On the Path to Extinction? …Not So Fast
Excerpts:
An economic tragedy is unfolding silently across American neighborhoods.
With fewer young careerists joining the residential valuations industry, real estate appraisers foresee a future where lenders and consumers alike face added costs and lengthened real estate delivery timelines due to a shortage of trained appraisers in the residential valuations space.
“The rate of decline in the appraiser population within the U.S. has been averaging between 4 percent and 5 percent,” explained Greg Stephens, Chief Appraiser and SVP of Compliance for Metro-West Appraisal Co. “That number is expected to increase due to the high percentage of practicing appraisers who are in their 60s and 70s and who will either be retiring, dying, or leaving the industry within the next decade.”
“If this trend continues I believe we will see dramatic increases in the cost and time needed for field appraisals. At the same time, I believe we will see increased adoption of other valuation products, including desktop appraisals and other non-appraiser valuation alternatives.”
Michael Floyd, Chief Appraiser and SVP of Compliance for Streetlinks Lender Solutions, blames a complete “lack of incentive” for the dwindling ranks of new appraisers. “With the amount of additional required oversight involved with accompanying an appraiser trainee to every inspection and the liability of being completely responsible for their conclusions, there is simply no discernable ROI to such a relationship,” Floyd added.
Note from article: The Five Star Institute is the parent company of the National Appraisal Congress, MReport, and theMReport.com.
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http://themreport.com/news/secondary-market/09-07-2015/on-the-path-to-extinction-not-so-fast NOTE ON THIS LINK. As of today at 1pm pacific time, it had been hijacked by a spammer and shut down temporarily.
For info on NAC, go to http://nationalappraisalcongress.com Click on Advisor to read their Fall 2014 newsletter with more comments.
My comment: The National Appraisal Congress members are mostly larger AMCs, such as ServiceLink, Proteck, MetroWest, etc. Who will they get for cheap fees to do their appraisals, when they are having problems now? Hmm…. Not me!!
There is not a shortage, just a shortage that will work for these AMC’s fees. Metrowest is one of the worst paying AMC’s out there. I think its like 180 or 190 for a URAR. They do pay all your expenses. Streetlinks, has called me multiple times to lower my fee. I get maybe 4 to 8 a year for them. I have been told if I lower my fee I get more work.
The AMC’s have no one to blame but themselves, due to they can only make money by finding an appraiser that will take the lowest fee. If they are confident in the service they provide, then they should offer the cost plus model. I am unsure how AMC’s promote public trust, when they only care about your fee and if you have a license.
Now that AMC’s are considered agents of the lender. Some lenders in order to avoid future lawsuits, due to AMC finding an appraiser that takes the lowest fee, are requiring AMC’s to offer a set fee. Any lawyer worth his salt, would ask if fee was the reason the appraiser was picked, and then ask how much the AMC made off the appraisal.
I believe that a shortage of appraisers will soon happen in some geographic areas, such as Colorado which already has a shortage of experienced certified appraisers, but capitalism will provide the solution. When a shortage occurs, fees will go up and eventually, this will attract new people to the industry. With higher fees, seasoned appraisers will be able to afford to take on trainees. I believe the market will take care of the shortage as it has in any industry. Appraisers will always be in demand as long as we have an open, competitive real estate market.
Wowie Zowie! Shortage of Appraisers! Imagine that!
Lenders have been trying to eliminate appraisers with increasing intensity for the past decade. As a result. . . meet Roboappraiser!! 4/5 computer jive and 1/5 clerk at minimum wage with zip knowledge or responsibility beyond button pushing. Delays? Maybe a short while for window dressing. Followed soon by far faster turnarounds, significantly less cost to the lender, and far more absolute control than previously with a human appraiser.
All those appaisers were the loose cannons to close a deal tight and fast and cheap. Computerized methods inaccurate in estimating values – of course! Guaranteed also to lean high? Who cares? The lender will make the loan, package the paper, and, when periodically necessary, be bailed out by the taxpayer. (Did someone mention Fanny and Freddy?) From time to time increased down payments will be required to “lessen risk”, but that won’t last long either. Can’t have reality deflating the industry bubble. Bye, bye appraisal “profession” other than those who choose to run the printouts and sign whatever forms will be deemed necessary as “documentation”. Don’t worry about it. Just more window dressing. Now what was all that business about the goose that laid the golden egg?
Michael Floyd, Chief Appraiser and SVP of Compliance for Streetlinks Lender Solutions, blames a complete “lack of incentive” for the dwindling ranks of new appraisers——-Really? And they find it difficult to pay a going wage from their company to fee appraisers? They should step up to the plate and lead the way to increase the incentives……of all the nerve…….
The profession is obviously getting older, and the influx of new ‘talent’ is very limited. I’ve had several trainees during my 25 years as an appraiser (yes, I’m still called “The Newbie” at seminars), and none of them lasted long enough to become certified. Today, I simply can’t compete salary and benefit-wise. No reasonably competent individual would work for someone for at least two years for essentially nothing. While I can’t speak for the rest of the country, in my area there is no shortage of appraisers. There is, however, a very limited number of appraiser willing to work with AMCs. There is no incentive to do so, since the majority of local assignments are lender-direct. The smart lenders have figured out that the AMC model doesn’t work in all areas. I have no sympathy for internet lenders who utilize AMCs and have to wait weeks or a month in order to close a loan. Start local, stay local…or pay the price.
The myth that there is a shortage of appraisers is simply not true. Do you have more work than you can handle? I don’t. I am “A” rated or Tier 1 with the majority of my clients and still for almost half the year I scratch just to make ends meet. So what incentive is there to bring on a trainee? Why would any appraiser want to bring more competition into the field? A trainee would eventually become another desperate appraiser willing to except orders for ridiculously low fees. And No- I’m not afraid of being replaced by an alternate valuation system, if the banks could replace us they would have long ago. The bottom line is when appraisers are so rare that the existing established are working full time for full fees then things might change.
I tried unsuccessfully to make Federal and State Officials aware that in the long run, fee appraisers would not work for: low fees; unlicensed AMC facilitators telling appraisers how to do their jobs in direct violation of USPAP; and worst of all no recourse for non-payment of fees.
No one cared enough to listen.
Unfortunately, AMCs did nothing to decrease valuation pressure or worse reporting safety and structural issues. If an appraiser refuses to “hit” the value or makes an appraisal “subject to” on a serious structural issue, the appraiser will never work for that client again.
I am 62. I have 40 years as a property manager, an MBA in finance and worked in finance for 25+ years.
The lending and appraisal industry will not see resources like me enter the industry unless serious changes occur.
agree w Keith, what other industry has a middle man taking a cut, I have no issue with AMC’s being between apprs and lender but their fee sb added as a seoarate fee on the HUD as we should set our prices bases on market not an AMC telling us that is all they want to pay which is not true and even more not true is what the lender is willing to approve for a fee, it is that the AMC wants a huge margin, look how much money they make with zero liability, also the contact harassment by AMC’s of appraisers, set the apt in 24 hours, deliver report 48 hours after inspection etc. etc. more lenders should use Mercury as it covers the regs, and you get one email asking for status w easy interface, even mobile, and then they sit on our money which they collect when the order is placed with them so they use our money for cash flow, when AMC’s fail we have no recourse to collect our fee, why are people leaving the business? long hours, hard to take a vacation, so much liability, why not some on RE brokers who have way more interaction with the public, if most consumers knew what ”transaction broker” meant they would have heart failure knowing that ”their agent” is not truly their advocate which they should be for the largest purchase most of the public ever makes. also enforce geo competency more as that is more a cause of bad appraisals than bad appraisers, you cant legislate honesty and integrity in any industry, with the new rules, for those appraisers who would fudge things for more business that is gone now so why so many bad appraisals? pressure to get done super fast, the new rules coming out about fee disclosure for lenders will be used to push our fees even lower, would anyone out there work for the same fee of 20 years ago? ask anyone in any other industry about taking a ten or twenty year roll back on income but do more work. I am late 50’s so cant re career, anyone who asks I tell them to not get in this business as it is no longer free enterprise. then you have someone who took a class at an AMC telling you your adjustments are wrong etc. when they don’t read the addenda, each report burns and extra 30 min to one hour doing stupid revisions that I don’t have with direct bank customers. ok time to go back to work sorry to rant but this has gotten out of hand.
No offense, but you need a grammar lesson.
The AMC’s will soon have “killed the goose that laid their golden egg” with their appraiser-extortion, pay-to-play business model. Death of the appraisal profession might still be avoided if every state appraiser regulating board would make the following rule for AMC participation: “An AMC cannot offer an appraiser less for an appraisal than that which they receive from the Client”. This rule would force the AMC’s to get paid for their service by the Client for whom they are working. They are not working for the appraiser, are not providing any service for the appraiser, and there is no reason that appraisers should pay them any part of the appraisal fee. Petition your appraisal board!
Keith, your comments and solution are spot on. The whole system was designed poorly from the start. AMC’s should be paid for their “services” by the client. Appraisers should be paid for their services by the client. The clients will eventually recognize where they get the most value for their money.
1. Cost plus models for lenders and AMCs.
2. Segregation of “appraisal fees” in TRID (“The Turd”) [a] BANK or Lenders ‘appraisal related’ junk fees; [b] AMC fees, [c] Amount paid to appraisal company or appraiser.
3. Adoption of the Federal Civil Service GS pay scale equivalents as a basis for MINIMIUM reasonable fees across the country. It has local area living cost multipliers. Applicable pay grades are GS 9 through GS 12 or 13 for SFR and GS 12-15 for C&I; land, etc.. Remember these are MINIMUM fees. Special conditions still warrant higher negotiated fees. The reason a minimum fixed national fee is needed is that under the new TURD regulations, no variation is allowed between GFE appraisal fee quote and fee without getting a NEW GFE signed. Wording is at best ambiguously parsed and no requirement included to encourage lenders to add risk to their processes by requiring additional signatures.
4. Model is GS 9 for non complex performed by licensee. It jumps to GS 11 for certified with bumps for complex vs non complex where lenders imply requires certified.
5. Calculated as BASE grade pay for state (or high cost area) + 20-25% federal benefits equivalency + 25% office & business operations overhead.
6. Time to rewrite FIRREA Chapter 11 and clean up all the subsequent add on legislation that is destroying the profession.