Understanding the Purchase Market from an AMC Standpoint

The economy has been heating up for months. The job market is hot, and the unemployment rate is dropping fast in many places across the country. While home purchase applications are ahead of their 2017 pace as of March 2018, the housing supply constraints are continuing to hold back many buyers who are looking for an affordable entry-level or mid-tier home. The Mortgage Bankers Association (MBA) forecasts a five percent growth in purchase origination volume in 2018 despite the predicted increase in the 30-year mortgage rate.

But what does this mean for an Appraisal Management Company (AMC)? With an affordable housing shortage, buyers are looking to jump on a house they like as soon as possible or face losing it to someone else. That means the appraisal needs to happen faster. Short turn times and a geographically competent appraiser becomes essential in the appraisal process.

The Appraisal Process

Home appraisals are a critical step in the mortgage lending process. The appraisal is an unbiased estimate of the market value of what the house is worth completed by a third-party, licensed professional. An appraisal is required by all mortgage lenders as part of the lending decision process. During the appraisal process, an appraiser will walk through the house to look at its physical condition and research recently sold comparable properties nearby. The appraiser will then calculate its current market value.

Understanding Lender Requirements

Mortgage lender requirements will vary slightly due to the type of loan you choose to apply for when buying a home, but for the most part is the same for both first-time and repeat buyers. Most home loans require at least a 3% down payment on the purchase or appraised value. Credit scores are extremely important, especially for first-time home buyers. Most lenders want a credit score of 600 or higher, although home buyers using an FHA loan will only need a minimum credit score of 500. While many lenders are easing up a bit on the debt-to-income ratios in 2018, many home buyers will need less than a 45% to 50% of debt-to-income, including the mortgage loan.

Shorter Turn Times Matter

With a competitive housing market in 2018, home buyers are eager to speed up the buying process, so they can move into their new home. In a world of instant gratification, many home buyers expect the appraisal to happen in 24 hours, but that is rarely the case. Most appraisals happen within 7-10 days depending on the geographic location.

New technology has allowed many AMCs, like NAN, to predict the turn times in markets across the country based on real-time data. Appraisers who complete accurate appraisals in shorter times are more likely to obtain repeat and regular work from AMCs and mortgage lenders.

Choose a Geographically-Competent Appraiser

Every housing market is slightly different. For the most accurate appraisal, you’ll want to choose a geographically-competent appraiser who is familiar with the area and understands the local housing market values. In hot markets where there is also a qualified appraiser shortage, like Colorado, Oregon, and Washington, choosing the right appraiser is critical. AMCs can help you do that.

Working with Listing Agents and Borrowers

It’s important for AMCs to extend the same level of excellent customer service to listing agents and borrowers as they do their lender clients. Lenders spend a lot of time cultivating relationships with real estate agents and provide a level of service that will cultivate repeat business. If the AMC that the lender uses does not have the same service-centric approach, this could spell disaster for the lender who is counting on a long-standing relationship.

Excellent communication and service with borrowers are also very important. Consumers seek reviews and referrals for this type of transaction in today’s world. If a borrower does not have a good experience or feels like they were not communicated with and is frustrated, it could lead to poor reviews.

Choose the Best AMC for the Job

With a competitive housing market, fast and accurate appraisals are essential. AMCs, like NAN, can help lenders choose the best appraiser based on turn times and geography. Make sure you submit your request for the latest county-level turn time data today!