Coronavirus is Changing the Face of Banking and Commercial Real Estate Appraisals 

By March 20, 2020 March 22nd, 2021 No Comments

Amid increasing concerns over the long-term impacts of the novel coronavirus, also known as COVID-19 (SARS-CoV-2), on the economy and daily life, banks are reassuring customers with information and by taking precautions. 

According to American Banker, J.D. Power’s VP of global financial services, Bob Neuhaus, believes that developing lines of communication is the way to build (and re-build) trust with consumers, saying,

“This is a moment of truth for the industry to step up communication and start showing tangible concern … It goes way beyond the standard email most companies are sending out. It has to be more tangible in terms of what customers can and should be doing.”

When it comes to small businesses that rely on lines of credit to keep them afloat, the coronavirus, also known as COVID-19, has been a source of uncertainty for many. However, some banks have already expressed their commitment to work with small businesses to prevent them from going under. Seattle-based bank, Washington Federal, Inc., has readied $100 million in credit to assist businesses negatively impacted by the novel coronavirus outbreak. 

Other banks are doing their part to help prevent the spread of coronavirus by closing branches. For example, Chase Bank announces to close 20% of their locations while the Federal Deposit Insurance Corporation (FDIC) has expressed their desire to limit disruptions and offer other ways to serve their customers

As “social distancing” has begun taking root across the U.S. in an effort to curb the spread of the coronavirus, personal banks in Maine have started implementing “distance banking” as a creative solution to keep branches open while limiting contact with others. They are urging customers to leverage mobile banking options when at all possible and if customers need cash, they are directed to ATMs and drive-thrus. 

How the Government is Helping

As the novel coronavirus continues to shake up markets, the federal government is doing its part to help prevent an economic shutdown by introducing a $1.5 trillion stimulus package that would help small to mid-sized businesses by temporarily cutting payroll taxes, or even suspending them altogether. 

Also, a part of the federal stimulus package is a push to send checks to every American to help put money back into consumers’ pockets to help fight off the financial effects of the coronavirus outbreak. Some reports indicate that it’s very likely for these personal checks to exceed $1,000 per person and should be on their way by early April. 

Some bankers are encouraging the Fed to decrease regulations so that they can increase lending in order to help spur the economy. Because the coronavirus is adversely affecting the economy in unprecedented ways, members of the Blackrock Investment Institute, an asset management group, have called for “unprecedented policies” to grapple with the next economic downturn. 

What This Means For Buying and Lending

Though typically a large stimulus from the federal government is a relatively uncommon occurrence, the coronavirus has created an unprecedented shakeup in the financial and banking industries. The U.S. Dollar is the strongest it has been in 3 decades thanks to an increase in liquidity from central banks. This comes on the heels of the U.S. Federal Reserve slashing interest rates to nearly zero to help stimulate economic growth. The cut in the interest rate from the Fed is designed to “entice borrowers and jump-start spending” across the board to fight the early signs of recession due to the coronavirus.

How Commercial Appraisals are Affected During Covid-19

As aspects of daily life are altered during these unprecedented times, the commercial appraisal process has also been affected.  However, it’s important to keep in mind that Interagency Appraisal & Evaluation Guidelines and Uniform Standards of Professional Appraisal Practice (USPAP) are adapting to the current state caused by the coronavirus. Andy Reisser, Compliance Director at MountainSeed states,

“They only require the degree of inspection to be sufficient for the appraiser to develop credible assignment results. That said, the decision regarding the level of inspection should be an agreement between the appraiser and financial institution, attending to inherent health risks and the level of risk for the transaction.” 

This means that CRE business can continue as it normally would with minimal delays related to safety inspection protocols. The most agreed-upon procedure going forward is to use caution in all scenarios and, if needed, to treat transactions like proposed construction appraisals. This allows a business to continue moving forward, and if any interior inspections cannot be completed during these uncertain circumstances, a follow-up inspection can be set for a later date.