With access to a deep well of data, Shawn has his finger on the pulse of the real estate market, especially as it pertains to appraisals. Learn about some of the trends in the appraisal industry that may impact real estate professionals.
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Tracey Velt:
This is your host Tracy Velt editor in chief of content for REAL Trends. Today, we’re speaking with Shawn Telford, chief appraiser for CoreLogic. Sean has been deeply involved in the valuations market for nearly 30 years and has been at the helm of adapting CoreLogic’s valuation solutions to address the needs of the market, including in response to the last and current recession. So welcome Shawn.
Shawn Telford:
Thank you. Happy to be here.
Tracey Velt:
So, COVID 19 has completely flipped the real estate market on its head. There’s always been worries about inventory, but lower home valuations. That’s over. Nobody’s really worried about that at this point, since home prices are all going up, but tell me a little bit about how the pandemic has impacted the appraisal industry specifically.
Shawn Telford:
Sure. Yeah. Happy to address that. You know, I’ll use two words to describe the two focus areas I think that have had the most impact. One is how inspections are done when needed and two is volume. So if we start talking about inspections, as we all know, when this thing popped up, it was a lot of uncertainty. We really didn’t know what to make of it.
Shawn Telford:
And so things just shut down. And that was a problem, but as people realized that we needed to continue on, the first thing was are workers in real estate essential? And the answer was yes. And then quickly after that, we saw the GSEs and the FHA and VA come out with flexibilities for the appraiser on how to continue doing appraisals, especially with regard to inspecting.
Shawn Telford:
So then all of a sudden we have this opportunity now to get back at it, and that covered a lot of scenarios, but not all scenarios. And so appraisers got creative with their inspections over the last few months. Working with the occupants, doing things like opening doors, turning on all the lights and all that kind of stuff so they could minimize contact in the home as they went out there.
Shawn Telford:
They wore personal protective gear, which probably none of them had ever even seen or used before. So they changed how they did that so that they could continue to get things done and they were successful in continuing to keep the process moving. Now, we also saw appraisers get creative with using FaceTime or other video apps to let them see the inside of the home, use those flexibilities from the GSEs, and still of course do their job as an appraiser.
Shawn Telford:
So a lot of creativity we saw there. And the second thing that really has impacted them is the volume. The interest rates have been as you know, historically low. And that’s just generated tremendous amount of work for appraisers, which is a great thing. And it’s been very, very busy.
And so we look at some of the statistics Fannie has put out that say appraisers are basically doing double the number of appraisals in a month that they were 10 years ago. So they’re busy, technology’s helping them get things done. So it’s been a very interesting ride over the last few months.
Tracey Velt:
Well, that is true. Definitely. Yeah. And I don’t think any industry has not been impacted and it’s interesting how the real estate industry has rebounded as soon as the stay at home orders were lifted or real estate was deemed essential. So based on CoreLogic’s data, where do you see the most change happening in the market?
Shawn Telford:
Those are always interesting questions cause there’s been so much activity in the last six months, but our price index has shown strong increase in prices. In August, I think we had a 5.7 increase and then I think it just came out of this morning and I saw it was 6.7 year year over year increase through September. That’s of course nationally. So, we believe that the prices are going to continue to increase.
Shawn Telford:
I think the forecast was through September of 2021, but we know that there’s just tremendous demand fueled by these low interest rates. And so we’re continue to see increases. There’s a few exceptions of course, but generally speaking, we’re seeing strong growth in price.
And I read an article in the Wall Street Journal recently that talked about the other trend that people are talking about is people leaving urban, densely populated urban areas and going to less populated, more suburban areas and what that’s doing.
Shawn Telford:
And the article I read was specific to luxury homes and it talked about people buying second homes or vacation homes and moving to those areas to give themselves a way to get out of the urban areas. So that’s a trend that who knows how much of that sticks, but we’re certainly seeing price pressure. We’re seeing lots of activity and we’re seeing some movement of people in the nation.
Tracey Velt:
Okay, great. It’s interesting how many changes, people wanting more space and more ability to walk around outdoors with being able to socially distance while they’re doing it. So all of those changes a lot of sense and yeah, it remains to be seen whether they will be continued trends or if hopefully this passes somewhat and it becomes less of an issue they’ll go back to wanting to be in the urban course.
Tracey Velt:
So yeah. There’s a continued push toward virtual transactions that will necessitate invention and innovation for among real estate professionals. So how does that impact their work with appraisers?
Shawn Telford:
Sure. As long as I’ve been in the industry, which in the introduction, you said 30 years, that makes me feel old. I don’t feel old, but as long as I’ve been in this appraisal industry, people have been talking about how things are going to change and they certainly have, but I think there’s still much to be done in the whole ecosystem of lending that will have to come to fruition before we see some real significant changes.
Shawn Telford:
But we’ve definitely seen incremental changes and we see trends based on what’s happened with COVID and the demand and all these different things coming together. But the good news is from the appraiser perspective, appraisers today can support virtual transactions. The appraising of a property isn’t necessarily the same thing as inspecting, although we see them happening often together.
Shawn Telford:
So as an appraiser, I can form an opinion of value without physically inspecting a home. So most of the inspections we do today that we see appraisers doing are a matter of policy or regulation. And so those things can change. And we’ve seen some of that start to happen with the appraisal flexibilities, but for years we’ve had drive-by appraisals, exterior appraisals. We’ve had desktop appraisals.
Shawn Telford:
These things are not new. They just haven’t been fully utilized. So I do think that we’ll see the trend be those types of services are utilized more by lenders and allow more by the secondary markets. And we’ll start to see that becoming more of the normal. And we’ve seen the GSEs experimenting with what they call hybrid appraisals over the last few years where you might have a third party gather data and make observations about the subject property and pass that along to the appraiser who then works from their desk.
Shawn Telford:
So there’s a lot of benefits you can see in that type of model, more capacity for appraisers. There’s people with concerns about that process, but all in all, I think the trend’s going to go that way and appraisers from my perspective are well equipped to evolve and innovate as the rest of the industry kind of catches up and makes this virtual transaction or faster transaction happen.
Tracey Velt:
Yeah. And that’s interesting because I noticed during the boom, there were a lot of drive by appraisals and I’m not seeing that as much right now. I’m seeing a lot of appraisers who have to come in the home and inspect the home. And so have you noticed that? Is it because of possibly the whole crash of the market that they went back to in-person appraisals more or is that just a trend maybe in my area?
Shawn Telford:
You know, it’s an interesting question, Tracy. The GSEs have their automated underwriting processes that make decisions about what’s the appropriate appraisal service. And over the years, since they launched the UCDP, Uniform Collateral Data Portal, the GSEs have been gathering data. And so they have built models that help them choose what’s the appropriate level of appraisal service.
Shawn Telford:
And so we’ve heard of things like waivers and things of that nature. So that’s probably a question that the GSEs can better answer, but in my opinion, we haven’t seen as many of those drive-bys and desktop services as we have in the past.
It seems like we’re either seeing a full appraisal as it’s called, a 10-04-70, where the appraiser inspects the property and does the appraisal or we’re seeing the waiver. So, yeah. I don’t know that there’s anything there that I’m aware of, but it is an interesting observation.
Tracey Velt:
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Tracey Velt:
Now back to our podcast. Let’s also talk about how real estate professionals, they continue to face increased competition, and that will accelerate the need for digital appraisal tools to provide quicker, more accurate valuations of properties. And that’s always an issue between appraisers and real estate professionals is accurate appraisals or they’ve heard of people coming from outside of the area and making an assessment that isn’t as accurate as they’d like it to be. So what is happening in that world?
Shawn Telford:
Yeah, that’s an interesting challenge. There seems like there can be friction in that process, for sure. As I mentioned before, there’s a lot of activity that’s been going on for years and has really kind of fueled and the COVID is serving as a catalyst for some of these experiments that are out there as far as services that allow the appraiser to work faster.
Shawn Telford:
That’s again, desktops, drive-bys, the amount of data available to an appraiser online that’s accurate and reliable is just crazy how good that data is compared with 20 years ago when you just didn’t have anything. So the ubiquitous data is becoming really helpful to this type of valuation process. It’s also hard because you get bad data out there, which people trust and then that creates some of the friction.
Shawn Telford:
But for sure, we’re going to continue to see appraisers being asked to use the data that’s out there and to use some of these new products and services to work from their desk, to work on the exterior services. So I think that’s a trend. How fast that moves it’s hard to say, but we certainly think that we’ll continue to see that happen.
Shawn Telford:
The regulatory environment is set up to try to prevent bad appraisals or bad selections of appraisals by lenders. So I think in general, the lenders do a good job of following the spirit of the law and choosing the right appraiser for the right scenario. Those things don’t always work out perfectly, but that’s a problem that I think we don’t hear as much about. So I think lenders do a good job of using the information they have to get appraisers out there.
Tracey Velt:
Yeah. And with the low inventory prices are obviously up because the demand is there, but the supply is not. So I would assume that it makes it even more difficult for an appraiser in accurately assessing a property that could be worth a lot more in a month, basically.
Shawn Telford:
When the market is pushing like that. As you know, appraisers rely on the historical data and if the market’s moving fast, then it’s hard to look at something that sold four months ago that may not represent the trend of the market at the moment. And so appraisers have to account for that in their process. There’s things that in the big picture that we could look at as an industry that might help with some of these challenges.
Shawn Telford:
For instance, we appraisers are asked to give a point in time estimate that’s a single value. $100,000 on November the first. You could do a range. The industry could switch to a value range. And we all know that it seems sometimes silly to be very accurate with a single number when we all know there’s some variability in things.
Shawn Telford:
So there’s ways that the industry could shift to a value range or even if we think outside the United States, there’s something that’s called a market lending value, which is more of a long-term sustainable value versus a current point in time. So there’s ideas out there that where we might be able to expand how this market in the US operates and provide new opportunities to remove some of the friction points we see.
Tracey Velt:
Yeah. And that kind of goes right into my next question is how is the appraiser, broker, realtor kind of relationship changing based on new tech and processes for working together?
Shawn Telford:
Yeah. It’s always critical that the appraiser and the broker, the real estate agent, the realtor, everybody whatever their role is communicating and working together for the good of our mutual all the folks involved. So I’ve always found the agents to be very good information sources, not only about the subject property, but about the market and the trends and the behavior of buyers and sellers.
So it’s always critical that that communication channels stay open and active because it just makes the process better the more information that the appraiser has as they go through their process.
Shawn Telford:
As I mentioned before, we may start to see more where a third party might be doing an inspection or making observations on the property. So it’s important for agents to understand that that’s part of the process. The appraiser may not always be at the property and that’s okay, but we may start to see trends where that becomes more and more commonplace as we begin to rely more on technology and data.
Tracey Velt:
Yeah, that’s interesting. My final question is let’s talk about opportunity. Where do you see the most opportunity in real estate brokerage, as far as valuations are concerned and their work with appraisers?
Shawn Telford:
There’s so many different. We kind of hit on a lot of them today. As we start to see the industry change with appraisers using different types of processes and technology and the lenders having more flexibility in the type of valuations they order and how they underwrite and review those appraisals.
Shawn Telford:
So I think we’ll continue to see those trends change. I think we’ll continue to see the process of getting a appraisal of an independent value on the property be streamlined. There’s always pressure to be quicker, but I think we’ll continue to see that process speed up.
And I think we’ll continue to see the need for appraisers to work with real estate agents to communicate and get the right information to get the process done. I think the appraiser, it will continue to be part of the equation for indefinitely, but how that equation works and how the appraiser works with the real estate agent and the borrowers and occupants will certainly change.
Tracey Velt:
Yeah, definitely. Well, Shawn, thank you so much for joining the REAL Trends podcast today. We appreciate your insight into the appraisal world and we appreciate your time. So thank you.
Shawn Telford:
Thank you. Happy to be participating today.