Understanding the New ROV Appraisal Rules: Tips on How to Respond to an ROV Request
What is a Reconsideration of Value (ROV)?
A Reconsideration of Value (ROV) is a request for an appraiser to review their appraisal due to missing or incorrect information. Borrowers can use this process to highlight errors or omissions in their property appraisal to their lender.
In this blog, we’ll delve deeper into the new ROV appraisal rules and provide valuable tips for responding to and reducing ROVs effectively.
What is a Borrower Initiated Reconsideration of Value?
Fannie Mae, Freddie Mac, and HUD recently updated their appraisal ROV policies. One of the new guidelines require mortgagees to establish a clear and transparent process for borrowers to initiate a reconsideration of value request when they believe the appraisal report is inaccurate or deficient. This process must include:
- Disclosure: Providing borrowers with easy-to-understand information about the ROV appraisal process, including expected processing times and how to request clarifications or corrections.
- Submission: Specifying the process for submitting an ROV request, the required information from the borrower, and any limitations (e.g., only one request per appraisal).
- Communication: Establishing protocols for communicating with the borrower throughout the ROV appraisal process, including acknowledging receipt of the request, providing updates on its status, and informing the borrower of the results.
Will ROVs become more common?
The short answer is yes—appraisers should expect to see more reconsideration of value requests moving forward. The process for submitting an appraisal ROV request is being made available to nearly every borrower.
Many lenders who previously didn’t have an ROV appraisal policy are now implementing one. Borrowers are notified about the option both before the appraisal and after receiving the report. In fact, it’s being actively advertised to them, so the likelihood of seeing more ROV requests is high.
The good news is that the submission process has been streamlined and standardized. The number of comparables a borrower can submit is now limited to 5, and many lenders and AMCs have teams dedicated to reviewing these submissions before sending them over to the appraiser.
How to Reduce ROV Requests?
With the new policies in place, appraisers will have to spend more time dealing with Reconsideration of Value requests, which can be time-consuming and frustrating. Below are two essential ways to reduce ROVs:
1. Be Thorough in Your Sales Search
- Include All Relevant Sales: When conducting a sales search in your market area, you’ll typically pull a list of sales from the MLS that fit within a specific boundary. Even if you don’t end up using all of these sales as comparables in your final report, including them in an addendum is a good idea.
- Provide Statistical Analysis: Clearly outline the sales from the relevant area and break down the data with a statistical analysis. Mention your search criteria and highlight key metrics such as the mean, median, mode, and the list price-to-sales price ratio.
- Explain Subject Property’s Position: When writing your report, reference this analysis and explain where the subject property fits within the broader market. Is it priced at the higher end or lower end, and why? This level of detail provides clarity and strengthens your report, making it less likely for someone to question your conclusions.
- Consider Additional Comparables: If you find additional sales that are somewhat comparable, go ahead and include them in the sales grid. Adjust them accordingly and save them in your work file.
Later, if an ROV appraisal request comes through, you can easily refer back to these sales and state that they were considered, but not used because other comparables were more appropriate. This proactive approach can pre-emptively address borrowers or agents’ concerns, saving you time down the line.
2. Open the Lines of Communication with Realtors
- Seek CMA: Communication is key, especially with realtors. Take the time to call the listing agent and ask for their comparative market analysis (CMA). Find out how they determined the list price or asking price. In many cases, the property can be overpriced.
- Understand Pricing Factors: The listing agent might also provide you with sales and listings they considered during their analysis, which can be useful for your work file. Ask them what other properties they showed the borrower—this helps you better understand what kind of home the buyer was after, giving you more context on the market conditions.
- Build Relationships: You gain valuable insights and strengthen your appraisal report by having conversations with realtors and other market participants.
Additionally, when a borrower later questions a low appraisal, the realtor might back you up by re-endorsing your earlier discussions with the realtor. This can help deter appraisal ROV requests before they even start.
How to Respond to ROV Requests?
1. Review the ROV and Check for Errors
The first step is to review both the appraisal reconsideration of value request and your original appraisal to identify any factual errors. So, if there is a mistake in your report, don’t ignore it. Address the issue and correct it to ensure your appraisal is accurate moving forward.
2. Pull All Relevant Data on Submitted Sales (Up to 5)
Keep an open mind when reviewing the sales data submitted. It’s important to gather as much information as possible from various sources. This can include data from:
- Multiple listing services (MLS)
- Real estate agents
- Assessor records
- Realist
- Zillow
3. Writing the Response
Start by quoting the search criteria you used in your original appraisal. Then, address each submitted sale individually. Remember that at this point, they’re just sales—not yet comparable—until you’ve thoroughly analyzed them.
- If one or more of the submitted sales aren’t competitive with the property you’re appraising, explain your reasoning clearly. Show how the sale doesn’t fit your search criteria and ensure your explanation is professional, as the borrower will likely read it.
- If one or more of the submitted sales should be considered comparable but were left out of your original report, explain why. For example, it could’ve been mislabelled in the MLS. These sales should be added to the sales grid and adjusted accordingly.
Conclusion
The rise in appraisal ROV requests will significantly impact the appraisal industry. Appraisers must be equipped to handle these requests by conducting comprehensive sales searches, fostering open communication with realtors, and responding promptly to reconsideration of value requests.
Connect by ValueLink can simplify the process for you. Our platform supports the management of ROV requests, allowing you to efficiently upload supporting documents, track the progress of reviews, and communicate with clients efficiently.
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