Friday , 21 February 2020

Appraiser Shortage – Myth or Fact?

We’ve all heard of the appraiser shortage. Is this myth or fact? It depends. Trying to find the right balance of appraisers to feed the housing finance demand is always a tricky thing. Appraisers enjoy the so called “excess demand” days but most know all too well that these scenarios are often short lived. Lenders, on the other hand, view the appraisal as nothing more than speed bumps to loan closings.

Let’s look at the data for a minute. In the FHFA OIG Report, dated February 6, 2014, 52,000 appraisers delivered 747,000 appraisals to Fannie Mae through UCDP between January 28, 2013 and June 15, 2013. Those numbers are quite revealing. First it confirms the number of active appraisers in the conventional residential space. But what seems oddly out of whack is that the average number of appraisals, per appraiser, is 14.36 over less than 6 months. From the appraisers’ point of view I think they would be screaming “what shortage”!

What we don’t know from the data is how many appraisers are part-time. If a full time appraiser has an average capacity of 8 appraisals a week, those 52,000 appraisers could produce approximately 7 million appraisals.

There are a couple of very real problems. Bubbles, yes I mean real bubbles, are certainly occurring in some markets. Demand exceeds supply and pressure on turn times is very real. (I’d be willing to bet fees do not rise proportionately). Take a look at the chart below. These are the top 30 Statistical Market Areas in the US. I have compared the appraiser population in those SMAs to the general population.

Clearbox_Chart

Of note is that the supply/demand ratio in Atlanta at 60 appraisers per 100,000 is quite different than Cincinnati at 14 per 100,000. So the real answer lies truly depends on geography. In addition, not knowing how many appraisers are fulltime vs. part time is just half of the equation. How many are nearing retirement or just can’t make a living any longer at appraising and have exited the profession is another unknown.

We all know that predicting mortgage volume is not easy. Few predicted this current refinance trend to have lasted as long as it has. What is predictable and should have everyone concerned is the “graying” of the profession. The average age of the appraiser is 55 years old according to Clearbox statistics. I expect that is skewed younger due to the resistance of older appraisers to register online, especially as they are nearing the end of their careers. Marry those numbers with the length of time it takes to mint a new appraiser and you do indeed have a collision course ahead. I just don’t know when.

Economics cures a lot of woes. The current squeeze on the appraisers’ fee will certainly not entice appraisal firms to train the next generation. Nor will it attract enterprising young college graduates to the profession. These are fixes that can be set into motion now.

In summary it simply takes too long to become a producing appraiser. Given the education and necessary training there is a giant gap with other professions for potential income and career opportunities. That is a fact.

Have any comments or would you like to submit content of your own? Email comments@appraisalbuzz.com

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About Joan Trice

Joan Trice
Joan N. Trice is the founder and CEO of Clearbox, LLC, publisher of Appraisal Buzz, and host of the annual Valuation Expo, the largest conference for the valuation community. Joan also hosts the Collateral Risk Network, a members-only group of more than 500 dedicated chief appraisers, collateral risk managers, regulators, and valuation experts who are focused on resolving the many challenges facing our profession.

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22 comments

  1. Avatar

    Joan, I certainly agree with you that there is a demographic collision coming in this profession. It’s just easier to make a dollar in so many other low barrier to entry fields such as roofing, landscaping, or entry level tech fields than it is to get into appraising. The reward does not match the risk at all.

    The ratios are definitely skewed especially in Dallas/Fort Worth where there are so many appraisers employed on the review side of things such as myself.

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      I agree, but I simply cannot understand why appraisers continue to compete for “business” in the basis of faster turn times and lower fees

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        It’s just supply and demand economics at play.

        Actually, I think Adam Smith gave a pretty good analogy in one of his books. He talked about a deer or elk that finds a plant in the forest that makes his antlers grow larger. If your a male deer or elk you want the biggest antlers. So for a while he’s eating this plant and his antlers are getting bigger and bigger till one day he is the leader of his group. However, one day other deer/elk find the plant and do the same. All of their antlers are getting bigger and bigger until one day a wolf comes along to eat them. They make a run for the forest only to find out that their antlers are too big to fit through the trees and they all get eaten. (short term advantage leads to long term demise)

        In this case there are too many appraisers for the amount of work there is so they are competing on speed and price. However, to do that AND make money they cut corners to get production up. Quality falls so Fannie Mae creates Collateral Underwriter and AMCs crack down on quality. Appraisers get upset and start leaving the profession with no one coming in.

        The problem is so systemic that I just don’t know how you fix it if you wanted to. People like Joan Trice and others who have pull among the powers that be in our industry know the issues and problems very well so hopefully they figure something out.

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          Figure something out? Shall we remember the rest of the economics principle? Relevancy. Appraisers are, as the article states, just another road bump towards making the loan go through. AND THEY DON’T WANT APPRAISERS!

          Appraisers no longer have a purpose under the new system, we are completely irrelevant. The banks don’t want us, the borrower doesn’t want us, and the government would rather suck up to the banks then protect its own assets, because the government officials either get elected by or propped up financially from the banks.

          Lets be real here, the only people who have real power in our political system are the banks, not the overseerers. Judges don’t back up USPAP principals, and never side with the appraiser. There is no point in even mentioning the pathetic State Boards, who are in charge of destroying every appraiser who doesn’t hit the bank’s number. USPAP can’t even make policy without the bank’s input and consent. Why do you think every single bank reform made through the Dodd/Frank Act has been removed, through back-door politics, yet somehow, the massive database with all of our work is still maintained and compliance with it enforced.

          Appraisers are no longer relevant, and as soon as the banks can yell “appraiser shortage” appraisals will be removed from the loan package, replaced by those comp-check things they call a neighborhood market report. We are irrelevant.

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            I hear them also yelling “appraiser incompetence” and “appraiser inaccuracies.” Makes me wonder if Joan Trice and the rest of CRN may have some version of conflict of interest when it comes to enhancing the trade. I cannot see how fewer appraisers or better appraisers are of any financial advantage to the lenders except to the extent if helps rid them of an unwelcome pest..

            What you observe, Ashurou, way out distances supply and demand as the cause. When there is no demand any supply is too much.

            Mortgage appraisers, especially those in the secondary market, are nothing more than a tax and are, as you say, designated speed bumps.

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            Then go do something else. Why are you still an appraiser? You could probably make just as much money selling roofing starting tomorrow and you wouldn’t have to deal with AMCs or USPAP ever again. Just a thought.

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            gee hans that could have been good advice for your great grand pa when he was in the nazi army & was ask to help these nice jews on the trains

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            Actually, my great grandad fought for American in WW1 in France. Trench warfare, mustard gas, machine guns….all of that stuff. He fought for our freedom. Then came back home to Oklahoma and worked his butt off to get our family through the Great Depression. He was a farmer in Norther Oklahoma. He raised 4 amazing christian kids. One who was my grandmother, one who became a doctor, and two who fought in the Korean War. I have never heard my great uncles complain or my grandmother and as farmers they have had far more to complain about than appraisers. They worked far harder than any appraiser in this country every will. You just have to look at their hands to see that.

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            Sorry for the comments Hans

            just shows the frustrations in our profession

            something is not right in the appraisal world right now & i know you agree with that statement.

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            I actually have a picture of his entire division from November 1917 hanging in my office (357th Infantry Division – mostly Okies). He’s there with the little x over his head. This picture was taken at Fort Travis before heading up to New York to get on a ship to head over to England and then to the front lines.

            I’m proud to be his great grand-son. I don’t let stuff like USPAP and CU get to me. I just remember what that guy right there had to go through and this is nothin’! If I had complained about this stuff in front of him I don’t think it would have gone over well from what my grandmother told me about him.

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            very honorable
            i,m still trying to get my foot out of my mouth

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            Our business is no longer relevant to the mortgage process. Eventually, the only appraisers left that have any work at all will be litigators. At this point, appraisers are just used to get rid of other appraisers.

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            OUCH Very honest well stated. So where are we headed as Appraiser’s ? (on the totum pole scale we are covered with dirt right now ) We need to get back to an appraisal is an un biased opinion of value

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            Since we don’t have the control, and are being pushed out anyway, we go away. It will take another market crash and another generation before the banks are kicked out of Washington. If that ever happens. If appraisers want to stay relevant, they need to find another field to use their skills in.

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            Brian McClellan

            u should take a sabbatical…

      • Avatar
        Brian McClellan

        either what u r saying is true or u r just sloooooooooooow

  2. Avatar

    While all good considerations, my feeling is the primary consideration for volume is quality of work. Appraiser’s accepting work for $250 will be out of work during slow times.

  3. Avatar

    It is no mystery why we have an oversupply of under-employed appraisers. Appraisal was never a high-paying profession to begin with. Now since 2008, AMC’s take 1/3 to 1/2 of the appraisal fee. We are required by law to have higher minimum levels of education and experience than those for whom we work (real estate brokers and mortgage lenders), yet we have – by far – the lowest fees in the deal chain. Even that modest fee is being constantly hammered by attempts to replace our work with AVMs and overseas reviewers who aren’t subject to USPAP or minimum wage laws.

    Lately, we are bombarded with advertising for companies that provide regression analysis software so we can ‘better support’ our work, but this all assumes clients actually care about quality, which seems doubtful in a world where the only ‘good’ appraisal is one that supports the loan deal long enough for the loan itself to be sold.

    No, there is absolutely no appraiser shortage; there are simply fewer and fewer ‘Skippys’ who are still willing to write 1004’s for $200. I don’t know any appraisers who could write eight 1004’s a week with the type of supportability I want when I attach my hard-earned license to a job. Joan, you might define me as a part- timer, but three to four 1004’s a week is plenty challenging because, nowadays, ‘easy’ jobs just don’t come my way. By the time an AMC broadcasts an assignment, it has already been rejected by their in-house appraisers as ‘complex,’ meaning it can’t be done fast and cheap, or someone inside would already have taken it. Soon it will take me even longer because I’ve decided to embrace the latest technologies and write my appraisals with regression-supported analysis. Like thousands of others, I would have switched fields years ago if I didn’t have family responsibilities that require me to have a flexible work schedule. Flex time also explains why we can keep our seniors when other professions force them to retire.

    By contrast, my niece graduated two years ago with a bachelor’s degree in statistics. She is extremely smart, hard-working and speaks several languages. She earns six figures, working for a sports organization. We appraisers dream about attracting bright young people like this, but she doesn’t need flex time. She needs cash to pay for her high tuition
    bills, and appraisal just doesn’t pay.

  4. Avatar
    Russell Jakubauskas

    By the way, Joan, where is this appraiser “shortage”? It appears to me that it is probably only regional at this point. If you contact the major nationwide AMC’s right now, few are taking on new appraisers in my area(Southern California)and the ones that are will tell you up front that there is very little work. Doesn’t sound like an appraiser shortage to me, but I could be mistaken.

  5. Avatar

    A SHORTAGE OF COMPETENT APPRAISERS.
    The problems in the Appraisal industry will start to disappear when everyone who got their Appraisers License w/ 2 Letters from 2 different Lenders, disappear.
    The day of the Vocational appraiser is dead. Having completed all the current requirements in college 20 years ago (appraising 15yr), and having been a Licensed Realtor (1978) and broker (1990). The lenders are correct in their assumption that most Appraisers are clueless and have no business appraising. Most cannot write a complete sentence, let alone a basic knowledge of statistical theory, which would require a College Class ( your POINTS from the Appraisal Institute don’t transfer anywhere).
    KNOW THAT ANYONE WHO PASSED THE STATE TEST (4HRS LONG) IS 1000 TIMES MORE KNOWLEDGEABLE THAN A 2 LETTER APPRAISERS.

  6. Avatar
    Brian McClellan

    i am 41 and i have. a 30 yr old trainee who should be licensed in about six months

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