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How to fix the appraiser shortage

MOST INVESTORS DON’T ALLOW THE USE OF TRAINEES.
 
LENDERS WANT MORE APPRAISERS, AMCs WANT MORE APPRAISERS,  FEE APPRAISERS WANT TO BE ABLE TO HIRE TRAINEES.

Investors are imposing lots of requirements on the lenders that sell them loans, including not accepting reports signed by trainees and supervisors. Every investor seems to have different requirements. If the lenders don’t do it, they won’t be able to sell their loans to specific investors.

The “good old days” when Fannie set the requirements with a few lenders adding more are gone.

There are a few portfolio lenders (don’t sell their loans) or lenders who work with investors who will allow trainees, but they are very few.

THE ONLY WAY TO FIX THE APPRAISER SHORTAGE IS TO ALLOW THE USE OF TRAINEES WITH THE SUPERVISING APPRAISER INSPECTING THE SUBJECT AND THE COMPS.

THE ONLY WAY THIS WILL HAPPEN IS IF INVESTORS ALLOW THE USE OF TRAINEES.

I have never heard of any time that lenders did not allow the use of residential trainees. This is the only way to handle the huge cycles of residential lending.

We too often forget the boom and bust of lender requirements for mortgage loans. Just a few years ago brokers could order appraisals and trainees could sign on their own. The 2008 mess is still being cleaned up. Lenders are afraid of loan buybacks. We will just have to wait.

All appraisers started as trainees, even before licensing. They were not called “trainees” but they needed to be trained and educated.

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Posted in: appraisers

Appraiser retirement plans?

AppraisalPort poll – retirement plans
Poll Results
www.appraisalport.com

Not considering Social Security, my Retirement Plan consists primarily of:

401k/IRA and savings 611 votes    14%
401k/IRA and investments 917 votes    20%
401K/IRA and pension 172 votes    16%
Savings, Investments and pension 412 votes 9%
401K/IRA alone 329 votes            7%
Investments alone 197 votes        4%
Pension alone 45 votes            1%
Savings alone 280 votes            9%
Income or other Property(s) 457 votes 10%
I need to start a plan 1,074 votes    24%

Total Votes: 4,494

My comment: Many active appraisers are getting older (as is our national population). With about half of appraisers 50 or older, many of us are thinking about retirement. The “old days” of retiring at 65 are declining fast. In the past, there was often mandatory retirement at 65 to allow new workers to enter the market. That is gone, except for a few occupations.

Last night I watched a new Frontline (PBS) documentary on retirement, focusing on mutual funds. I thought I was knowledgable, but I realized I was not. I had a company 401k when I worked in a corporate real estate job many years ago. I didn’t really analzye how my money was being invested. I cashed it out to start my appraisal business. I did not realize the high costs investors pay to mutual funds. Also, the severe impact on employees of the shift from pensions to 401ks as businesses quit offering pensions. One of my brothers had all his 401k invested in his company stock, which tanked and has never come back. I warned him, but the stock price was zooming then.

I will be 70 next month and starting to collect Social Security. Like many fee appraisers, I starting cutting back on appraisals several years ago. I don’t need as much money now as I did 10-20 years ago. I am no longer willing to work 7 days a week, 12 hours a day. As we get older, all of us are physically less able, which means no more 2-3 inspections per day plus hours and hours of driving, etc. for residential appraisals. Fortunately we can always do desk reviews, hire someone to drive us around and help with inspections, etc.

Stress is also a factor. I am no longer willing to put up with clients that are a real hassle. Unfortunately, the hassle factor keeps going up and up with AMCs.

I was surprised that only 10% answered real estate. The appraisers I know who retired early all invested in real estate. I only have one investment property, a duplex. But, rents go up over time in my area and are steady income. A much more steady income than stocks and bonds. My other source of retirement savings will be the sale of my publishing business some day. I have never planned on selling my appraisal business. It is possible, but I did not set up my business for future sale. Also, newsletter businesses sell for a lot more and there are plenty of buyers. One of the reasons I started my newsletter is that there is a very active market in selling business to business newsletters, like this one. I really like appraising and this newsletter, so I plan to continue both businesses. But, I will be cutting back more on appraising. Even if I am no longer writing appraisal reports, I will always be an appraiser!!

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Posted in: appraisers

The First Rule of Real Estate is location, location, location. But, do lenders care?

Not every property fits well on residential forms. Today, many don’t fit due to the incredible scope creep.

Savvy appraisers are screening appraisal requests and turning down any assignment that will cause “problems” when submitted. Many appraisers are very busy. Every minute spend on a tough appraisal is time that could be spent on appraisal that takes much less time, not counting all the stips. The time to take the “tough ones” is when business is slow. If an AMC doesn’t like it when you turn down assignments, drop them and get a new AMC to work for. There are plenty of them desperate for appraisers.

Lender appraisal commoditization, and the UAD, have significantly decreased the focus on the importance of what appraisers provide – expertise in a local market. Every market, and submarket, is different and unique. In many areas, the markets are changing on almost a daily basis.

More and more frequently, appraisers are not trusted and local experts. The incessant requests to “consider” comps from public records, change the “wording” of a phrase, appraiser vs. public records sq.ft., cats in photos, etc. Do they even care about local knowledge? Is it just fitting everything into a form that can be easily “reviewed” by software and unlicensed persons that focus too often on what is irrelevant to the value opinion? Is this information what clients (lenders and investors) really want?

More important, the wide use of non-local reviewers with no local knowledge really makes it hard to explain what is happening so it fits into their rigid criteria.

For example, in some markets location on a busy street is not a factor that affects market value and in others it has a significant affect on value. Or, location on the first floor in a condo project is a plus, and in others it is a minus, for various reasons.

Don’t let lender restrictions affect your value or what you put into your report!!

Appraisal Today newsletter

Posted in: AMCs, appraisers, lender appraisals

Number of certified appraisers way up!

Certified Appraisers at All-time High, Opportunities Coming:
Appraisal Institute study

My comments: Licensed appraisers are dwindling as FHA and many lenders will not accept their appraisals. The AQB only determined certified appraiser qualifications. When licensing started, many states set up a licensed category because there were fears of an appraisal shortage as no one knew how many appraisers existed pre-licensing. Unfortunately, state licensing requirements varied widely, with some states (i.e., IL and OK) having very minimal requirements.

Appraisers are aging. That is true of many types of work, primarily due to the aging of the baby boomers. When I started my business in 1986, the AIREA (merged into the AI) survey said the average appraiser age of their members was in the early 50s (most were commercial appraisers). Few appraisers started appraising as their first career, so appraiser age has always been higher.

The positive spin is that there will be a shortage of appraisers in the future. This is nothing new as residential lender appraising has always been boom and bust. 70% of appraisers are residential. Another positive factor is that the post-licensing qualifications of  appraisers has gone up with more certified appraisers.

========================================================

Text of AI press release:

The percentage of appraisers with a state certification is at an all-time high, the nation’s largest professional association of real estate appraisers announced today. With more than half of U.S. appraisers aged 51 to 65, the Appraisal Institute anticipates opportunities for new appraisers.

The Appraisal Institute has analyzed the Appraisal Subcommittee National Registry data since 2006 using a consistent methodology, and the long-term trend is clear:

· The number of appraisers continues to decrease at a rate of about 3 percent per year;
· The appraiser population could decrease 25 to 35 percent over the next 10 years due to age attrition and fewer new entrants.

“In spite of a higher level of appraiser qualification overall, the lack of career prospects for trainees and few new people entering the profession are legitimate and serious issues, yet opportunities do exist to reach the next generation and employment options will, in fact, likely be enhanced in the coming years,” said Appraisal Institute President Richard L. Borges II, MAI, SRA.

Broader analysis suggests this is primarily due to:
· A sharp and long-term decline in the number of new people entering the field;
· A high rate of future retirements due to the high mean age of appraisers;
· Individuals leaving the profession due to challenging business conditions;
· Increasing government regulation;
· Wider use of alternative valuation technologies displacing some appraisers (especially in the residential sector); and
· A potential oversupply of residential appraisers. (Nearly 70 percent of all appraisers focus primarily on residential appraisals.)

While the overall number of appraisers is decreasing, the number of certified general and residential appraisers is on the upswing.

The analysis shows there were nearly 6,000 more certified general and residential appraisers on Dec. 31, 2012 than there were at year-end 2006. For the same period, there was a decline of nearly 16,000 licensed appraisers. About a third of the decline is because appraisers achieved certified status. A large majority of appraisers who left the profession in the past three years were licensed-only appraisers who were either relatively new to the profession or did not pursue certification.

The proportion of certified appraisers to total appraisers was 72 percent at year-end 2006. As of year-end 2012, the proportion was 87 percent; therefore, the proportion of appraisers with a certification is higher than it has ever been. While the total number of appraisers has decreased 15 percent since 2007, the data indicates that the appraiser population is more qualified overall.

Commercial, non-traditional (non-point-in-time) valuations appear to be a growth opportunity for individuals with advanced analytical, financial and mathematical skills, Borges said. He said that key growth markets might be working with accountants, financial analysts, investors and others on real estate portfolio management/analysis, purchase, lease and investment packaging. He also noted that additional areas of real estate valuation – right of way, conservation easement, taxation issues and litigation support (expert witness testimony) – could provide opportunities for professionals looking to enter the valuation profession.

Link to 2 page Fact Sheet of stats and graphs:

Appraisal Today newsletter

Posted in: appraisers

New AMC – 8 hour turn time!!

An AMC to Keep Pace With?
Q&A with Richard Johnson of Pacer AMC
April 1, 2013
Appraisal Buzz

BUZZ: How will you differentiate your company from the other 500 AMCs?

RICHARD: We have created a unique appraiser scorecard. We have an algorithm that measures the appraiser’s self esteem. We find appraisers who set a low fee, never complain when we are a slow pay, and love challenging assignments. We have no dress code. Appraisers just hate that.

We have spent a lot of time picking the best appraisers for our assignments. We call it dialing for dollars. We reward our processers based upon setting new lows.

Because we are the low cost provider we attract the very largest lenders in the US.. These large lenders too have an algorithm that includes input as to the cost of regulation. They have figured out the risk of penalties and fines is somewhere between slim and none. They have lobbyists to ensure that. We have hitched our star to their wagon.

BUZZ: What is this we have heard of your 8 hour Turn Times?

RICHARD: One of the ways we feel we can stay ahead of our competition is we have instituted an 8 hour turn time. We feel it shouldn’t be too hard to get all our appraisals done the same day they are assigned.

Of course we are not unreasonable though if a property is over 250 miles away we allow an extra 2 hours to submit your report.

BUZZ: With all the transparency, disclosures and Customary & Reasonable laws how do you get away with being the low cost provider?

RICHARD: It is really simple. We know our clients love AMCs because they get our services for free. It is the greatest business on the planet. The appraiser pays for the services for the lender. What a racket. We find appraisers who are willing to drive anywhere and do anything for an ungodly low fee.

We don’t worry about compliance because the appraiser signs an affidavit that certifies we have paid them a customary and reasonable fee. Have you seen the CFPB enforce any appraisal rules ? No of course not. Zero risk for lenders and AMCs.

My comment: be sure to click on the link and read the rest of the articled before you let your blood pressure go way up ;> It was published on April Fools Day!!

http://appraisalbuzz.com/an-amc-to-keep-pace-with

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Posted in: AMCs, appraisal management company, humor

75% of appraisers work solo

Real Estate Appraisal in the US: Market Research Report
Thanks to Appraisalscoop.com for this Most Interesting info!!

My comment: Unfortunately, the report costs $825. I’m not sure who would buy it, but below are some interesting excerpts. It does confirm that 75% of appraisers do not have any employees.

I did a surveys in 1992, just as licensing was beginning. At that time, relatively few appraisers worked solo (22%). 25% had 2-3 appraisers, 25% had 4-6 appraisers, and 27% had 7+ appraisers. The average was 5.4 appraisers per company. Number of years of experience of The business owners had 5-10 years of experience. I had three appraisers.

Around 1995 came a big crash, and many of us downsized to one appraiser. Few of us went back up to the old days. Newer appraisers in the mid-2000s hired lots of trainees to increase firm size. Most of them have gone back to one appraiser. Same Old Cycle. Nothing New.

Excerpts from report:

The top five firms in the Real  Estate Appraisal industry account for less than 15.0% of industry revenue  with the largest having a market share of just 6.2%. The larger participants in  the industry are generally subdivisions of large multinational property,  brokerage, and global real estate service firms. The vast majority of companies  operating in the industry are small, independent firms with few employees or  single-owner operators.

According to the US Census and IBISWorld estimates, 75.3% of establishments are nonemployers. From 2008 to 2010, the total number of  establishments in the industry was decreasing. The number of nonemployer  establishments was decreasing at a faster rate than employer firms. This trend, however, has reversed recently.

Click here to read more and post your comments at www.appraisalscoop.com .

http://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2013/03/real-estate-appraisal-in-the-us-industry-market-research-report-from-ibisworld-has-been-updated.html

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Excerpt from press release
Over the past two years, however, IBISWorld expects that industry revenue has recovered substantially, and estimates it will grow 6.7% in 2013 as the volume of real estate transactions increases and property values continue to recover from recessionary lows

Link to press release with more info:
http://www.prweb.com/releases/2013/3/prweb10545179.htm

Appraisal Today newsletter

Posted in: appraisers

Source of Work – refis and foreclosures

www.appraisalport.com

Excerpt:

As we all know, the housing market has been going through some major changes over the past years. As the market changes, so does the source of many appraisal assignments. This month we ran some polls to see how much work is generated from both refinance activity and foreclosure activity.

The first poll asked, “How much of your work comes from refinance activity?” and received a total of 5,404 responses. The results show refinance activity accounts for a good portion of the current appraisal assignments. No surprise there. The top answer was, “I do 51%-75% refinance work,” with 35% of the vote. A close second was, “I do 25%-50% refinance work,” with 30% of the vote. Quite a large group (20% of the appraisers) responded that more than 75% of their work is for a refinance loan. This work seems to be holding steady for now and should continue if interest rates stay at these historical lows.

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The second poll asked a similar question, but instead of refinance work, the focus was switched to foreclosure work. We had 5,395 total responses to this poll and we found that foreclosure assignments make up a much smaller portion of work volume for appraisers. There are a couple of potential reasons why foreclosure work isn’t as important for appraisers when compared to refinance work.

First, often foreclosure work is done by brokers providing BPOs, rather than by lenders ordering a full appraisal. Second, the default and foreclosure rate is actually falling rapidly in most areas of the country, which is good news for everyone. The top answer with 60% of the vote was that less than 25% of the work volume comes from foreclosures. Keep in mind that this answer includes those who get 0% of their work from foreclosures. About 22% of appraisers responded that they still get 25%-50% of their work from foreclosure activity. The last two possible responses of 51%-75% and more than 75% were essentially tied, each category receiving approximately 9% of the vote. So we can conclude appraisers are not currently heavily dependent on foreclosure activity for new assignments.

My comments: nothing new here. BofA’s recent appraiser layoffs and other layoffs due to shrinking foreclosures show that this is happening. They love their BPOs for foreclosures. There is work for Fannie and others trying to get money from appraisers who were to “high” in the boom time.

Posted in: appraisal

Appraiser education levels

Question: What is your highest level of education (non-appraisal related)?
www.Appraisalport.com poll results

Didn’t finish High School. 93 votes     1.5%teacher and class
High School or GED 300 votes             5%
Some College classes 1,475 votes         25%
Community College Graduate (AA) 555 votes 9%
Tech school graduate 139 votes          2%
University Graduate (BA, BS, etc.) 2,947 votes 49%
Graduate Degree (MA, PhD, etc.) 506 votes 9%

Total Votes: 6,015

My comment: Down from the Stone Age, pre-licensing, when it was hard to get an appraisal job without a bachelor’s degree, but still 58% with at least a bachelor’s degree and only 6.5% with no college.

What level of education, training, and experience should a review appraiser have relative to the appraiser originating the report?

www.Appraisalport.com poll results
More   2,772 votes   48%
About the same   1,993 votes    35%
Less   25 votes    0.4%
It doesn’t seem to matter these days   980 votes    17%

Total Votes: 5,770

Posted in: appraisers

Flintstone House in Burlingame CA

Excerpt:
The Flintstone House is a free-form, single-family residence in Hillsborough, California[1] overlooking, and best seen from the Eugene A. Doran Memorial Bridge on Interstate 280.[2][3] It was designed by architect William Nicholson and built in 1976 as an experiment in new building materials, in the form of a series of domes. It was constructed by spraying shotcrete onto steel rebar and wire mesh frames over inflated balloons. Originally off-white in color, it was repainted a deep orange in the mid-2000s. The house contains three bedrooms and two bathrooms.

Known popularly as “The Flintstone House”, it derives its name from The Flintstones, a Hanna-Barbera Productions animated cartoon series of the early 1960s about a Stone Age family.

My comment: it is very strange in an upscale neighborhood, visible from the freeway. I don’t think the neighbors like it ;>

Link to Wikepedia: http://en.wikipedia.org/wiki/The_Flintstone_House

Posted in: unusual homes

National Appraisal Compliant Hot Line to start by 3/29/13 Appraisal organizations ask for delay

ASC notice to state regulators:
Excerpt: The Hotline will begin operation no later than March 29,2013. The Hotline will refer complainants to appropriate State and/or Federal agencies to handlecomplaints of alleged violations of the Uniform Standards of Professional Appraisal Practice(USPAP) and/or appraisal independence requirements. The Hotline will direct complainants tocontact you to formally file their complaint using the existing protocols established by your State.The Hotline does not initiate complaints, act on behalf of complainants, arbitrate complaints, assistin appealing the outcome of complaints, or follow up on complaint referrals previously provided

Link to full notice:
http://www.scribd.com/doc/126820613/ASC-Appraisal-Complaint-National-Hotline-Notice-to-States
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Feb 4, ASA/NAIFA sends letter to ASC asking for delay

Excerpts of a few bullet points:
– The ASC designed the appraisal complaint hotline system behind closed doors, and has failed to allow stakeholders to comment on it prior to final implementation:
– The ASC’s hotline system, as proposed, violates congressional intent and the clear language of the dodd-frank provision authorizing it:
– Congress intended the hotline to provide appraisers with an ability to report efforts to undermine their independence, not as a catch-all mechanism to be used against appraisers by persons disgruntled because the appraised value did not meet their needs or for other non-specific or Non-serious reasons:

Link to letter http://c.ymcdn.com/sites/www.naifa.com/resource/resmgr/legislation/02.07.2013_letter_from_asa_a.pdf

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Feb 12, AI/ASFMRA sends letter to ASC asking for delay

Excerpt:

However, in speaking with state appraiser regulatory officials, practicing appraisers and others involved with real estate and mortgage finance, virtually no understanding of the hotline and its intended purpose, as well as the proposed protocol, exists. As such, we believe that the protocol could be met with unnecessary trepidation simply because to date the ASC did not seek stakeholder input. As such, we respectfully request that the ASC refrain from approving the protocol, and instead release the protocol for public comment, similar to the process used by the ASC in drafting Policy Statements. Since the hotline likely will impact other mortgage and real estate professionals and regulatory agencies, we believe that all stakeholders deserve to have an opportunity to review comment on the hotline before it is operational. This is the foundation of good government and, in this case, we believe that such a measure actually will engender support for the proposed protocol.

Link to AI/ASFMRA letter
http://www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2013/AI-ASFMRA-to-ASC-on-Hotline.pdf

My comments: The ASC was mandated by law to set this up. I have not read all these links, so I have no opinion. It is all up to you!!

Posted in: appraisal, Appraisal Foundation