pictures and a description from the listing agent. And believe me, that agent will put everything nice about the inside in that listing. On the refis, that’s a different story, because there, an interior remodeling may have been done one to five years ago and the information may not be available. I always call and talk to the homeowner before I go out to the property and most owners are honest about things. So again, I see issues potentially being raised by lenders on a refi, but there should be less problems with data on purchases.”
Reed, though, says some appraisers are continuing to do interior appraisals because they may have to, and he can’t blame them for that. There should be a universally accepted method during this time, he said, because nobody truly knows how long this is going to last.
Reed then discussed what he anticipates when that return to “normalcy” is.
“It depends on risk, I think,” he said. “The technology part of the appraisal profession will speed up. I work out of my home and am a one-person company. Since 2008, I have been working out of my house, so I’m very familiar with working from home. But how will those who have never had to do it before adapt in the months to come?
“I have a feeling that people, who have offices with many employees will be the most impacted,” Reed added. “More appraisal companies with a larger number of employees could disappear and merely go the way of permanently working from home because the advanced and quicker technology will allow them to do so. In short, the post COVID-19 era may find businesses going to one-person operations, I think.”