Reblogged from Scotsman Guide – Victor Whitman
Addressing appraiser shortage isn’t a simple fix
Much ink has been devoted to news stories over the last few years about the declining number of residential appraisers and the dearth of young people going into the profession. Although it is true that the number of appraisers is down nationwide, the challenge of producing quicker, accurate appraisals is nuanced.
It will take more than simply adding to the overall numbers of qualified appraisals to ensure timely service in all areas, industry experts told Scotsman Guide News.
A declining number of appraisers has been the focus of concern. According to the Appraisal Foundation, the pool of people qualified to assess a home’s value has dropped from 96,251 individuals presently, down from 121,344 a decade ago.
These lower numbers are primarily driven by a steep drop-off in state-licensed appraisers. The number of state-licensed appraisers, who have less training than certified appraisers but are qualified to handle most home appraisals, has fallen dramatically, to 7,854 nationwide today, down from 30,286 in 2007.
The number of certified residential appraisals has dropped as well, from 54,177 to 49,187 over the past 10 years. The number of certified general appraisers, who are able to appraise both commercial and residential properties, has risen to 39,210, up from 36,881 a decade ago, the Appraisal Foundation reported.
Increasing the number of appraisers won’t solve the problem of getting a timely appraisal done in many parts of the country, however, said David Bunton, president of the Appraisal Foundation, a Washington, D.C.-based nonprofit that sets the congressionally mandated standards for appraisers. He said the real issue is not so much a lack of professionals overall. It is that certified and state-licensed appraisers often aren’t willing to travel far afield to do the work.
Appraisers have to spend more time on the job and get paid less on average than they did a decade ago, Bunton said. Nowadays, in the post-financial crisis world, the federal government requires a firewall between lenders and the appraisal process. Appraisals are now ordered through third-party appraisal management companies, which take a cut of the fee.
“The economic issue sort of transcends all areas. It can be urban or suburban,” Bunton said. “If I have to drive three hours in each direction to go view a property, and I am being offered a relatively modest amount, I just won’t do it. I am going to go out and do either litigation support or divorce work or insurance, or move on to something else.”
Fewer rural appraisals
The sharp drop in state-licensed appraisers has come about largely because the Federal Housing Administration (FHA) now only accepts a valuation from certified appraisers for FHA-backed loans. Bunton said state-licensed rural appraisers have been disappearing since FHA changed the rule in 2008.
Rural appraisers often typically do just one or two appraisals a month. It is a part-time job. When the FHA stopped accepting appraisals from state-licensed appraisers, they had the choice of going back to school or letting their credentials lapse. The cost and time involved in getting certified didn’t make sense to them, Bunton said. Given that the FHA would no longer accept their appraisals, they stopped doing appraisals, even for the loan types that still accepted them.
“We visited with a congressman from New Mexico,” Bunton said. “He represented the entire southern half of New Mexico. He said Las Cruces, New Mexico, has a population of 100,000, and we only know of two people who want to do residential appraising. I went back and looked, and there is a federal registry of appraisers, and there were 47 people with a Las Cruces address that were on the appraiser registry. They are there. They just don’t want to work for the money being offered.”
During an interview last week, Susan Allen, senior vice president in CoreLogic’s Valuation Solutions Group, said that the focus of the industry’s attention should not be fixated on the number of appraisers at a given time. She noted that demand for appraisals fluctuates greatly, while the numbers of appraisers can’t be adjusted that fast.
“No matter how we adjust appraiser certifications, training requirements, or education requirements, we are not going to instantaneously see 25 percent more appraisers available in that market to fill the void,” Allen said. “So, it is not practical that we are going to address the industry’s desire to compress turn times solely by increasing the number of appraisers to the point where we can handle peak mortgage application volume in every part of the country. It is not going to happen.”
Allen said that improvements in efficiency and turnaround times will likely depend on technological advances and improvements to the process. She said although computer valuation models have improved, technology won’t ultimately replace the need for live appraisers.
“We have to leverage appraisers for their unique skill sets, especially research and analysis,” Allen said. “Those things are critical in our business for understanding value, but we have to fuel that appraiser with robust data, analytics and appropriate technology to allow them to proficiently do their job.”
The views expressed are my own and do not necessarily reflect the views of my employer.
Visit my website at: www.juliecnichols.com or contact me with any of your home loan questions.