Q: How would you categorize the overall state of the appraisal sector?
Mike Christensen: Busy and frustrated, but watchful.
Busy: Most residential appraisers are busy at this time. With continuing low mortgage interest rates, increasing existing home sales, and an uptick in new construction, most appraisers are keeping busy with traditional first mortgage appraisal business. This is particularly true in booming energy market states like North Dakota and Texas.
Frustrated: Appraisers are feeling pressure on many fronts. With increasing new construction, home sale, and refinance activity (especially on investment properties), pressure from mortgage companies, credit unions, banks, and some AMCs on value opinions continues. Also, appraisal fees have not increased much, if at all. In fact, some AMCs are still paying 50%, or less, of the overall fee to the appraiser. Many appraisers are simply trying to work through the current state of the industry; anticipating a brighter day.
Watchful: Appraisers are watching debates on customary and reasonable (C&R) fees, especially in light of fee surveys done in Texas, Louisiana, Virginia and Utah. State regulators are unable to effectively act on the C&R issue until the CFPB provides them with some concrete guidance. The difficulties facing the CFPB on this issue are both practical and legal. The potential costs associated with waging this fight, along with some valid constitutional concerns, are resulting in delayed policy communications. This delay in developing and releasing guidance has resulted in non-action, leaving the appraisers waiting on something that may, or may not, occur.
Q: Do you see appraising, as a profession, attracting a new wave of young professionals?
Mike Christensen: Residential appraising is not attracting the number of young professionals needed to maintain current valuation demand and the market is closely watching. The Appraisal
Foundation is reportedly looking into new methods for attracting and educating a new generation of appraisers, but in the meantime, entry into the residential specialty segment is stunted by increasing licensing and certification qualification thresholds, limited availability of supervisory mentors willing to take on the regulatory and financial liability, and uncertain financial and demand potential.
Q: How has technology improved the appraisal field? And, on the flip side, has technology created new problems for appraisers?
Mike Christensen: Technology has decreased the hard costs of producing appraisal reports; creating efficiencies in inspecting, measuring, photographing, and reporting. Even the perceived excessive required augmentation to the traditional standard uniform appraisal dataset (UAD) form appraisal report has been largely taken care of by built-in industry-specific software that has been developed with input from HUD and the GSEs.
Technology has been the most significant driver in this rapidly changing profession. Some appraisers are challenged by it, resulting in unreasonable suspicion and fear. Others are invigorated and motivated by it. It is clear that those who embrace technology, including hardware, software, and supporting analytical theory, will excel and find significant success in the future.
The reverse is also true. To remain unchanged, in a rapidly changing business environment, can quickly result in one’s professional irrelevance.
Q: What do you see as the main challenges facing appraisers in 2015?
Mike Christensen: Keys to the residential appraiser’s success in the near future are 1) to be able to embrace technology, 2) to avoid being fearful of other perspectives on price and value (i.e., AVMs, BPOs, Evaluations, etc.), and 3) learning what the users of their unique skill-set need and demand. It appears that a significant segment of appraisers are unbending in their approach in meeting market demand; attempting to dictate what valuation services they will provide. The market knows, and will obtain, valuation services it needs to meet its similarly unique financial and regulatory challenges. This dog (the market) will wag its own tail.
Appraisers will need to utilize many perspectives, approaches, and types of analyses and communication; understanding how this information is utilized by the market. I am confident the market will continue to desire qualified analysts to provide traditional judgment-based services. Typical homes, located in homogeneous neighborhoods, may not require the same level of human touch, but the segment consisting of atypical, complex, and unique properties will continue requiring their experience and education-based analytical services.
The limited number of current professional entrants, along with advancement in technology and valuation reporting development, has resulted in innovative valuation products that can more efficiently meet the increasingly complex market demand. “Evaluations,” as defined in the Interagency Guidelines, are emerging to join AVMs, BPOs, and traditional appraisals to meet emerging lending and portfolio management needs.
Select Appraisal Management is online at www.snselectappraisalmanagement.com/.
Phil Hall has been (among other things) a United Nations-based radio journalist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Also, as you will discover, he is not shy about stating his views.