appraisers

Press release:
CHICAGO (July 17, 2013) – More than three-fourths of U.S. real estate appraisers are very or somewhat positive about the demand for their services over the next one to two years, according to an Appraisal Institute survey released today.

Eighty percent of residential appraisers and 78 percent of commercial appraisers said they are upbeat about their future, according to the survey conducted in May-June by the nation’s largest professional association of real estate appraisers.

“Appraisers have faced a challenging real estate market in recent years, and it’s great to see that so many valuation professionals are feeling optimistic about the future,” said Appraisal Institute President Richard L. Borges II, MAI, SRA.

According to the survey, 95 percent of residential appraisers and 49 percent of commercial appraisers said there is currently more demand for their services than a year ago.

My comments: Hmmm… refi demand has been declining because of increased rates. “Starter” home sales may be affected – harder to qualify for buyers. Don’t know about all cash investors, a big part of the market in many areas. Commercial appraisal fees are still down in many parts of the country. But, it is good to see that some appraisers are optimistic, at least during the survey period of May 31-June 17. The commercial appraiser results are interesting as they are seldom surveyed. The results are similar to what I have observed locally.
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Additional results  from the AI survey (excerpts):

Trainee hiring

Trainee hiring will remain relatively weak for the next one to two – years. While commercial real estate appraisers comprise less than one – third of practicing appraisers in the US, they disproportionately employ more full – time appraiser trainees.

Commercial appraisers also hired more trainees in the past 12 months than residential appraisers did, and commercial appraisers said they would hire more full-time trainees in the next one- to two-years than residential appraisers would hire.

Nearly one-half (49 percent) of commercial appraisers surveyed said they employed one or more full-time appraiser trainees in the past 12 months. By comparison, less than one-third (29 percent) of residential appraisers employed one or more full-time trainees.
„h Of the residential appraisers who employ trainees, an overwhelming majority (93 percent) employs one to three trainees ¡V only 7 percent employs four or more trainees. Comparatively, slightly more than one-fifth (21 percent) of commercial appraisers employ four or more trainees.

Strong majorities of commercial and residential appraisers surveyed (75 percent and 80 percent, respectively) said the number of trainees retained in the past 12 months did not change. Concerning recent new hires, 14 percent of commercial appraisers said the number of trainees retained increased over the past 12 months. Comparatively, only 5 percent of residential appraisers hired more trainees.

Res appraisers – different clients than commercial appraisers
Substantial proportions of commercial appraisers anticipate more demand from financial institutions (47 percent), law firms/lawyers (33 percent), and government agencies (25 percent). Residential appraisers anticipate a different mix of business predominantly from AMCs (36 percent), financial institutions (34 percent), and property owners/buyers directly (33 percent).

Commercial and residential appraising are going in very different paths. These results reflect that dichotomy. Commercial appraisers are seen as professionals. Residential appraisers used to be seen as professionals but are now perceived by way too many clients as not reliable, probably because of the 2008 crash.

Click here to read the full press release
http://www.appraisalinstitute.org/newsadvocacy/news/2013/Real-Estate-Appraisers-Optimistic-About-Future-16-7-13.aspx

Click here to read the full survey results:
http://www.appraisalinstitute.org/newsadvocacy/downloads/fact_sheets/2013-Real-Estate-Appraisal-Outlook-Summary_Jun-28.pdf

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Appraisalport poll – 6/23/13

How do you foresee your workload and income changing in the next year if the government slows its purchase of mortgages and/or interest rates begin to rise?

I see things slowing a lot. 2,083 votes 36%
I see things slowing a little. 2,210 votes 38%
I don’t’ see any real change 1,091 votes 19%
I see things picking-up a little. 218 votes %
I see things picking-up a lot. 139 votes 4%

Total Votes: 5,741

FYI, appraisalport users do residential lending appraisals. www.appraisalport.com
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My comment on the two survey/poll results: Quite a difference between the results of the two surveys!! Of course, the Appraisalport survey asks the opinion if rates rise and mortgage purchases slow, but most everyone sees rates rising. Also, it was a poll, not a survey. Appraisalport users work for lenders. Rates started increasing in May.

By William K. Black

Excerpts:

On July 9, 2013 I participated in a radio interview with a lobbyist for the 100 largest financial firms.  The San Francisco radio program host asked me what question I would ask the lobbyist and I said that any discussion should begin with allowing him to state his view of what caused the crisis.  In the course of his explanation, he bemoaned the fact that there was no warning about the crisis.

I found this ironic because I had just published that morning an article about how the appraisal profession warned us that the senior officers controlling the mortgage lending firms were engaged in pervasive “accounting control fraud.”

Note that the appraisers’ petition began in 2000 and was public.  When the regulators and prosecutors did nothing in response to the appraisers’ warning the appraisers delivered it to government officials to ensure that no one could say they were not warned.  What tends to be forgotten is that the mortgage industry’s leaders did nothing to restrain the fraud epidemic and a great deal to expand it.  A finance industry representative claiming in 2013 that no one warned the industry of the coming crisis when the warnings began no later than 2000 epitomizes the industry’s death of accountability, integrity, and candor.

My comment: Worth reading. Appraisers got what they wanted – freedom from mortgage broker pressure. But, at a huge cost – low fees and incredible scope creep. Fees are up now, but will go down when lending slows down. Maybe lenders will figure out that scope creep doesn’t help anyone and slows down appraisal production.

http://www.creditwritedowns.com/2013/07/housing-appraisers-warnings-fraud-crisis.html

First American Professional Real Estate Services Releases Automated Value Model For Commercial Properties

Press release excerpt:
First American Professional Real Estate Services, Inc., a leading provider of real estate transaction-based products and services through its Evaluations group, announced today the release of the Indexed Value Report (IVR), an automated valuation model (AVM) for commercial properties.

Used in portfolio management, loan extensions and new originations by commercial lenders and others, the new IVR model incorporates current commercial property sales data from assessors’ offices, covering more than 3,200 counties in the United States.

In an independent reliability test conducted by three professors from Minnesota’s St. Cloud University on 19,000 commercial properties sold within the last year, the IVR estimated that values for these commercial property sales across the U.S. represented an average of 87 percent of the purchase price and a median value of 103 percent of the purchase price. This is considered to represent reliable indications of value from an AVM. Additional information about the new IVR can be found by visiting www.firstamces.com .

My comment: Over the past  20 years, every so often I heard about one of these. None of them were successfully implemented and sold. Of course, the problem, as with residential AVMs, is data. Costar was rumored to be looking at one some time ago. I can’t imagine using assessor’s office information that is publicly available for a commercial AVM. Income and expenses are critical to determining values for many commercial properties.

Click here for the full press release:
http://www.firstam.com/news/2013/65278.html

Click here for more detail on the product and a link to a sample report
http://www.firstamprs.com/products_services/survey_site_coordination/commercial_evaluation_services

A Florida Bankruptcy court said Chase was not liable for appraisal fees not paid by Evaluation Solutions, which is in bankruptcy.

There has been a lot of online discussion about this. I don’t understand the legal issues.

Fortunately, Scot DiBiasio of the Appraisal Institute posted a succinct comment on the Appraisal Buzz email forum. Here is his revised version – succinct and easy to understand.

“This decision is from one Judge in a single U.S. Bankruptcy Court District – the Middle District of Florida.  Another Judge in the same, or different, Court could very easily rule a different way on a different case. And, it remains to be seen whether or not the valuation companies that objected to the Settlement Agreement in this case will appeal to the U.S. District Court or to a Bankruptcy Appellate Panel, where the outcome could change.”

Here’s a link to the recent WorkingRE article on the topic:
http://www.workingre.com/workingre/Bankruptcy-Court-Absolves-Chase-of-All-Liability-page.html

My comment: I like to use California data as trainees were licensed, giving a much better picture that asc.gov, which does not include trainees, only licensed and certified. The number of residential appraisers has always gone way up and down, dependent on mortgage lending volumes. Lenders will start allowing trainees when the number of appraisers get too low. About half the residential trainees/appraisers lose their jobs in the downturns. Nothing new. Commercial appraising has always been much steadier as there was reliable, steady work.

This was posted 5/25 by George Hatch on the very active http://appraisersforum.com 

I’ve been keeping track of the number of licensees in my state (California) for a long time now. As of this morning this is what it looks like:

– The low point in numbers was in 2001-2002, but the percentage comparisons are made against 2000.
– The number of fully licensed/certified residential appraisers last bottomed out at less that 6,000 heads before nearly doubling by 2008.
– The number of CGs have steadily declined each year during the entire time frame except that we had a one-time bump (~170 heads) in 2007 prior to the increase in qualifications criteria.
– Even though the number of fully licensed/certified residential appraisers is 23% lower than the 2008 peak it’s still 36% higher than it was 10 years ago.
– The number of CGs has dropped to within 19 heads of the previous low spot in 2003, and remains 17% lower than the 2000 number. I would imagine this year we’ll lose enough more heads to result in the new low.
– If any of you residential appraisers (in CA) are actually giving serious consideration to restarting your puppy mill operations just remember that the CA market is still grossly overserved relative to the number of appraisers prior to 2005. You’ll be cutting your own throats – again – the next time the markets bust.

By Ann O’Rourke

I recently spoke with a savvy appraiser who is turning down all purchases. Too much hassle and way too much pressure.

In many markets, including mine, there are many multiple offers way over list on almost all sales. In my market, appreciation is increasing on an almost daily basis.

I call multiple offer bids “auctions”. The eventual sales price may, or may not, be market value – the most probable sales price. We had them here in the 2000s boom.

I spoke last week with a local Alameda resident who asked me about appraising her house for a home equity loan. She had read about non-local appraisers coming in way too low. I explained that appraisers are licensed and subject to laws. Also, borrowers could not choose the appraiser. I also explained about the crazy local market. I asked her about the equity in her home. It was a low LTV, so I told her that the value she “needed” was much lower than prices today. I also told her that an appraiser may not be used – an AVM may be used. If an appraiser is used, it may be a “driveby” appraisal where the appraiser did not come inside.

I go on the local broker tours almost every week. I had not been to one for a few weeks and went out yesterday. WoW – what a change!! Prices are increasing at a faster rate – easily up to 4% or more per month.

If I was doing lender appraisals today, I would not accept purchase appraisals either. I hate being a deal killer and subject to pressure. Plus, it is very, very difficult determining current values now.

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.

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!!