Sean Locke

Working during a pandemic has changed processes and routines for just about everybody, including home inspectors and professional appraisers. While looking at comps and online data provide a lot of usable background on a property, the on-site visit is still critical. For home inspectors, going virtual is not an option.

“The process of a professional home inspection is a hands-on experience. I have not yet seen an algorithm that is capable of entering and inspecting a crawlspace or attic,” says Mike Wagner, a home inspector with R.A.L. Inspections based in Westfield, Ind., and the current president of the American Society of Home Inspectors.

What’s happened to the volume of activity in the inspection business since the virus landed depends a lot on geography. Wagner has been in contact with inspectors from different parts of the country and shared some anecdotal data. “My conversations have indicated impact ranging from 10% to 20% loss in business in areas that have less restrictive stay-at-home orders, growing up to 80% to 100% in areas where the virus has reports of substantially higher numbers of infected individuals,” he says.

There was also an upward spike early in the pandemic. “A few inspectors indicated that their business volume was actually up in March,” says Wagner. “I believe this is likely a result of the real estate market pushing to move transactions along quickly and other inspectors in their areas making the business decision to stop performing inspections altogether.”

While a proper inspection cannot be done virtually, the inspectors who are still working in the field are relying on technology to incorporate the buyer into the process without putting them at risk. “During this pandemic crisis, many inspectors are now asking the buyers to not attend the inspection in person,” says Wagner. “They are incorporating live video stream or a post-inspection video conference through various technology platforms to help deliver the inspection information.”

Wagner notes that the inspection process now also excludes the usual cast of characters including occupants, agents, and clients. Some inspectors have suspended operations entirely, and many have adapted to wearing masks, gloves, and shoe coverings during the process.

Professional appraisers typically work for lenders and as consultants to builders, developers, and investors. At this point in the pandemic, they are considered essential personnel in every state. The biggest tool in their box is numbers as opposed to flashlights, and in many cases their work is unaffected by the COVID-19 pandemic.

“While the valuation profession doesn’t recognize the term ‘virtual appraisal,’ appraisers certainly can perform residential appraisals without entering the property,” says Jefferson L. Sherman, principal of Sherman Valuation & Review, in Willoughby Hills, Ohio, and president of the Appraisal institute, headquartered in Chicago. “Their ability to do so depends in part on the assignment’s scope of work and investor requirements.”

Jefferson L. Sherman, Appraisal institute
Jefferson L. Sherman, Appraisal institute

At the same time, Sherman acknowledges that most appraisers would prefer to see the entire property in person before attaching a number to it. Many federal agencies and clients have issued guidelines accepting appraisals that do not require on-site property visits. But Fannie Mae and Freddie Mac are still requiring “traditional appraisals.” Pennsylvania and Vermont are currently prohibiting appraisers from performing interior inspections.

Sherman believes the biggest challenge facing his part of the real estate business is risking the health of his appraisers to get the data required by lenders, especially the interior inspections required by Fannie and Freddie. “The GSEs’ refinance policies do not help this situation, as they actually utilize the interior inspection requirement as a policy tool against the transfer of risk from loan sellers to the GSEs,” he says. “And the fluidity of the current situation presents challenges for many appraisers as they seek to develop reliable, credible opinions of value for their clients.”

Despite the dark prognosis for the immediate future of the country’s economy, Sherman and Wagner both have reasons to stay positive. “From a micro-perspective, I do believe real estate will have an opportunity to rebound quickly depending on how long this pandemic lasts,” say Wagner. “Our economy, including real estate markets, were strong heading into this crisis. I believe if we are able to start to see relief from the spread of the virus in a month or two, markets could spring back quickly and the delayed transactions could cause high demand as they eventually hit the market.”

“Typically, a real estate appraisal is counter-cyclical to the economy, as many investors and financiers have particularly good reason to understand collateral value in a down economy,” says Sherman. “Further, the economy will recover, the real estate market will rebound, and appraisers will be as valuable to their clients as ever.”