There has been considerable discussion and debate about the current number of real estate appraisers in the United States. Is there currently a shortage in some areas? Will there be enough appraisers in 3-5 years? Let’s take a look at some of the facts influencing the subject.
Strictly by the Numbers
It is common to hear that the number of appraisers has declined by 20 percent since 2008. While that is true, what is not generally stated is the fact that the number of appraisers increased by 20 percent from 2005-2008, a result of the “real estate bubble.” Therefore, that period was an anomaly and not reflective of the past two decades. The chart below—developed by the staff of the Appraisal Subcommittee—illustrates the rise and fall of appraiser credentials as well as the correlation between appraiser credentials and mortgage originations:
In addition, the number of state certified appraisers has actually increased over the past eleven years:
Certified General 33,725 39,257
Certified Residential 40,726 50,472
Licensed 25,095 8,622
Total 99,546 98,351
Let me first point out that the migration from the Licensed Residential to Certified Residential classification was largely a result of the 2008 Federal Housing Authority (FHA) decision to stop utilizing Licensed Residential appraisers. Having said that, the number of state certified appraiser credentials has actually increased 20 percent from 74,451 in 2004 to 89,729 as of December 31, 2015.
While the total number of appraisers hasn’t changed much in the past twelve years, there are other factors impacting the perceived availability of appraisers. In large part, these factors apply almost exclusively to the residential mortgage lending sector of the profession.
The Economic Factor
Even with the “customary and reasonable fees” provision contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) enacted in 2010, there is little debate that residential appraisal fees have stagnated in recent years. Whether it is due to the advent of Appraisal Management Companies (AMCs) or because some users of appraisal services view appraisals as a “commodity,” there has been an impact on the number of appraisers who want to perform appraisals for residential mortgage lending. Many have opted out of residential appraising altogether or have diversified their practice to include such specialties as right of way, insurance, assessment appeal, and litigation support. While the number of residential appraisers remains strong, there may be a shortage of appraisers willing to accept assignments below a certain fee threshold.
In addition, the working conditions for many assignments in this sector are viewed as untenable. Many of the pricing and turnaround time models used by AMCs were developed for urban and suburban markets. In rural areas many appraisers refuse to take on assignments due to: (1) the level of compensation; and (2) a short turnaround time requirement when the property is a considerable distance away.
Many clients and users of appraisal services have also asked for more in residential mortgage appraisal assignments. Performing an enhanced scope of work and providing more detail in a report should create an expectation of greater fees, not lower. Lower fees, quick turnaround time expectations, and increased client requirements result in an unsavory cocktail for many appraisers; from a strictly economic point of view, it is simply not worth their time.
The Dispersion Factor
While we can easily identify the number of appraisers in each state through the Appraisal Subcommittee’s National Registry, how those appraisers are dispersed in their respective states is much more difficult to assess. There is little doubt that there are counties and towns around the United States that are underserved by appraisers. But how prevalent of a problem is it? To date, we have only received anecdotal evidence to process. The Appraisal Foundation’s (Foundation) Appraiser Qualifications Board (AQB) is looking into the possibility of conducting a national appraiser dispersion study so that we can obtain empirical evidence on the issue.
The User Education Issue
Another significant change that has occurred since 2004 is the fact that many lenders today do not want Licensed Residential appraisers or Trainee appraisers involved in the performance of residential appraisals. This decision occurred in large part because of the abundance of caution that lenders exercised following the economic crisis of 2008. It was surprising for us to learn that many lenders believe that Dodd-Frank prohibits them from using these individuals, which is simply not the case. Lenders allowing the use of trainees in performing residential appraisals would provide a great avenue for trainees to gain the experience they need for their state credential. The Foundation is working with the professional associations representing lenders to raise the awareness level that the use of trainees is permissible and should be encouraged.
A Look Ahead
The Foundation has some concerns about the number of appraisers 3-5 years from now and wants to ensure there are no unnecessary barriers to entry for qualified individuals seeking to enter the appraisal profession. It is for this reason the AQB is looking into alternative ways that individuals may meet certain requirements of the qualification criteria.
The AQB’s examination of this issue commenced with a Concept Paper issued last July, followed by a public hearing in Washington, DC last October. In February, the AQB issued a Discussion Draft paper, soliciting input on such topics as:
- Development of an alternative track for upgrading from Licensed Residential to Certified Residential
- Development of an enhanced practicum curriculum to assist in meeting the experience requirement
- Allowing and documenting alternative experience from similar real estate related fields
- Should the “Trainee” nomenclature be changed?
- Is the three year residency requirement for supervisory appraisers necessary?
The AQB will hold another public meeting on this issue on Friday, April 8, in Phoenix, Arizona and I strongly encourage you to attend. For more information, please go to https://www.appraisalfoundation.org/TAFCore/Events/Event_Display.aspx?EventKey=AQB201604. .
Following the meeting in Arizona, the AQB intends to propose potential revisions to the appraiser qualifications by issuing the first in what will likely be a series of exposure drafts soliciting public comment. The quality of the AQB’s work, as well as all boards of the Foundation, is a direct result of the level of public comment that we receive. I encourage you to get involved so that together we can continue to improve the valuation profession.
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