Friday , 21 September 2018

Barriers to Appraiser Training and How the Industry Responds

Today, fewer individuals are ready to take the dive into real estate appraising. Many of them simply don’t know about the profession, and for those who do, the training process doesn’t always present the most attractive picture, especially because of increasing licensing and certification standards and regulatory compliance. But there are appraisal professionals out there who are dedicated to hiring, training, mentoring, and retaining new appraisal professionals.

We spoke with Forsythe Appraisals, LLC President and CEO John Forsythe, SRA, and Chief Appraiser and Senior Vice President Alan Hummel, SRA, to get their take on current barriers for prospective associate appraisers and what the industry is doing to remove those obstacles.

How training has changed over the years

The training process to become a valuation professional certainly is not what it once was.

“When I got started, there wasn’t any licensing in place, but obtaining an industry credential was a very significant commitment and important to obtaining assignments,” Forsythe said.

Forsythe went on to say most of their company staff appraisers earned a designation through a professional organization like the Appraisal Institute or American Society of Real Estate Appraisers.

Hummel noted the training process didn’t start in earnest until the Appraisal Qualifications Board created licensing and certification requirements in 1992. Now, prospective appraisers must take a course before starting training to understand exactly what the process means, and supervising appraisers must do the same.

Moreover, interested individuals need a 4-year college degree, and the number of required experience hours for certification has gone up, rising from 1,500 hours to 2,500 in no fewer than two years in most states.

The effect of increased regulatory compliance on training

New regulations have had an indirect impact on people entering the appraisal profession. While federal or state rules haven’t made it harder to start training, lenders’ and potential supervising appraisers’ perceptions about liability and what the regulations allow have changed.

“There is a misconception that Fannie and Freddie do not allow a trainee to conduct a solo inspection on an appraisal,” Hummel said. “In fact, that’s just totally untrue. Fannie and Freddie both accept licensed trainees to sign an appraisal report that’s delivered to them as long as the licensed supervising appraiser also signs the report and accepts the supervisor certifications.”

Moreover, Forsythe pointed to a fear for some supervising appraisers. In particular, if an associate makes a mistake, what kind of exposure could supervisors face? Because of this apprehension, many trainees have a hard time finding a mentor.

“We acknowledge the critical importance of proper training and mentoring; however trainees are an opportunity to invest in the right individuals and build a future valuable member of your staff,” Forsythe said.

Challenges faced by future appraisers

The aforementioned training standards and regulatory issues, as well as other factors, create barriers for people who consider becoming an appraiser. Here are the obstacles Forsythe and Hummel highlighted:

Finding supervising appraisers

The perception of unknown liability exposure for the supervising appraiser is a key factor that impedes trainee appraisers from being able to find a mentor. In addition some experienced valuation professionals are worried about training their competition.

“I would suggest not all appraisers have the skills or want the expense, stress and liability of being a sole proprietor,” Forsythe noted. “Treat employees right, and the vast majority will recognize the value of remaining a long- term employee. This business has become much more complex and appraisers are more often recognizing the value and stability of being a staff appraiser. Many appraisers are so stressed that they are looking for opportunities to stick to the core practice of appraisal.”

The other issue is economic.

“Will the supervisor be able to increase production to the point where it makes financial sense to bring on a trainee?” Hummel asked. “One- or two-person offices may have a lot of appraisals on Monday and Tuesday, none come in Wednesday and Thursday, and then they get another one on Friday. The workflow is not always conducive to having work available for a trainee.”

Knowing the profession

Another issue relates to how the appraisal industry markets itself. First, few people are exposed to residential appraisal as a possible profession. Many appraisers became aware through a family member or friend who is an appraiser. Some individuals have organic exposure to the profession through work at a bank, lending institution, or as a real estate agent.

Then, those who do find out about it don’t get the most accurate picture of the profession, particularly if they already have experience in real estate. College grads often come out of school with a lot of debt, so the prospect of being in training for up to two years can seem unappealing. Moreover, real estate agents and underwriters who consider the appraisal profession don’t want to start at the same trainee level as the person whose only experience is summer jobs during high school or college.

How the industry has responded

The good news is that these issues are being addressed by the appraisal profession. Appraisers, appraisal firms, lenders and appraisal management companies have recognized the challenge this entire industry faces with the declining number of trainees and its impact on service levels.

“One thing that has had some positive momentum lately is the acknowledgement by lenders that there are no Fannie or Freddie restrictions on the use of properly supervised trainees, and we’re seeing a few  lenders and AMCs saying, ‘Yes, we’re going to allow the use of properly educated,  supervised and mentored trainees on our appraisals,'” Forsythe said.

As for the actual training requirements, Hummel noted the AQB recently sent out a questionnaire to get feedback on the minimum standards for certification. This includes whether 2,500 hours is the right threshold and what other types of experience should count toward certification.

Training advantages offered at appraisal firms

National appraisal firms in particular offer more pathways for individuals to begin training and advance in their careers. While the certification standards are still at play, firms can do more to get an associate appraiser started. Here’s how:

Steady work

Staff appraisal firms are equipped to handle a larger volume of assignments, so there’s less worry an appraiser in training won’t be able to gain experience. Also, there’s less risk of a supervising appraiser absorbing all of the work during slow periods.

Diverse products

Sole proprietor supervisors can sometimes find themselves somewhat limited in the types of appraisals that make up the preponderance of their volume, meaning trainees may not get the valuable breadth of experience. Most large national firms handle anything from traditional full interior and exterior inspections, to desktop appraisals, employee relocation, and luxury property valuations, so new appraisal professionals have the opportunity to be properly mentored and trained to develop a variety of skills. Plus, with a large number of seasoned colleagues, there are many peers to help out with more complex assignments.

Opportunities for advancement

People want to see the opportunity for advancement in their careers, and many firms offer that for trainee appraisers. Internal training and mentoring programs help these individuals develop into certified real estate appraisers and continue their education thereafter. Before they know it, there could be career opportunities as branch managers, training managers, client relationship managers, or in corporate management and business development.  They could even decide to become a specialist in specific appraisal disciplines such as relocation appraisals.

All of these benefits allow appraisers in training to direct their attention toward growing the core skills with less distactions and stress.  In the end, they can focus on what first attracted them to the appraisal profession—appealing compensation, flexible schedules, and being out in the field providing well-supported opinions of value on residential real estate.

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7 comments

  1. The article was written for/by large appraisal firms (like Forsythe given the last part) however its not completely wrong, if you find a dedicated trainee and actually spend time on educating them in the beginning it will pay out in the end. if you treat them with respect and explain the appraisal process they will go to the ends of the earth for you (the parts of your area you might not have gone to). and if you provide reasonable compensation they will stick around even after they get licensed. but as a business owner you have to also calculate is it still beneficial to check and get more work in case they might leave and take the work with them. I never took trainees in my immediate area (no point) but i say if you have the time and the patience do it and at least you will have someone to help you out when you want a vacation.

  2. Until appraisers are adequately paid in relation to the amount of work needed to create the appraisal report, it makes no sense training new appraisers. We need to discourage new appraisers and create an appraiser shortage which will push up fees (supply and demand). Then we can start to worry about training new appraisers. All this present concern about not enough new appraisers is a smoke screen to keep appraisal fees low. If fees were appropriately high, we would have no issues with new people wanting to be appraisers. We do not need to lower the qualifications. They are just fine where they are. Lowering the training bar is the wrong way to attract new appraisers, raising fees substantially is the way to attract new appraisers. An appraisal report has an important role in making a very expensive financial transaction possible. An appraiser is on the hook legally, for the appraisal report for years after writing it. An appraiser put in such a position needs to be very well trained, have their training constantly updated and well compensated to justify the work and training needed to create a quality report. If lenders and users of appraisal reports are unwilling to pay appropriately, then they are really saying they think the report is window dressing, put in place to fool secondary market buyers in to buying faulty mortgage paper. If lenders and users of reports threaten to do away with appraisers and the appraisal process, all they doing is exposing their real motives, which are to make as much money as possible and damn the consequences if it ends ups like the 2008 melt down. This is the true reality of the appraisal world.

  3. We can all make an argument as it relates to low pay, increased liability, but over site is often over looked. The fact is I may be unnecessarily and unfairly supervised by the owner, borrower, listing agent, buyers agent, loan officer, AMC staff, underwriter, AVM’s / big brothers CU platform, where no one is considered my professional equal (they don’t hold an appraisers license). As long as I’m grandfathered in, I suggest the standards be doubled as I agree with Jim (create a shortage). An additional issue I see is random requirements to either be added to an AMC panel, be considered for a typical assignment, or even be eligible to apply to a particular lender for employment. After I received my certified license, Flagstar told be I needed 5 years of experience from receipt of license before I could be considered for work (since reduced/eliminated). I was asked to complete a jumbo field review recently (in-house AMC) where it was a requirement to have 8 years of experience since licensed. And lastly,I work with a lender client (preferred panel) that required me to have 10 years of experience before I could even be considered for their panel. If I graduate high school, go to college 5 years, train under an appraiser for 2 to 3 years and need 5, 8, or 10 years of further experience just to be eligible, then I will be in my early to late 30’s before I can even get started.

  4. Russell Jakubauskas

    Regarding some of the points in this article: 1)I see the greatest impediment to hiring trainees is the refusal of most AMC’s/Lenders to accept reports with a trainee’s name on them. This is due the perception that there is somehow a greater liability due to the fact that the trainee is active in the appraisal process and the preparation of the report. This is something that must be addressed by those in our profession who have the ear of these institutions(and that definitely does not include the typical independent appraiser). The fact is that any appraiser signing the report has full and complete responsibility for all content contained in the report, therefore, the supervisory appraiser(the one who is certified)has no more or no less responsibility than a certified appraiser signing a report individually. I can guarantee that this is not understood, as it is my experience that most AMC’s today will not even consider accepting a report with a trainee and a supervisory appraiser signing it. Since the majority of work for independent appraisers(like it or not folks)is mortgage related, this is a severe impediment to the hiring of trainee’s. No question about it.

  5. Retired Appraiser

    I had lunch with a representative from an appraisal sweat shop like Forsythe once just for the fun of it. I pretended to be interested just so I could learn how badly they stuck it to starving appraisers who would do anything to stay in the business. It boiled down to them paying appraisers around $50 per appraisal with a requirement of churning out 15-20 appraisals per week. I had to laugh in her face when she told me what they paid. She was gracious enough and even paid for my meal but I could tell that she was embarrassed to disclose their fees. I doubt that Forsythe Appraisals, LLC pays much more today than appraisal mills of yesteryear. Why should they? They own the board, the dice, and the gaming parlor. I raise my glass to people like Forsythe…the slum lords of our industry.

  6. John Panzavecchia

    I cannot foresee having another trainee. I have tried recently again and the idea of it is great. The problem is you need two things. 1) A college educated, high quality person who can be dedicated to doing the job right and not cutting corners. They have to be willing to work hard to learn this profession, which can be tough the first 6 months or so.
    2) They have to be willing to work for PEANUTS. Try combining those two into one person. I have tried and failed 3 times. I simply could not get them doing enough work at the fee split to make enough money to stick with it. I had 2 trainees that almost got certified. One was fresh out of college and was living across the street with me at his moms house. He also cut grass and made money from that. He decided to make more money with less aggravation and moved onto a sales job. He was about 75% of the way to being certified. The second guy was an agent and did appraisal on the side. He was catching on well after a slow start but died of a heart attack after 6 months. I took on were 3 others that all quit within the first month. They simply needed to earn more money starting out. 40% of 1-2 appraisals per week that you struggled through is not a lot of money. The first few weeks is basically no pay because I cannot hand out free money when the trainee is actually slowing down production. Understandably this is hard for a potential trainee to exist on until he gets good enough to earn a decent living. There is also the whole supervisor side of things and the fact that “required” or not by FNMA. NO client I have allows a trainee to inspect the home alone or type the report without the supervisor. So how can you increase workload and actually come out ahead? I would do it for one of my kids but otherwise I see appraisal as a non-scalable business.

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