Merriam-Webster defines “best practices” as procedures that have been shown by research and experience to produce optimal results and are proposed as standard. However, in the commercial appraisal industry research, regulations, and standards are constantly being updated, and it’s sometimes hard to stay on top of those best practices. As an appraisal management company, we’re dedicated to discerning best practices and sharing our knowledge with you, especially when it comes to appraisal reviews.
Best Practice No. 1: Do not release the appraisal prior to the completion of the appraisal review.
While it might seem like a harmless gesture, there are many reasons not to release the appraisal until the review is complete. First, releasing the appraisal in advance often causes confusion and decreases productivity. Consider this: many times, appraisals are sent for revisions. These revisions can be lengthy and significant, and can even include changes to the final estimated value. There might be more than one revision needed, and chances are, it will take multiple attempts to obtain the answers to complete the review. If the appraisal is released before the review is complete, you’ll spend unnecessary time and effort trying to determine which document is the latest report and what changes were made. Save yourself the trouble and do not release the appraisal prior to the review.
Best Practice No. 2: Avoid compromising the appraisal independence of the review program.
If you remember one best practice, this is it. The reviewer, like the real estate appraiser, must be “independent of and insulated from any influence from loan production staff” (Interagency Appraisal and Evaluation Guidelines, December 2010). What exactly does that mean? In a nutshell, the reviewer needs to be left alone to arrive at his/her own opinions and conclusions regarding the appraisal under review. If the appraisal is released and the reviewer receives requests to revise the report prior to completing the review, appraisal independence is compromised. While releasing the appraisal report prior to completion of the review seems harmless, it should be avoided.
In the unusual case that you receive an appraisal prior to completion of the review, it is important that the reviewer never be contacted during the initial review process. This will maintain appraisal independence, and you’ll avoid any regulation nightmares. Wait until the review is completed to make any additional changes.
- Pro Tip: To ensure you’re following appropriate procedures, we recommend following MountainSeed’s revision process. Take a look at our debunked myths too, so you can be aware of the most common mistakes banks make in the appraisal review process.
If you ever find yourself questioning your procedures for appraisal ordering, review, evaluations, or appraisal management, feel free to reach out. We’re happy to put your concerns at ease.