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Close 20% more loans by better utilizing your appraiser.
By Brian Blanchard, Chief Operations Officer, PROvalUSA.com
Part 2 Continued:
Lock out your competition by getting your borrower to commit
In the last two articles, we touched on 3 key points to improve your close ratio:
1) Pre-Qualify your borrower’s property collateral (estimated value)
2) Lock out your competition by getting your borrower to commit
3) Follow Through
Today, we will discuss the second point in greater detail.
Industry wide, nearly one out of three loan apps cancel after the appraisal is ordered and after significant time has been invested by you and/or your firm. The first reason for this high rate of cancellation is unrealistic estimated values. A second equally important contributor to this cancellation rate is heightened competition fueled by educated shopping.
Jupiter Research estimates that about $34 billion in mortgages will be originated online this year and over $70 billion/year by 2009. The majority of these online consumers are drawn to lender referral services the likes of LendingTree.com, where they can compare rates, then apply with multiple lenders. These and many other types of websites turn traditional consumers into educated shoppers.
As an educated shopper, many consumers have found multiple lenders offering very similar products. Therefore, competing on rates alone is often a losing battle. Successful lenders must also compete through service; getting their borrower to commit sooner.
In the last 5 years, I have seen several examples of this in which two or more lenders are working the same loan, usually with very similar loan packages. Not surprisingly, the one whose appraiser sets an inspection first is the one who closes the loan.
The reason for this is two-fold:
1. The appraiser is collecting a fee from the borrower locking them in to the lender they represent.
2. In today’s environment of out-of-state lending and internet-based lending, this is often the first face to face contact the borrower receives, personalizing their borrowing experience.
Locking out you competition
It is possible to turn your appraiser into one of your greatest allies. If the appraiser contacts the borrower within 24 hours, your loan is significantly more solidified, virtually locking out your competition. If the appraisal is delivered in 3 to 7 days, this solidification turns into a faster closing and additional referrals.
This level of appraiser performance is easily accomplished if you follow three basic rule sets, each of which is little more than common professional courtesy.
1) Engagement Rule
2) Respect Rule
3) Volume Rule
Engagement Rule…You get what you ask for, most of the time. When ordering an appraisal, the appraiser makes a record of your exact request to be used as a guideline for the appraisal order. Appraisers refer to this as the Engagement. If you ask for the appraisal to be delivered in two weeks, that is what they will shoot for.
If you wish to lock in your borrower, simply ask the appraiser to contact the borrower within 24 hours to set an inspection. Then request that the order be delivered between 3 and 7 days, depending on the local market.
Respect Rule…Most appraisers know that the appraisal industry is understaffed leaving lenders with few options in many parts of the country. Therefore, they have the luxury of servicing their clients in the order of importance. The number one factor involved in an appraiser’s priority list is how greatly a lender respects their company and the work they perform. The following two guidelines will show you how to gain a mutual respect and improve your placement in the appraiser’s priority list.
Preparation…No one likes to waste their time doing work they will never get paid for. Appraisers are no exception. Pre-qualifying your borrower’s property collateral will reduce your cancellation rate as discussed in the previous article. In addition, it will avoid the need for your appraisers to run time consuming comp checks. Lenders who do not regularly request comp checks earn the respect of the appraiser and are shot to the top of the appraiser’s priority list.
Payment…A common issue for appraisers is delayed payments or lenders who do not pay their appraisers at all. This issue has become so prevalent that there are now more than 20 different websites dedicated to the purpose of keeping track of lenders who do not pay their appraisers. If you wish to be treated as a priority lender by any appraiser, be sure to disclose your pay out schedule to the appraiser during engagement. Then stick to it.
Volume Rule …The more orders you place with an appraisal firm, the higher you place on their priority list. This is the central philosophy to appraiser recruitment at PROvalUSA.com. This rule is why we only add appraisers when there is sufficient business to foster a mutually beneficial relationship in a particular market. Distributing more orders to a smaller base of appraisers will allow you to gain priority through repeat volume.
We have also seen that there truly is strength in numbers. An additional way to receive priority through volume is by placing your appraisal orders through a community of lenders like PROvalUSA.com or any of our competitors. When you use a shared web-based ordering platform, your appraisal is treated as an order from the larger community, thus giving you priority, regardless of your individual volume in a given market.
In closing…Significant increases to your loan volume can be had by making 4 simple modifications to your appraisal processing guidelines. First, Pre-Qualify your borrower’s property collateral. Second, gain and maintain the respect of your appraiser. Third, ask for prompt action on your appraisal orders. Last but not least, increase the volume of appraisal orders sent to each appraiser by; shrinking your base of appraisal firms or order through one of several one-line communities.
These simple actions can equate to a 10% to 15% increase in closed loans.
In our next article, we will discuss mechanisms available for seeing that each of these steps is performed consistently. We will also provide a listing of vendors who can assist you in accomplishing this increase in closed loans with little to no changes in your appraisal processing procedures.
Brian Blanchard is the Chief Operations Officer of PROvalUSA.com, the source for residential appraisals nationwide. The St. Peters, Missouri based company provides appraisal management with a modern twist. Since its creation in 2000, PROvalUSA.com continues to attract lenders to its unique open approach to appraisal management. For more information about PROvalUSA.com, visit http://www.provalusa.com/ActiveRain/ or call (866)243-7723 ext. 201.
The comments in this blog are solely the opinion of Brian Blanchard and are not necessarily representative of PROvalUSA.com's position on any particular topic.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.