How Time Actually IS Money in Your Appraisal Operation

At Reggora, our mission is to make fast, high-quality appraisals the norm for mortgage lenders. Along the way, we’re able to solve problems that lenders often don’t realize they can fix. In part four of our value series, we'll show how traditional, slow appraisal management can cost lenders $87 per loan file and how Reggora eliminates those losses via automated appraisal ordering and management.

Simple mistakes from manual work during the appraisal ordering and management process can cost lenders. In this business, misspent time directly impacts profits. Slowed appraisal turn times and lengthened loan cycle times increase carrying funds cost and hedging costs. Lenders lose money for each day that is added to these processes.

Lenders can reduce the associated losses and get their appraisals completed faster by automating most of the order management process — order creation, allocation, status updates, appraisal review, and payment processing. Of the time a lender spends managing appraisal orders, 23% is used for order creation and allocation, status updates account for 29%, and appraisal review takes up 16% of time. In this article, we’ll examine areas where automation can increase efficiency throughout the process, and how Reggora’s appraisal management solution has dramatically improved operations and savings for lenders.

The Real Costs of Manual Appraisal Management

Without digitizing manual work, employees spend too much time on tedious, low-impact tasks. Even when teams are effective, repetitive tasks lower output quality, increase the likelihood of human error, and stifle professional growth. These issues ultimately impact profitability by slowing turn times and lengthening cycle times for the loan process, costing lenders $44 per loan file in employee wages and $43 per loan file due to the cost of funds when cycle times drag.

By automating these key parts of the appraisal management process, lenders can make operations more efficient and cost-effective.

Order Creation and Allocation

Ordering and scheduling the assessment is among the most time-consuming and error-prone parts of the appraisal process. Missteps happen, like waiting too long to order after being granted intent to proceed, accidentally ordering a conventional appraisal for an FHA loan, or sending an order to an appraiser who isn’t accepting work at the moment.

These actions result in costly delays. In the early part of 2022, STRATMOR Group found that the average time to find an appraiser was three days, while the period from order creation to a scheduled appraisal was one week. Automation helps lenders ensure they order the right appraisal product for the right appraisal fee at the right time.

Status Updates

Manually executed tasks often result in siloed information. Some details may live in the LOS, while others are scattered around in spreadsheets, on notepads, or in an inbox — inaccessible to every internal team member who may need access.

The lack of visibility creates additional work, as loan officers (LOs) and other stakeholders must inquire about an appraisal’s status instead of being able to check themselves in an integrated system with centralized data. Time spent tracking down data takes away from time spent driving revenue; LOs should be focused on chasing leads, not data, yet these types of follow-ups account for 29% of the time lenders spend managing appraisals.

Appraisal Review 

STRATMOR found that without integrated review tools, reviews and revisions can drag cycle times. On average, 25% of loans required a revision, which pushed out turn times by an additional 2.5 days. Issues with a lack of comps for complex properties also added several days to the process.

An underwriter’s most important job is risk assessment. Any low-level task that takes them away from that focus is wasted time. Working with Clear Capital, we found that an extra 30 minutes of manual work, such as importing files or gathering additional data points, not only adds time to an underwriter’s assessment but also costs lenders $99 per loan file. By integrating information systems, including comps and photos for underwriters, and automating these labor-intensive tasks, lenders can reduce both errors and review times.

Payment Processing

When employees manually keep track of an appraisal’s status, it’s no wonder that billing and invoicing sometimes get overlooked. Automation can collect payment from borrowers, pay vendors, and organize all payment details for accounting in one place, which reduces a lender’s cost per loan by $35.

By automating repetitive manual tasks, lenders can strategically shift full-time employees into higher-impact roles. Additionally, lenders can avoid the need to hire entry-level employees when demand spikes since automation effortlessly scales when volume increases.

Reducing Costs Through More Efficient Appraisal Management

Reggora’s appraisal management platform addresses every one of the aforementioned areas. Each feature comes ready to use, but can also be integrated with other systems and customized to support the lender’s specific needs and business rules. Lenders who activate Reggora within their appraisal operations reduce the time employees spend managing orders by 33% and cut cycle times 2 or more days.

Time is money. By reducing the number of full-time employees (FTEs) required to manage appraisals — and moving them into higher-impact roles — lenders save $44 per loan file. Here’s how the math breaks down.

On average, across Reggora’s customer base, it took 1 hour to manage one appraisal order prior to using our platform. For the average lender, the fully-loaded hourly cost of personnel associated with processing and underwriting is $132. When Reggora reduces this cost by 33%, you’re saving $44 per loan while putting your FTEs’ time to better use.

Appraisal Management Time Cost Before Reggora

• Average Management Time: 1 hour
• Labor Cost: $132 per hour
• Appraisal Management Time Cost: $132

Appraisal Management Time Cost With Reggora

• Average Management Time: 0.67 hours
• Labor Cost: $132 per hour
• Appraisal Management Time Cost: $88‍
• Reduced Cost per Loan: $44

And the savings associated with a 2-day reduction in cycle time? Freddie Mac’s 2022 Cost to Originate Survey shows that the daily cost of funds for each day a loan was in process corresponds to .0075 basis points. Assuming an average loan amount of $285,000, one day of cycle time will cost the average lender about $21. Cycle times are running 40 days long on average. Reggora’s 2-day cycle time reduction equates to $43 per loan file.

Loan Cycle Time Cost Before Reggora (on $285K average loan)

• Cost of Funds: $21.375 per day
• Average Cycle Time: 40 days
• Loan Cycle Time Cost: $855

Loan Cycle Time Cost With Reggora (on $285K average loan)

• Cost of Funds: $21.375 per day
• Average Cycle Time: 38 days
• Loan Cycle Time Cost $812‍
• Reduced Cost per Loan $43
  

Want to calculate how much your organization could save? Contact our mortgage solutions team for a free cost per loan consultation. Our team will quantify your current costs related to time spent managing appraisals and provide a detailed model of the costs you can eliminate.

Reggora’s automated appraisal ordering and management is saving lenders $87 per loan file. These numbers represent averages. We’ve seen our lenders experience a range of results.

• Alpha Mortgage decreased the number of FTEs on its appraisal desk by 75% and reduced cost per loan by $70.
• Assurance Financial reduced its cost per loan by $150 and cut appraisal turn times by 7 days.
• PRMG saved 1,000 FTE hours per month managing appraisals, which is approximately six FTEs.

The benefits of these savings extend externally to improve the borrower’s experience and satisfaction. Neat Loans, for example, saved 2 hours per loan file — equating to $235 per loan in reduced cycle time — which helped them achieve their value proposition of speed and ultimately generate more business.

“We’ve had multiple occasions where even the borrower has been shocked by how fast the appraiser has accepted the order and done the inspection and then gotten the report,” said Adam Dagilis, Appraisal Desk Lead at Neat Loans. “I know it’s definitely made a difference for our borrowers. There’s been times where I’ve been told by the LO that [the speed of service] won us the deal over another bank because the borrower was not expecting an appraisal to be scheduled that fast.”

The Value of Optimizing Your Appraisal Process

Reggora's order management platform automates and optimizes order creation and allocation, status updates, revisions, and payment processing to remove the burdens and costs of manual appraisal management. This speeds up appraisal turn times and ultimately reduces the cycle time for lenders, saving them money, making better use of their employees’ time, and winning new business in the process.

Slowed appraisal turn times and lengthened loan cycle times from labor-intensive work aren't the only challenges that lenders face when it comes to appraisal management. In our white paper on the ROI of appraisal management technology, you can learn more about costly challenges and impactful solutions for quality control, revenue leakage, appraisal billing, and visibility into the process, all of which we have either already outlined or will in future posts as a part of our value series.