There is a common misconception that AMCs are unconcerned with the problems affecting appraisers. AMCs should be viewed as business partners for appraisers, offering appraisal assignments and ready to assist the independent appraiser to better understand the regulations and rules that are constraining the business and provide guidance on how to better navigate those challenges. AMCs are a part of the industry as a whole and we believe they share in the responsibility to reverse the declining number of appraisers. AMCs can, and are, taking action to both change restrictive policies and increase the number of licensed appraisers. There will be dramatic consequences for all in the mortgage appraisal industry if the number of appraisers continues to decline at the same rate. Through lobbying, education and policy change, AMCs believe they should help reverse the trend of appraisers leaving the business.
Strain on Appraisers
The decline in appraisers over the last few years has been steep. The average annual rate of decrease is approximately three percent – a cumulative decline of 22 percent since 2007 (Appraisal Institute Research Department). As large of a decline as this is, there is the potential for these numbers to become even more dramatic in the future. More than 62 percent of appraisers are over the age of 51, and only 13 percent are younger than 35. The lack of youth in the profession and the decline in appraisers can both be tied to increased barriers of entry into the profession.
Currently, certified level appraisers are expected to have a four-year college degree, two additional years of apprenticeship and pass certification requirements. The four-year college degree does not need to be in a field of study relevant to appraising and some suggest a school for appraisers would impart more relevant and valuable skills than an unrelated four-year degree. What’s making the apprenticeship period more difficult is that many lenders refuse to accept appraisals that include the signature of a trainee on the left side, though the supervisory appraiser does take full responsibility by signing on the right side. It’s incredibly difficult to find people to train as potential new appraisers because they’re being asked to work and train for some 2,500 hours without being able to establish their own reputations by signing their own work.
Appraisers are backlogged in work and some try to complete 2-3 appraisals a day, on top of making corrections to any existing appraisals and submitting their work through multiple systems to multiple companies. The workload and demand on their time has risen sharply. Appraisers are under immense pressure to be organized, efficient, adaptable, and accurate despite the increasing workloads. With only 24 hours in each day, those appraisers who fall behind suffer from stress, long hours driving and exhaustion. While many would benefit from an apprentice or trainee appraiser, many appraisers are not sure how to manage that situation to the ultimate benefit of both parties. Many appraisers strive to minimize risk and asking an individual to risk his hard-won reputation and business by using unseasoned appraisers is a risk many are not willing to accept.
What can AMCs do to provide assistance to bridge this chasm? It’s an issue which needs an immediate solution. Time is not on our side. Given that it takes two to three years to move from trainee status to fully licensed appraiser, the industry requirements have guaranteed there will be no quick relief for several years. While some argue technology is the future, AMCs believe there will always be a need for human appraisers in the real estate business. Technology can change the way appraisers offer services, but can never replace the need for an unbiased, talented and experienced appraiser.
Strain on AMCs
The same strain impacting appraisers is occurring at AMCs. With the decline in overall numbers, there are less qualified appraisers able to take on the burdening expectations. AMCs are forced to search harder for qualified appraisers. The means more time and resources are allocated to dig deeper into databases to find the most qualified appraisers. This forces AMCs to search for appraisers who are further away from the property to be appraised. In some circumstances AMCs may have to search for appraisers outside the county, and even, very rarely, across state lines. While these problems may be less visible in more urban areas where there are still many appraisers to choose from, the shortage is impacting the more rural or isolated areas the hardest.
Effects on Appraisals
AMCs worry that if the decline in appraisers continues, it will have a negative effect on the quality of appraisals. AMCs strive to find the most qualified and informed appraisers to make decisions on properties. The further away from the subject property an appraiser is, the larger the possibility for potential error based on lack of geographic competency. Although many AMCs currently have large vendor networks and are currently able to find the most qualified leads, in time, with fewer appraisers offering services, it will potentially affect the accuracy, turn time and quality of the appraisal market as a whole.
Another substantial goal AMCs have is to protect the value of appraisals over cheaper alternative valuation products such as AVMs. The time needed to complete an appraisal would increase with the continued decline in the number appraisers. This increasing wait could come with mounting pressure for appraisals to be substituted by other valuations products which do not have the insight, accuracy or accountability of an appraisal. In this area, AMCs can help ensure the value of the appraisal product while fighting for more appraiser friendly regulations and policies. Ultimately AMCs need to work with appraisers to change the overly restrictive regulations surrounding the sector.
The current environment needs to change to better protect the appraisers at the center of the industry. In order to reach solutions it is up to the mortgage industry to increase its voice to influence policies. AMCs are taking action to change the current environment. Many AMCs are joining the Real Estate Valuation Advocacy Association (REVAA) who lobby for positive change for the industry. REVAA and other non-profit trade associations monitor public policy and serve as an important resource to federal and state regulators and policymakers. They work on creating solutions with policy makers about the attrition of appraisers and ensure the movement to halt the decline is a top agenda item.
There are many innovative ideas on how AMCs can help combat the decline in the number of appraisers if policies were changed. This includes AMCs starting their own training programs, but these ideas are often limited by existing rules and regulations. As long as AMCs’ ability to affect change is limited by government regulations and existing lender policies it is harder to address the root causes of the lack of appraisers. Outside the policy sphere, more information needs to be published for potential recruits on the benefits of working as an appraiser. The ability of appraisers to work their own schedule, own their own shops and the flexibility of working for themselves are major draws for younger people interested in the profession. More potential recruits need to know that an appraisal career can offer security, stability and has the potential to be lucrative if well-established.
The final way AMCs can help reverse the decline of appraisers is to take responsibility over their operations and relationships. AMCs need to do more to directly help the profession become stronger and better. AMCs need to treat their appraisers right; with respect, reasonable turn times, and fair and adequate compensation. AMCs must be held accountable for their part of the relationship. The healthier a relationship that can be formed between AMCs and appraisers, the more attractive it will be for future appraisers to join the field. Simply by acknowledging and guaranteeing that AMC s value the work of appraisers, AMCs can help attract more people to the field.
From Discussion to Action
AMCs are very aware of the decline in the number of appraisers, and have been feeling the same strain that appraisers are all too familiar with. AMCs are having the hard discussions of what can be done to support the appraisal profession and are working towards finding solutions to reverse the decline in the number of appraisers. While the lack of appraisers is fundamentally affecting the length of time to acquire and fund financing in several states, if the current rate of decline continues, there will potentially be very big problems soon. While there are still many discussions to be had on how to fix the problem, AMCs and appraisers must work together to correct current trends before it’s too late.