Appraisal Innovation Coming
Housing giant Freddie Mac plans to dispense with traditional appraisals on some loan applications for home purchases, replacing them with an alternative valuation system that would be free of charge to both lenders and borrowers. The company confirmed that it could begin the no-appraisal concept as early as next spring.
Instead of using professional appraisers, Freddie plans to tap into what it says is a vast trove of data it has assembled on millions of existing houses nationwide, supplement that with additional, unspecified information related to valuation, and use the results in its assessments of applications.
For consumers, the company believes, this could not only eliminate appraisal expenses — which typically range from $350 to $600 or more — but could cut down on current closing delays attributable to appraisals. It also could relieve lenders of their current burdens of responsibility for the accuracy of appraisals — a major sore point with banks that sell loans to Freddie subject to potential “buy back” demands if significant errors are later found in appraisals.
Source: The Nation’s Housing, Ken Harney