Appraisal Changes coming April 15th!

The Evolution of Home Appraisals: A Look at Recent Changes and Future Trends

Years ago, the idea of buying a home without an appraisal was unheard of. The industry relied heavily on a single appraiser's valuation, which was considered more of an art than a science. However, in recent years, there have been significant changes that are shaping the future of home appraisals.

Fast forward to 2017 and the introduction of the Property Inspection Waiver (PIW) caused a stir in the industry. Many experts predicted that it would lead to inaccurate valuations and potential problems for buyers, sellers, realtors, and lenders. However, many buyers opted for PIWs, indicating a growing acceptance of alternative appraisal methods.

In 2020, the COVID-19 pandemic created a V-shaped recovery in the housing market, fueled by the Federal Reserve's purchase of billions of dollars in mortgage-backed securities and treasuries to drive mortgage rates to record lows. With low inventory levels and high demand, appraisal waivers, appraisal gap offers, and cash offers with underlying financing became the norm. Although the option of PIWs was not up to the lenders, Fannie Mae or Freddie Mac provided it and then passed it on to borrowers.

Looking ahead, Fannie Mae is set to roll out more appraisal options for buyers across the US from April 15th, 2023. This "Appraisal Modernization" initiative is driven by the technology Fannie Mae has access to, which allows them to review prior appraisals of the same property and compare them to a vast database of comparables.

One of the primary reasons for this move is to enhance the origination cycle's speed and appraisal capacity, especially in rural areas with limited appraisers. This change will save time and extra fees and reduce the turnaround time for appraisals. While appraisers are still vital to the industry, advanced technology and the internet are changing the conventional lending appraisal requirements. Fewer traditional appraisals are being required, and alternative options such as no appraisal, hybrid, or desktop appraisals, are becoming more popular.

In conclusion, the appraisal industry has undergone significant changes in recent years, driven by advancements in technology and the COVID-19 pandemic. Fannie Mae's "Appraisal Modernization" initiative is a clear indication that the future of appraisals is changing rapidly. It is essential to stay up-to-date on these changes to ensure that you are providing the best possible service to your clients as a real estate professional.

(This only pertains to conventional loans that are underwritten using Fannie Mae's Desktop Underwriting (DU) program)