Revolutionizing Mortgage Process: The Bifurcation of the Appraisal Process  

Abstract: In the evolving Canadian real estate market, lenders are adopting the bifurcated appraisal process to improve efficiency, reduce costs, and enhance customer experience. This innovative model divides the traditional appraisal task into two specialized roles: the field inspector and the desktop appraiser, each focusing on their specific expertise areas. Technological advancements support this model by enabling real-time data transfer, which expedites the appraisal process and reduces errors. Moreover, the bifurcated approach offers significant cost advantages, quicker loan processing, and contributes to environmental sustainability by reducing travel and associated emissions. This streamlined method not only meets the rapid pace of today’s market demands but also ensures more accurate and reliable property valuations, fostering a more dynamic and customer-focused real estate landscape in Canada.

In the rapidly evolving landscape of Canadian real estate, lenders are continually seeking innovative strategies to enhance efficiency, reduce costs, and improve the customer experience. One transformative approach that is gaining traction is the bifurcation of the appraisal process.  

While automated valuation models (AVMs) are important tools in a lenders toolkit, their application is best placed in low loan-to-value (LTV) scenarios. For higher LTVs (60-85%), bifurcating the appraisal process not only streamlines operations but also sets a new standard for accuracy and  speed in property valuation.  

The Bifurcation Model: A Dual Approach to Appraisals  

Traditionally, the appraisal process has been a linear, time-consuming task, with a single appraiser responsible for the physical inspection of the property, data-input, and the subsequent analysis and report generation. The bifurcation model reimagines this workflow by dividing it into two specialized roles: the field inspector and the desktop appraiser.  

The field inspector, equipped with expertise in property inspection for appraisal purposes, visits the subject property to gather essential data, including photographs, measurements, and condition assessments. This role requires a keen eye for detail and a comprehensive understanding of the elements that contribute to a property’s value.  

Conversely, the desktop appraiser operates from a centralized location, focusing exclusively on analyzing the collected data, conducting market research, and compiling the appraisal report. This separation allows each professional to concentrate on their area of expertise, leading to more accurate and reliable appraisals.  

Technological Integration: The Catalyst for Efficiency  

The linchpin of this bifurcated approach is the seamless integration of technology. Modern app solutions are designed to facilitate instant data transfer from the field inspector to the desktop appraiser. Moments after the inspector completes the on-site evaluation, detailed information, including visual documentation, is uploaded to a centralized platform, accessible by the appraiser.  

This real-time data transmission not only expedites the appraisal process but also minimizes the risk of data loss or misinterpretation. By leveraging such technology, lenders can ensure appraisal reports are swiftly delivered and grounded in the most current and comprehensive property details.  

Cost Reduction: A Strategic Advantage  

One of the most compelling arguments for the adoption of the bifurcated appraisal process is its  potential for significant cost savings. By delineating the roles of inspection and appraisal, lenders can optimize resource allocation. Field inspectors, who do not require the same level of certification and training as licensed appraisers, can be employed at a lower cost for the on-site component of the appraisal. This specialization in the workforce leads to a more efficient use of human resources and, consequently, a reduction in the overall cost of appraisals.  

Moreover, the increased speed of the appraisal process allows lenders to process loans more rapidly, reducing holding costs and improving the turnover rate of capital. This efficiency not only benefits the lenders’ bottom line but also enhances the competitiveness of their loan products in the market.  

Enhancing Customer Experience  

In today’s market, customer satisfaction is paramount. The speed and reliability of the bifurcated appraisal process directly translate to a better customer experience. Borrowers are increasingly seeking faster loan approvals and closings, and the traditional appraisal process can often be a bottleneck.  

By adopting a bifurcated approach, lenders can significantly shorten the time from application to approval, thereby meeting or exceeding customer expectations. This responsiveness not only improves the individual customer’s experience but also bolsters the lender’s reputation in the  market, potentially attracting more business.  

Environmental Considerations: Reducing Greenhouse Gas Emissions  

An often-overlooked advantage of the bifurcated appraisal process is its contribution to environmental sustainability, particularly in reducing greenhouse gas emissions. In the traditional appraisal model, appraisers are required to travel extensively, often covering vast distances to conduct on-site inspections. This not only contributes to increased fuel consumption but also results in a significant carbon footprint associated with the appraisal process.  

By adopting the bifurcated approach, the need for appraisers to travel is substantially reduced. Field inspectors, who are more likely to be localized, inspect more properties during a single trip than an appraiser can in the conventional set-up.  

This division of labor not only streamlines the appraisal process but also aligns with the environmental goals of many Canadian banks, which are increasingly committed to reducing indirect greenhouse gas emissions. By minimizing travel requirements, lenders can contribute to a more sustainable future, aligning their operational practices with broader environmental objectives and demonstrating corporate responsibility in the face of global climate challenges.  

Navigating Challenges and Ensuring Quality  

While the benefits of bifurcating the appraisal process are clear, it is also essential to address potential challenges head-on. Ensuring the quality and consistency of appraisals in this model requires rigorous training for both field inspectors and desktop appraisers. Robust quality control  measures and reporting play a vital role too.  

Lenders or their appraisal partners must invest in comprehensive training programs to equip field inspectors with the necessary skills to accurately assess and document property conditions.  Similarly, office appraisers must be adept at analyzing data and understanding market trends to ensure their reports reflect the true value of the property. 

Quality control mechanisms, including random audits and peer reviews, can help maintain high standards and identify areas for improvement. By proactively addressing these challenges, lenders can fully leverage the benefits of the bifurcated appraisal process.  

Ensuring Accuracy through Geographical Specialization  

A potential concern for lenders and mortgage brokers considering the bifurcated appraisal process is the importance of geographical specialization in producing accurate reports. The nuanced understanding of local real estate markets, including neighbourhood trends, zoning regulations, and community developments, is crucial for precise property valuation. Appraisal companies adopting the bifurcated model address this concern by allocating appraisers to specialize in specific markets.  

By fostering expertise in a limited number of geographical areas, both field inspectors and desktop appraisers can develop a deeper understanding of the local dynamics, leading to more accurate and insightful appraisal reports. This specialization not only enhances the quality of the appraisals but also builds trust with lenders and mortgage brokers, who rely on the appraisers’ localized  knowledge to inform their lending decisions.  

Through this approach, the bifurcated model not only maintains but potentially enhances the accuracy and reliability of property valuations, reinforcing the confidence of all stakeholders in the appraisal process.  

Moving Forward  

For lenders looking to implement the bifurcated appraisal process, selecting the right partner is crucial to ensure the transition is smooth, efficient, and ultimately beneficial. The key is to prioritize innovation and agility in your selection criteria, focusing on partners that demonstrate a clear commitment to pushing the boundaries of traditional appraisal practices within the standards set  by associations.  

Firstly, seek out companies that are recognized for their innovative approach to real estate appraisals. These firms are often at the forefront of adopting new technologies and methodologies, including the bifurcated appraisal process. They understand the importance of leveraging digital tools to streamline operations and enhance the accuracy and speed of their services. A partner with a strong innovation ethos is likely to be more adaptable and forward-thinking, qualities that are essential for navigating the complexities of implementing a new appraisal model.  

Moreover, it’s important to evaluate the track record of continuous innovation within potential  partners. Companies that consistently explore new ways to improve their services and adapt to changing market conditions are more likely to provide sustainable, long-term value. Look for evidence of ongoing investment in technology, professional development for their staff, and a proactive approach to addressing industry challenges.  

Next, look for social proof that potential partners have the ability to get things done, and done well.  A great place to start your research is on-line feedback tools such as Yelp! and Google Reviews.  Social media may also be a good place to get information about prospective partners. 

Traditional providers of appraisal services may not possess the vision or agility required for such a transformative shift. Their established processes and larger organizational structures often hinder rapid change and innovation. Consider partnering with smaller, more nimble firms. These companies have the flexibility to implement changes more swiftly and are more responsive to the unique needs of their clients. Their leaner operations allow for quicker decision-making and a more  personalized approach to service delivery.  

In Summary  

The bifurcation of the appraisal process represents a significant leap forward in the efficiency and effectiveness of property valuation. By embracing this model, Canadian lenders can achieve cost savings, enhance customer satisfaction, and maintain a competitive edge in the dynamic mortgage market.  

As the industry continues to evolve, it is incumbent upon lenders to explore and adopt innovative practices that align with the changing needs and expectations of their clients while taking on appropriate levels of risk. The bifurcated appraisal process, supported by cutting-edge technology,  offers a promising path forward, where appraisals are faster, more accurate, and more cost effective than ever before.  

In embracing this change, lenders will not only streamline their operations but also contribute to a more vibrant, accessible, and customer-centric real estate ecosystem in Canada.  

About the Author

Christopher Bisson is the CEO & Founder of Value Connect Inc., an appraisal management and technology firm changing the way everyone feels about property appraisals, by making them simple and efficient. Chris earned his MBA from the  University of Notre Dame, where he conducted an in-depth analysis of the North American appraisal management  industry. He can be contacted by phone at 226-251-0108 x4250 or chris@valueconnect.ca