The Desk Appraisal Review

The purpose of this column is to highlight and laud the benefits of the three most often used appraisal review reports as quality control tools: the electronic appraisal review, the desk appraisal review, and the field review. They're listed in order of least to most complete, and the purpose of this series of columns is to help the reader decide which review tool is ideal for their particular scenario. A desk review is a frequent collateral-assessment and appraisal-review technique. It's commonly used three times to evaluate real estate appraisals.

The first is a pre-funding review, which occurs just before a loan closes. This is, without a doubt, the most important moment to examine an evaluation. If done correctly, the review can prevent a loan from being made on a property with a defective appraisal. As a result, the evaluation must be completed as promptly as possible. To some extent, this aspect degrades quality.

The quality control sample assessment after financing is the second occasion. This is usually done to satisfy bank regulators, who require that a random sample of all closed loans be evaluated. This is done to highlight a weak risk management system or inept or unethical appraisers, not to prevent a specific loan from being made. Because the review normally takes a long time, there is minimal urgency to complete it quickly.

Loss mitigation or foreclosure is the third and final reason for an appraisal review. Although this is after the horse has bolted, it does offer the lender with data that aids in the management of slow-paying and/or delinquent accounts. There is also plenty of time to complete the evaluation without the stress of a deadline hovering over the review appraiser's shoulders. Unlike the different automated systems used in appraisal review today, the desk review is conducted by a human. While it isn't always necessary for the reviewer to be a state-certified appraiser, it is the most usual method. In some circumstances, rules demand that the desk evaluation be carried out by an appraiser who is licensed in the state where the property is situated. Because the desk review is written by a person, one could expect a degree of logic and reasoning that is not present in electronic evaluations. Because of the human factor, a desk review may produce a better result than an electronic review.

The scope of desk reviews differs. It's crucial for the lender to understand how the evaluation will be carried out. Whether sales and subject property data are confirmed, whether additional sales data is researched beyond that which is included in the appraisal, whether the reviewer simply gives the appraisal a pass-fail grade, or whether the reviewer gives a different opinion-of-value of the subject, in cases where the reviewer disagrees with the appraiser's opinion of value are some of the variables of the desk review. When should a desk review be used as a method for evaluating an appraisal? Like the question of how long a man's legs should be, this one might be left open-ended. We've all heard it said that a man's legs should reach the earth. The usage of the desk review might have a similar answer.

Each context dictates when the desk review should be employed. It's the instrument in the review-appraisal toolkit that's halfway between an electronic review and a field review. When an automated review suggests that a certain appraisal requires further study, some lenders employ it as a second line of defense. While this is the most common route to a desk review, it is far from the only one. Institutions that adhere to a higher standard of quality control may demand a desk review of all appraisals before a loan is closed. Cost factors, such as whether or not an appraisal review should be requested for a certain transaction, are additional factors to consider.

The cost of a desk review is reasonable, ranging from $100 to $200, around half the cost of an appraisal. Uniform Standards of Professional Practice include a section on desk reviews (USPAP). When providing a review without a value opinion, the reviewer must state and/or identify the client, the users, the purpose of the review, the work under review, the date of the work under review, the effective date of the opinions and conclusions, the name of the appraiser performing the appraisal, the effective date of the appraisal review, all extraordinary assumptions and hypothetical conditions, and how these assumptions and conditions affect the appraiser's value opinion. The desk review, like all other review techniques, has flaws. There may be a lack of independence and the risk of reviewer bias, as well as a lack of a subject property and/or a comparable-sales inspection in some situations. These concerns do not rule out the possibility of a legitimate desk review in most cases; but, when considering additional review duties, these flaws in the product must be taken into account.

When considering the advantages of a desk review, the human factor should not be overlooked. There's no way an electronic review system can match the logic and reasoning supplied by a human. However, unlike in a more full appraisal study, the reviewer is unlikely to have physically viewed the topic and similar homes. For lenders that want a middle-ground appraisal study, the desk review is a reasonable solution. It's also worth noting that the desk review will occasionally fall short. In these situations, a more thorough evaluation examination is necessary. A skilled and experienced management team reviewing and interpreting the findings of a desk review is essential. If an institution does not have appropriate in-house assistance for this role, it should consider hiring professionals in this sector or outsourcing it to a respected appraisal review agency.