Last month, the Federal Housing Finance Agency (FHFA) expanded eligibility for appraisal waivers on purchase loans by increasing the maximum loan-to-value (LTV) ratio to 97%. This change allows appraisal waivers—especially without property inspections—for loans with up to 97% LTV. As a result, borrowers may be able to finance nearly the entire cost of a home without fully understanding its value, exposing consumers to financial risk, particularly during a market downturn.
So, what does this mean for appraisers?
For those who primarily complete lender-based appraisals, it’s clear that FHFA and its appraisal waiver policy believe they can manage risk without requiring an appraisal. This will likely lead to reduced volume for appraisers in the future. While the appraisal waiver program still represents a small portion of the overall volume, it signals that FHFA will continue to push for waivers and alternative products over traditional appraisals. This should serve as a wake-up call for appraisers who rely heavily on lender work—now is the time to diversify.
The solution is to move away from lender work and diversify your client base. Consider providing appraisals for real estate agents and sellers, helping them set accurate listing prices. Partner with attorneys to conduct appraisals for estates, both current and retrospective. Explore divorce appraisals, as attorneys and spouses rely on them daily for divorce proceedings. As the waiver program grows, market yourself to buyers and agents as a provider of “double-check” appraisals: we’ll verify your purchase price to ensure you’re not overpaying. There are plenty of opportunities to carve out a niche in the non-lender space—get creative to meet the needs of your market.
Breaking into the non-lender space isn’t easy, but it’s necessary. FHFA is signaling that your volume will decrease over time if you don’t adapt. If you want to remain in the appraisal business, you must redesign your business and diversify your client base. You’ll need to step out of your comfort zone, market your services, and be proactive to succeed. Appraising is a rewarding profession, and once you diversify away from lending, you may find yourself enjoying it again.
I’m not suggesting you abandon lending altogether. By securing non-lender appraisals, you’ll be able to choose to work with only the best direct lenders or AMCs that value your expertise and compensate you fairly.
If you’re interested in learning more about networking and growing your non-lender business, I encourage you to consider joining ReferAppraisal.com. We offer a $20 per month or $199 per year membership, which provides full access to our micro-lessons filled with real-life scenarios and actionable tips. If you’re not ready to invest, we also offer a free membership that lets you connect with other appraisers, offer nationwide appraisal coverage to clients, and earn money through non-lender referrals and peer referrals.
