What a year! By all accounts, residential appraisers are as busy as they have ever been. In fact, the MBA’s most recent 2020 forecast estimates over $3.18 trillion in new originations this year, making 2020 the second biggest origination year in history – only topped by 2003. This record demand for mortgages is driving a record demand for appraisals. With low rates forecast into 2021, the demand for residential appraisals will likely remain strong for the near future. Despite these trends, the number of new appraisers entering the profession is low. What gives?
Part of the reason – we are not seeing a rapid increase in the number of appraisers to offset the increased demand for their services is that the supply of appraisers is inelastic, meaning it cannot flex quickly to accommodate increasing demand. Currently, there are about 40,000 to 50,000 active residential appraisers in the U.S. depending on the source. Becoming an appraiser is not a quick or easy process. Individuals wishing to become an appraiser must first work with a supervisor to log sufficient experience and then wait at least six months to a year for Licensed Residential accreditations for Certified Residential accreditations. This training requirement is made more difficult for many who do not have a direct connection to an existing appraiser like a family member or friend. The good news is that according to The Appraisal Foundation, the number taking the national exam for all license types has been increasing for the past five years, from 580 Licensed and Certified Residential appraisers in 2015 to 1,217 in 2019. While the number for new appraisers is trending up, many believe this is not enough.
The Appraiser Qualifications Board (AQB) of The Appraisal Foundation has worked over the past several years to right-size the experience and time requirements. AQB created a new path to entry called PAREA (Practical Application of Real Estate Appraisal) which has the potential to simplify the experience requirement using a completely technology-based approach. There is great hope the industry will leverage the PAREA to increase the number of new industry entrants.
For several years, the GSEs have been exploring alternatives to traditional appraisals and appraisal hybrid solutions. As technology solutions and GSE appraisal waivers have become more common, some believe the fear of increased automation and resulting impacts to available work may discourage new entrants from joining the industry. The increase in GSE appraisal waivers is being couched as a positive by providing relief to the demand on appraisers who, at current origination levels, could likely not keep up. There is a school of thought that without the waiver relief, consumers and lenders would be clamoring for a solution to meet current demand that was not appraiser dependent.
At the same time, there are several companies, both lenders and AMCs, that have been investing significantly in appraisal trainees for the past several years. Three years ago, CoreLogic launched a trainee program of its own to augment its nationwide network of hundreds of staff appraisers using its in-house appraiser education division, The Columbia Institute, to support the effort.
The first CoreLogic trainee cohort launched in late 2018 with 12 trainees. The second cohort of three, which was limited by COVID, is now underway. The plan for 2021 is to train 12 more appraisers. In the CoreLogic process, trainees obtain their qualifying education and spend four weeks in a “boot camp,” onsite in our Dallas office. The trainees work as a group, building relationships, learning the internal processes of the appraisal firm and learning practical skills. Finally, the trainees are assigned to work with a supervisor until they acquire sufficient experience. The members of the first cohort have all passed the national exam.
Wells Fargo has also invested during the past five years, moving two cohorts of 10 through the entire process to certification. An interesting note to the Wells Fargo program is the fact that half of the participants are armed forces veterans. Wells Fargo has also invested in a commercial appraisal training program. Wells is just one additional example, as other lenders and AMCs are also investing in programs for trainees.
Clearly, there is a need and a demand for appraisers. While the result of these efforts by CoreLogic and others may seem relatively small, it represents an added capacity of 750-1,000 residential appraisals per month. Moreover, these efforts and those of others are pushing the industry to return to a mindset where an appraisal trainee is viewed as a benefit to their supervisor rather than a burden. The long-term benefits to those that invest in an appraiser training program are wide ranging, including higher customer satisfaction levels, more loyal employees, and more comprehensively trained appraisers.
The value of the appraiser remains strong, and there are numerous opportunities for individuals seeking good careers in appraisal and valuation.
As an industry, we need more investment in the future of appraisers. The short-term and long-term benefits are real.
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