Few things have remained unchanged during the novel coronavirus pandemic.
Home appraisals are no exception.
They’re as routine as the sun rising every morning.
But even home appraisals have had to adjust to the COVID-19 pandemic that stresses physical distancing for the sake of public health.
Just a few short months ago, appraisers would walk through a home to assess its value when someone applied for a mortgage on a new property or hoped to refinance their existing home.
Now, with flattening the curve being top of mind, appraisers are relying more than ever on technology to do their job.
What to expect when getting an appraisal.
“There’s a lot that can be done on computers,” says Scott Nazareth, mortgage professional with Mortgages.ca.
Appraisers are turning to MLS in search of comparable sales to help determine a home’s worth. Then they’re making adjustments. Does your home have a marble floor? That will be considered in an assessment if an appraiser could only find similar homes with hardwood and carpet online.
The marketability of a home is also factored into appraisals. Is it next to a railroad or cemetery? What are the trends in the neighbourhood?
Appraisers did this kind of virtual legwork previously but more emphasis is put on it now.
Extraordinary assumptions in extraordinary times.
For as much as an appraiser can glean online, there’s nothing like seeing a home in person.
Appraisers typically go into a home to look at any renovations and upgrades. These days, they’re looking through windows, noting this in assessments as an extraordinary assumption.
Extraordinary assumptions were frowned upon by lenders previously, but that’s changing, Nazareth says.
“Before, it would be considered a drive-by appraisal and not normally accepted,” he says. “Now lenders have accepted this new form of appraisal and it’s called a modified appraisal.”
Securing financing with a modified appraisal.
A-lenders quickly adjusted to accept extraordinary assumptions, Nazareth notes.
But private and B-lenders, which might be the only option for some borrowers, realize they’re taking on extra risk by granting financing based on these modified appraisals. B-lenders that may have offered up to 85 percent of a mortgage’s value before the pandemic has scaled back to 70 or 75 percent, Nazareth explains.
“They’ve really had to change their underwriting criteria and have had to change the amount they lend,” he says. “It’s definitely impacting the ability of clients to take money out in the alternative and private space.”