Jonathan Miller felt a sense of relief when the Federal Housing Finance Agency announced this morning that it is instructing Freddie Mac and Fannie Mae, the government-backed mortgage enterprises it regulates, to adopt alternative home appraisal methods.
Instituted in light of the coronavirus crisis, which has sent cities and states into various stages of lockdown, the rule, along with new means of verifying borrowers’ employment, is in place through May 17.
Miller, president and CEO of real estate appraisal and consulting firm Miller Samuel in New York City, heralded the move as a measure not only to protect appraisers and homeowners but also to facilitate the home lending industry.
“The Federal Reserve cutting rates doesn’t do anybody any good in the housing sector if appraisers are forced to go inside properties and endanger themselves and the occupants,” Miller says.
Before restrictions shuttered most activities in the state of New York, which has now surpassed Washington in the number of COVID-19 deaths, some homeowners worried about appraisals, Miller says.
“We were getting pushback from the homeowners in terms of letting us in,” he says. “So, the concern was mutual.”
Miller says that even though the volume of appraisal requests has dipped this month, last week still saw a “fair amount” of them.
Lisa Lippman, broker with Brown Harris Stevens in New York City, says she had to move an appraisal appointment originally scheduled for today to last Friday in order to evade any complications due to offices’ shutdowns.
From drive-bys to desktop appraisals
While FHFA did not specify what the alternative ways of home appraising might be, Miller says there are several options.
One is “drive-by” appraisals for residences in suburban and rural markets. “You drive your car up to the property,” says Miller. “You’re still seeing the neighborhood’s housing stock, getting a sense of where that house is positioned in the neighborhood.”
“Desktop appraising” or the review of available public and private data – from local property registries and multiple listing services, for example – can also generate an appraised value.
“You have [comparable properties], you have the description on the web, you have the floor plan, you have photos,” Lippman says, adding that doing appraisals online is easier than actually showing or relocating to new abodes during the current healthcare crisis.
Another possibility is a “curbside” appraisal, in which the homeowner would virtually show the property to an appraiser through tools such as FaceTime.
“The homeowner walks through the house being essentially the camera person for the appraiser and does a real-time video of the interior of the house,” says Miller.
“Desktop” and “curbside” appraisals are especially useful in locales with “shelter in place” or other mandates that discourage – or downright prohibit – non-essential business operations and urge citizens to hunker down and work from home.
While such alternatives might prompt concerns about deception and wrongdoing, Miller says it is crucial that “the appraisals, themselves, are not waived because there will be almost instantaneous fraud and predatory lending.”
Published by Forbes
