Compliance with commercial real estate appraisal standards is smart business for banks. In addition to saving time and money, this approach also improves morale within the financial institution. Healthy financials and a healthy work environment means happy investors and customers.
Learning from Alcoa and Paul O’Neill
When Paul O’Neill took over as CEO of Alcoa in 1987, his primary focus was one that seemed infinitely odd to investors: He wanted to make Alcoa the single safest place to work in all of America. People thought he was crazy, but throughout his tenure, he lowered the rate of workdays people lost due to injury from 1.86 per 100 workers to 0.2. As a result, Alcoa’s profits soared. In fact, profits rose so much that by the time O’Neill left, Alcoa was five times as profitable as what they had been when he arrived.
While the story of Paul O’Neill and Alcoa may not seem related to appraisal review policies, they are actually quite related. Just like O’Neill improved Alcoa’s overall performance by improving safety standards, banks can improve their overall performance and functionality by focusing on improving appraisal review policies, which are a key component of a bank’s safety standards.
The Importance of Good Appraisal Policies
Sound appraisal policies are a key component of safety standards in real estate lending. When a bank gets them right and sticks to a consistent and predictable appraisal pattern, they save time and money, as well as improve morale across the board. Here’s a breakdown of why these benefits are so critical to a bank’s well-being:
- Save time: If a bank’s appraisal process is done right, there is no need to scramble in preparation for a bank audit. In addition to boosting the bank’s preparedness for audits on the front-end, sound appraisal policies mean that you don’t have to spend time correcting the things an audit reveals you did wrong.
- Save money: If your bank’s appraisal policies are sub-par, you are spending too much time fixing mistakes instead of processing new business. By having sound appraisal policies, you allow your bank to focus on generating new revenue rather than fixing old oversights. Additionally, better policies could save the bank from potential fines for repeated non-compliance.
- Improve morale: A good appraisal policy can work wonders on interdepartmental morale. While appraisal compliance audits can be stressful and anxiety-laden, banks that are not worried about audits (because they know their loans are in good shape) get rid of anxiety. This allows your bank to focus on new projects instead of continually fixing old mistakes.
Review Your Appraisal Policies for Better Business Today
While there are many benefits to improving your appraisal policy guidelines, the most pronounced are saving time and money, and improving morale throughout the bank. Even if you think staffing an appraisal review department is out of your reach, the advent of third-party appraisal review firms is a fantastic option for banks that engage in commercial real estate lending.
Using a third-party appraisal review firm provides all of the benefits of an appraisal review department at a fraction of the cost – or no cost at all*.
To learn more about this option and whether it’s right for your company, contact us to get a free appraisal policy review today!
*The financial institution’s customer typically pays the review fee as part of the appraisal cost.