Introduction

Technology saved countless jobs in the face of the pandemic by allowing companies to take their workforce and operations remote. It was during the spring and summer of 2020 that the mortgage industry better understood just how reliant it had become on in-person processes and manual workflows. In a socially-distant world, we couldn’t complete business as usual. Out of necessity, the adoption of digital alternatives, like eClosings, eNotes and remote online notarization, soared.

Property appraisals faced an additional challenge: a workforce decline that preceded the pandemic by more than a decade. As thousands of licensed and certified real estate appraisers leave their job each year, such as to retire or go into a different line of work, they are not being replaced at a comparable rate by new professionals. This has resulted in an appraiser shortage for the U.S. housing market.

It’s estimated that the number of appraisal professionals will decrease annually by approximately 3%, according to an analysis by the Appraisal Institute. Some mortgage industry professionals have described the ongoing appraiser shortage as a “national crisis,” an especially hot topic when volume was through the roof during the refi boom in 2021. Regardless of market conditions, the steady decline of appraisers indicates the shortage will be an ongoing issue for the industry to tackle. However, it does not mean that lenders have no immediate recourse. Remote appraisal technology and appraisal management software are important parts of the solution, both in the short term and for improving how appraisals are conducted in the future. Appraisal management software utilizes a variety of integrated capabilities to help lenders streamline operational workflows to improve turn times and reduce overhead costs.

Sometimes it takes government-sponsored enterprises (GSEs) to make the first move to inspire confidence and encourage adoption among industry stakeholders. In March of 2022, both Fannie Mae and Freddie Mac officially incorporated desktop appraisals into their Selling Guides for many new purchase loans. According to the Federal Housing Finance Agency, “The GSEs’ green-lighting of desktop appraisals is an important step forward in changing inflexible legacy practices. Although this advancement will not be available for all loan types and properties, it will deliver some efficiency gains and alleviate a bit of pressure on appraisers’ schedules.” In addition to desktop appraisals, the GSEs have also announced hybrid products, such as Freddie Mac’s ACE+ Property Data Report, which will play a pivotal role in appraisal modernization.

According to a survey published by Fannie Mae in May of 2022, 94% of surveyed lenders think that appraisal modernization efforts will simplify the origination process. This positive momentum is great; however, mortgage industry stakeholders need to stay on top of this process evolution by investing in appraisal technologies that are adaptable and able to accommodate frequently changing regulations. Lenders who prioritize modernizing their technology stack will be best positioned to support the inevitable future of appraisals and make their organization future-ready.

Why It's Crucial to Adopt Modern Appraisal Technology

The legacy appraisal process is fraught with inefficient manual workflows, from finding an available appraiser and scheduling the assessment to managing fee escalations and collecting borrower payments. Modernizing these workflows is not as time-intensive as other technology upgrades, and the result is a high return on investment (ROI).

When lenders consider ways to improve their operations, appraisal technology typically does not receive as much attention as implementing a shiny, new point-of-sale (POS) or loan origination system (LOS). However, appraisal management platforms deserve a share of the spotlight for their ability to deliver on important business objectives like cost cutting, efficiency gains, improved turn times, and increased customer satisfaction. Crucially, appraisal management technology is significantly less of an implementation burden compared to other major technology initiatives, particularly when following implementation best practices learned from other lenders.

How is Appraisal Management Technology Different from an AMC?

Some may confuse appraisal management technology with appraisal management companies (AMCs), but they are not the same. Appraisal management technology is typically cloud-based software designed to help lenders streamline each aspect of their appraisal operations. It may offer direct integrations with AMCs — among other technologies, like a POS and LOS — so that the systems can share data and automate processes, thus eliminating the need for lenders to jump between different vendor platforms. Key information is centralized in the appraisal management platform to facilitate effective oversight of and control over the appraisal ordering process.

What Reggora Does

• Integrate with lender's LOS
• Automates borrower payments to AMCs
• Consolidates all of the lender's AMC interactions into a centralized pipeline
• Makes it easy for lenders to chat with and get notifications from their vendors

What The AMC Does

• Fullfills the appraisal
• Manages turn times
• Coordinates with property contacts and handles scheduling
• Manages revisions and follow-ups

We’ll get into the science of calculating your ROI later on, but let’s first consider the “soft” or downstream costs to your business. Ask yourself these questions to better understand the impact of your current operational setup and whether automation or technology could help:‍

• ‍Increase Vendor Adoption‍

Are your appraisers not willing to work with you, and therefore not picking up your orders in a timely manner, due to the inaccessible user interface on their side?

• Increase Efficiency

How much of your internal support capacity is being used up by appraisal-related problems? How much is appraisal-related headcount costing?

• Improve Retention

Does your appraisal process provide a negative experience for your production staff?

• Scale Business

How many more loans could you do each month if your appraisal capacity was higher?

• Reclaim Sunk Costs

How much money do you waste in appraisal fees where the borrower falls through, because you don’t have modern payment-processing technology?

• Improve Borrower Experience

How many loans miss rate locks due to the appraisal being delayed? How frequently are there mismanaged expectations when it comes to appraisal fees charged to the borrower?

• Provide Transparency

Do your borrowers feel in the dark when it comes to the appraisal process, decreasing your organization’s net promoter score (NPS)?

These issues can be mitigated or even eliminated with appraisal management technology that is able to address each facet of the appraisal process. The following list describes the systems that are directly related to the appraisal process and how modernizing each of them can improve lender outcomes.

Ordering, Allocation, and Scheduling

One of the longest and most manual parts of the real estate appraisal process is finding an available appraiser and scheduling the assessment. In fact, recent research conducted by STRATMOR Group found that it takes lenders an average of more than seven days from the time of application to the scheduling of an appraisal. Today’s cloud-based technology can automate every step of the ordering process, saving team members time from completing these tasks manually. Connected mobile apps support the process by allowing appraisers to see and accept new orders in a tap, anywhere they are. Seminari outlines where tech can help cut down turn times through the ordering process in a 2022 article.

"The major volume decrease and supply constriction have had limited effect on bringing appraisal turn times down. This is one area where leveraging technology may be the answer, with some appraisal management software vendors claiming to cut this timing down by two or more days," Seminari writes.

Appraisal Payments

Many lenders manage most aspects of payment processing manually, from managing fee escalations and fee disclosures to collecting borrower payments and paying out appraisal vendors. Automated payment processing both eliminates manual work and speeds up remittance.

Notifications and Communication

Borrowers have high expectations for response times and process visibility in today’s always-on digital world. If those expectations are not met, they check in often, thereby slowing down the LO and appraisal desk. Automated notifications and status updates keep all parties informed without the need for manual intervention. Appraisal technology can also help minimize reactive communication by automatically generating a daily report for LOs that provides the latest status of all their active orders.

Document Delivery

Once the appraisal is complete, lenders need the final documentation to be delivered to the borrower, a process that can be rife with mistakes if it includes manual touchpoints. An appraisal management platform can streamline file delivery by sending an automated email to the borrower with a download link, which can also serve as means to track receipt. Plus, appraisal technology can also automate the process of uploading files to an LOS and submitting reports to the GSEs.

Handling Disclosures

Changes of circumstances via fee escalations cost lenders tens of thousands of dollars. That’s why it’s important to have a workflow in place that programmatically registers fee escalations and can automatically interface with the lender’s LOS to take action and redisclose automatically, ensuring compliance. To achieve the best outcomes, whether working with AMCs or their own panel, lenders must ensure that their appraisal management solution is able to accommodate and optimize all of these important, interconnected parts of the appraisal process.

Exception-based Pipeline Management

Lenders should not have to open up each appraisal order within their system to see what the status is and whether any action is required. With modern appraisal management technology, lenders can see their entire appraisal pipeline in one view and easily filter them to see which require attention or follow-up. You can even set automated notifications and flags to ensure that nothing gets missed.

Appraisal Review & Underwriting

Underwriting the appraisal is a very important but manual task. The good news is that many components of the appraisal review can now be automated, which helps keep your valued underwriters focused on the high-impact tasks.

Performance Data & Reporting

As with any operational initiative that impacts your bottom line, it’s crucial for lenders to know how well their appraisal operations and appraisal vendors are performing. How long does it take to find an appraiser? Schedule the inspection? How often are you submitting revision requests? And how does all of that impact your overall cycle times?

In addition to your own operations, many lenders track the performance of their appraisal vendors as well. By knowing which appraisers are the most responsive and delivering the best turn times, you can begin to optimize your allocation strategy.

When you take the time to think through these questions, it becomes clear that lenders incur many hidden costs throughout the appraisal process, no matter whether they are working with AMCs or managing their own panel. Not only can these costs amount to physical dollars and cents, but they may also impact the borrower’s experience and employee retention (consider how some of these manual, tedious tasks affect loan officers’ (LOs) happiness on the job).

The Importance of Integrations

What use is an appraisal management platform if it does not communicate bidirectionally with your LOS to keep loan files updated in real time? Or if it cannot plug into a payment processing platform? Modernizing your tech stack is much less valuable if you end up keeping your systems in silos. Integrations are necessary to connect all these technologies and allow them to work together seamlessly.

Look for an appraisal management vendor that has both ready-to-use integrations, which allow lenders to immediately connect their existing tech stack to the new platform, and an open API (application programming interface). The latter should be nonnegotiable. Vendors will not have out-of-the-box integrations for each software system you use now or will onboard in the future. Having access to an open API allows developers to code their own integration so lenders can connect any outliers in their tech stack to the appraisal management platform. This ensures that none of your software works in a siloed environment, and that your business will be future-ready to quickly take advantage of new technologies.

Considerations for Your Vendor Search

Defining Your Goals

Goal setting is a multistep process — and not one to be taken lightly. Without clear and specific goals, you won’t be able to work backward to identify which tech solutions are right for your business, nor will you later be able to determine whether you ultimately got the ROI you needed from your tech implementations.

The first step is to define your long-term objectives. Keep them high-level, but make sure they include some measurable specifics. Here are a few examples that are common among lenders looking to tighten their appraisal operations:

• Improve turn times by X:

Use a realistic and achievable goal.

• Improve customer satisfaction and increase NPS by X:

Quantify this goal so it is measurable.

• Efficiency and cost savings:

Identify where the time and monetary savings will come from (such as from a department or process) and how much you’d like to save.

• Generate detailed reporting that includes KPIs for appraiser performance:

Define the KPIs you care about on two levels — must have and nice to have.

• Streamline your payments to vendors:

Be specific in defining what “streamline” means for your business. If you are going from manual to tech-enabled, consider how you will determine whether this process is as automated as it can be.

• Improve the borrower experience:

Be specific about the experience you want to deliver to borrowers. Online payment collection? Better status visibility? Faster closings?

Next, reframe the long-term goals as a series of smaller goals. Doing this will help you better understand the exact components your appraisal management technology needs to have.

Take improving turn times, for example. When you approach this goal in the context of appraisals, there are multiple ways to achieve it. Review the systems you have now and determine which are ripe for digitization and automation. This could include ordering, allocation, and scheduling, or possibly payment collection and processing, document delivery, managing disclosures and more. Each of these represents a smaller goal. Tackling some or all of them will help you achieve your ultimate objective of shaving days off your average turn time.

Laura Bae, head of operations at LoanSnap, advises lenders evaluating tech to consider hidden costs and benefits of the tech in question.

"As a numbers-driven person, you’re only trying to see what’s on the paper," says Bae. "But what we don’t see often are opportunity costs. When you lose that borrower because the appraisal took too long because our operation could have been more efficient, think about that cost."

Bae continues, "the marketing costs you have already spent and the lead costs you have already spent on the borrower are gone. These are the things I would definitely look out for when you’re considering a partner, making sure they are driven by technology."

Defining Your System Requirements

Before you start lining up demos with technology vendors, you will need to clearly define your technical system requirements. This should include two things:

1. The components you need to integrate this new platform with the rest of your operations
2. The technical capabilities that will enable you to reach your high-level objectives, such as automated payment processing that will enable you to streamline payment operations. (That is why breaking down your goals is an important first step.)

Here is a sample list to illustrate this point:

Jonathan Gifford, VP of operations at Inspire Home Loans, also believes in the importance of scoping what the new process will look like for all stakeholders.

"When we began looking at new technology for our appraisal management system we started off by listing our pain points along with a list of what was working," Gifford said. "We talked to the actual users of the system (the Appraisal Desk) along with those that relied on the appraisal process (LO, LP, UWer) and finally we reached out to a small group of appraisers to see what they liked and disliked about our current process and management system."

Only after consulting with all stakeholders would he begin to consider vendors. "After we had all of this outlined we reached out to our team to see who they have worked with at past companies along with reaching out to our peer group of other lenders to get recommendations. This process was crucial to confidently selecting which vendor would serve our needs the best."

Aligning Your Internal Team and Stakeholders

We cannot stress this enough: getting buy-in from those who will be most affected is very important. It’s easy to assume that your employees will see a tech upgrade as a benefit, but that is not always the case. Some may be concerned that the new workflow automations and efficiency gains could cost them their job, not realizing that it actually provides an opportunity for them to take on higher-level responsibilities. Have a proactive discussion with your people about the benefits of the new system, the timeline for implementation and how you anticipate it affecting roles and responsibilities.

Additionally, you’ll want to discuss the transition with those outside of your organization who will be affected — like appraisers and AMCs — as well as making a roll-out plan for borrowers. Like your internal employees, it’s important that your external partners feel comfortable using the new technology. Plan to hold a training session with your vendors and implement a feedback loop to ensure you’re aware of any hurdles or technical difficulties during the ramp-up period.

Finding and Evaluating Tech Partners

Understanding the Vendor Landscape

The discovery process for appraisal management technology is similar to that of any other Software as a Service (SaaS) solution. You’ll find two things no matter what type of tech you’re on the hunt for. One is a range of vendor options, from specialized, siloed software focused on a particular feature to comprehensive, integrated platforms. The other is a vendor landscape that includes unproven technologies with misleading marketing alongside respected, award-winning solutions.

Approach your search with a clear understanding of your organization’s needs, based on the goals you’ve outlined. This will guide you toward the type of solution — siloed or comprehensive — and the exact features it must have to help you reach your high-level objectives.

Next, collect vendor recommendations from colleagues in other organizations and discover others by reading trusted industry publications. Narrow your search to five or fewer before you begin contacting vendors. The vendors in your final list should be reputable and known for continuous improvement, innovation and quality customer service. Their tech solution should be scalable, have open integration capabilities and, most importantly, offer all the features your organization needs to achieve your goals.

When you are ready to talk to vendors, don’t make the mistake of immediately diving into a demo. Schedule a call to gain a better understanding of their technology and company. Ask all the questions that their website doesn’t answer. Use this checklist to get started.

Questions to Ask Vendors

How to Simplify Your Implementation

The first step toward a successful implementation is drafting a strategy. Just like the goals you’ve already defined, this will serve to guide you through the process and keep your team on track. Build in some flexibility, knowing that the details are likely to change as you get closer to selecting a vendor and signing the contract — as key players could shift and the vendor’s level of involvement might be different than you originally anticipated. However, it’s important to start putting some thoughts on paper so it’s easier to finalize the strategy when the time comes.

Make sure your approach includes these four important components:

• Assemble the right team
• Clear roadblocks
• Leverage your appraisal tech partner
• Set clear goals and expectations

Jonathan Gifford, VP of operations at Inspire Home Loans, advises that lenders test as much as possible during implementation.

"The first step in onboarding any new technology is to use our test environment to work with the new vendor," Gifford says. "We start by identifying a handful of SME’s (Subject Matter Experts) to work in the test environment to identify any bugs or conflicts the new technology may have on the rest of our processes."

Gifford stresses that a small rollout ahead of the full go-live can also drive success.

"Once we feel confident in the testing of the technology, we move the vendor to our production site and train all personas that will be using the new technology," says Gifford. "Once we have the vendor in production and the team sufficiently trained we target a small group of loans (by branch, or Loan Officer, Loan Program, etc.) to use as a pilot program. We stay in the pilot program until we are comfortable that the technology is working as expected and then continue rolling out to other branches until we have gone company-wide."

Assemble the Right Team

There are a few key roles for any tech implementation: developers, project managers, operations specialists, testers and trainers. You will need to decide how many people will be assigned to each role, based on the scale of implementation and the size of your organization. After identifying who will fill these roles, discuss expectations with them far in advance of the actual onboarding. They will need time to wrap up other projects so they don’t have conflicting priorities, as well as create their own implementation plan based on their particular role.

• Developers

You will need one or more people who can write code for an open API, integrate your existing tech stack with the new software and troubleshoot throughout the testing phase and beyond.

• Project Managers

These people will manage those who are involved with the implementation, ensure everything stays on schedule and serve as the main point of contact for all stakeholders.

• Operations Specialists

These are the people who will take the wheel after the developers make all the necessary connections. That means assigning roles and permissions, creating conditional workflows and automation sequences, defining business intelligence rules, scheduling reports, organizing content, setting up dashboards, and more.

• Trainers

To ensure effective adoption and satisfaction with the solution, designate staff who will write manuals, develop quickhelp resources, create standard operating procedures (SOPs) and conduct training sessions across your organization.

Clear Roadblocks

Some of the biggest barriers to a smooth implementation and high usage should be addressed if you follow the approach we’ve outlined. Even so, it’s possible to overlook or downplay the importance of seemingly small pieces. When you see them in context, it’s easier to understand how they can hinder progress. Review these common roadblocks to ensure you don’t fall victim to any.

• Roadblock 1: Difficulty finding time for a full implementation

Solution — Assemble your dream team of developers, project managers, operations specialists, testers and trainers at least one full quarter in advance of implementation. Include their new responsibilities as an outsized part of their goals for the next quarter so that they can prioritize their other tasks accordingly.

• Roadblock 2: Adoption pushback

Solution — Change is hard for many people. That is why achieving early buy-in across the organization is critical. Belief in the technology and excitement for the changes that it will bring will leave your people eager to log on each day.

• Roadblock 3: Inadequate training support and resources

Solution — No matter how “user-friendly” the new tech seems, not everyone will catch on quickly. Offer a variety of resources — and make them easy to access — to help every type of learner at your organization: group training, individual sessions, comprehensive manuals, quick-help guides and video tutorials.

• Not capturing valuable feedback

Solution: In the testing environment, you will use a feedback loop to learn what’s going well, what needs to be worked on and general suggestions from the testers. Apply the same framework to gather feedback from those who are now using the software each day. It’s important to encourage participation by being transparent about how you are using feedback to improve the experience.

Leverage Your Appraisal Tech Partner

Your vendor partner should offer a dedicated engineer and customer success point person to guide you through the implementation period and assist when you run into obstacles. In addition to technical support, leverage your partner for tips that will help your team get the most out of the new software — like ideas for efficiency gains, adoption and usage, feedback collection and more.

Set Clear Goals and Expectations

In the “Considerations for Your Vendor Search” section, we advised that you write out your long-term objectives and then break them down into smaller goals. Let these guide you during and after implementation. Review KPIs on a regular cadence to ensure you are getting the ROI you expect from your appraisal tech.

Additionally, communicate these goals and expectations to your implementation team and management personnel. Identify those who will be responsible for particular KPIs moving forward. Giving others ownership over top-level results will ensure you have support throughout your organization and lead to a higher likelihood of long-term success.

Measuring Your ROI

Directional change is important, but measuring your actual ROI will show what you’ve gained in relation to the cost of the investment, whether it’s savings in money, time or both. There are two core areas lenders should focus on to measure ROI: appraiser performance and operational performance. Start by calculating how much appraisal is costing you today, and then review the numbers regularly post-implementation. You may choose to measure ROI monthly, quarterly, every six months or annually — the cadence will likely change the further you are past the implementation period and whether there are specific goals you are continuing to optimize for.

Review these lists of metrics to understand what can be measured in each focus area:

Operational Performance

• Current monthly appraisal order volume
• How many full-time employees (FTEs) are directly responsible for appraisals operationally?
• What percentage of a processor’s time is spent on finding an appraiser to complete the order or reallocating the order to a more eligible appraiser versus managing exceptions during the appraisal process?
• What are the main categories of exceptions/issues that processors must deal with during the course of the appraisal order that ultimately slow down the appraisal in general?
• How many FTEs are there relative to order volume?
• What percent of your operations team’s time is spent:
  • Scheduling
  • Following up
  • Correcting or editing

Appraiser Performance

• Average appraisal turn time
• Average appraisal cost
• Revision rate (what percent of appraisals require revisions?)
• What percent of appraisals are delivered on time?
• Turn time breakdown:
  • Average days to accept (how long on average, does it take you to find an appraiser?)
  • Average days to schedule
  • Average days to first submission
  • Average days to last submission
  • Average days to complete inspection

Many lenders can do a little legwork to determine their current business costs in regards to the above. A trustworthy technology vendor can help you review these costs and point to specific savings you would gain by making simple changes to workflows and systems.

For instance, with Reggora lenders can expect a significantly reduced cost per loan — up to $258 per loan file as outlined in our ROI white paper. Of course, we practice what we preach and advise anyone considering Reggora to dive deep into our library of case studies.

Conclusion

If you’ve made it this far, it’s likely that you’re already evaluating appraisal technology vendors or you’re now considering it. Congrats for being ahead of the game! By continuing down this path and investing in a new technology partner for appraisal management, you’ll be preparing your business for whatever challenges or changes come next, whether market swings or new regulations. You’ll have scalability, flexibility, and confidence, not to mention happier customers and stakeholders.

We know that the process of selecting and rolling out new technology can be daunting, but with the right partner, the implementation is likely to be less work than you think.

And of course, if we can be of any assistance in your search or evaluation, please reach out!