There’s nothing quite like confidently walking away from what you think is a job well done, only to be met with a different sentiment from others. Yes, we’re talking about reconsideration of value (ROVs) and revision requests.
These don’t always leave us with a great feeling, but there are ways to prepare for them and things to keep in mind that will soften the blow.
Also worth noting: The five best practices are laid out under the assumption that the ROV or revision request is appropriate and necessary. We recognize that is not always the case, but that is a blog for another day.
Remain Objective and Professional
Take a deep breath. We know it’s frustrating, you know it’s frustrating, your client probably even knows it’s frustrating. You typically don’t get paid for ROVs and revision requests, so let’s go ahead and throw the phrase “worth your time” out the window.
Instead, try to look at the requests as an opportunity. This is your chance to rise above and provide exemplary service. If the main correspondence is taking place over email, ensure that your tone remains professional. (Pro tip: Use a browser plugin, such as Grammarly, to gauge your language and help you phrase things in a way that matches your goal tone.)
At the most basic level, try to speak to the client as you would if you were face to face. We all know home buying is a complicated process, and we all have the same end goal: getting the buyer in their home.
Get (re)Organized
Once you receive an ROV or revision request, you will need to reopen your completed report and make sure your workfile has all the necessary data, communication and forms. If it doesn’t, take the extra time to track everything down before moving on to addressing the request. This will save you time in the long run.
DataMaster can help you stay organized automatically so you have what you need for ROVs and revision requests. DataMaster conveniently saves your workfile as you work. In fact, everything you considered, researched or used in your report is automatically saved.
Be Thorough and Clear in Your Response
If there’s anything you take away from this article, let it be this: Communicate clearly. The entire process requires clear communication.
When reviewing comparable sales, it is the appraiser’s job to explain why — or why not — each of them is comparable and how it impacted their analysis.
If there are any adjustments made to the comparable sales data or other factors affecting the property’s value, be sure to clearly explain how you arrived at those changes. Include a clear response to each item mentioned in the ROV, and ensure that the report provides a well-supported and defensible opinion of value.
Make a Mental Note about Regulators
This one may not be a “best practice” so much as a heads up, but is vitally important nonetheless. Be aware that HUD, FHFA and the federal government are examining the ROV process related to bias.
The Biden-Harris administration has been vocal in its efforts to address racial and ethnic bias in home valuations. In 2022, the administration launched the interagency task force on Property Appraisal and Valuation Equity (PAVE). Led by HUD, PAVE’s task force is made up of 13 federal agencies, including the FHFA.
This month, U.S. Vice President Kamala Harris announced that the Biden administration is developing a rule to tackle racial bias in home valuations.
“Today, I’m proud to announce we are developing a rule that will require that financial institutions ensure that their appraisal algorithms are not biased, for example, that they do not produce lower valuations for homes owned by people of color,” Harris said according to NBC News. “We are also releasing the guidance to make it easier for consumers to appeal what they suspect to be unbiased valuation.”
Additionally, on June 7, five federal agencies together proposed new interagency guidance on the reconsiderations of value (ROVs) for residential real estate transactions. The agencies include the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC).
“The agencies have received questions and comments from financial institutions and other industry stakeholders on ROVs, highlighting the uncertainty in the industry on how ROVs intersect with appraisal independence requirements and compliance with Federal consumer protection laws, including those related to nondiscrimination,” the guidance states.
As reported by HousingWire, “The guidance outlines how financial institutions may either enhance their existing ROV processes or create new ones while maintaining safety and soundness requirements and complying with all applicable regulations and laws. The guidance also prioritizes appraisers’ independence and responsiveness to consumers.”
In line with these efforts, HUD published draft guidance earlier this year to make it easier and quicker for prospective FHA borrowers to request an ROV on a property if the initial valuation is lower because of suspected illegal bias.
Keep in Mind that Revision Requests aren't Always about Value
While value is the principal reason for revision requests, it isn’t the only one (except for reconsideration of value requests). We often think of the borrower requesting the revision, but it can also be the underwriter or lender. They may flag an initial report to ensure compliance with specific legal or regulatory requirements. This could include adding or modifying language, addressing specific appraisal guidelines, or providing additional regulatory disclosures.
Whatever the case may be, take a deep breath and keep these best practices in mind as you make your way through the process.
Note: This blog was updated on June 15, 2023, to include recent statements from U.S. Vice President Kamala Harris and an announcement from five federal agencies regarding ROVs.
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