• Thu. Dec 1st, 2022

The number of real estate appraisers is declining. Here’s why you should care


The ranks of real estate appraisers are expected to decline significantly over the next five years, which could mean longer waits, higher fees and even lower quality appraisals as more appraisers cross the borders of the world. State to evaluate the properties.

According to the Appraisal Institute, an industry organization, 78,500 real estate appraisers were working in the United States earlier this year, down 20% from 2007. This could drop another 3% each year over the next decade. , depending on the group. Much of the decline occurred among residential rather than commercial appraisers.

Some say Americans are unlikely to feel the effects right now, as this is mostly confined to rural areas and the number of assessment certifications – many assessors are licensed to work in multiple states – has remained relatively stable. Others say it is already happening and that rural areas are just the beginning.

Since most residential mortgages require an appraiser to appraise a property before a sale closes, they say, a shortage of appraisers is potentially problematic – and costly – for homebuyers, who rely on accurate valuations to make sure they’re not overpaying; and salespeople, who can see business fail if valuations are low.

Read: 10 things real estate appraisers won’t tell you

“As an appraiser, I should keep my mouth shut about this shortage because it’s great for current business,” said Craig Steinley, who runs Steinley Real Estate Appraisals in Rapid City, SD. there no doubt, since the market cannot solve this problem by adding new appraisers, [is] this will solve the problem by doing less evaluations.

A swimming pool that shrinks and ages

As the number of assessors decreases, the pool ages: 62% of assessors are 51 and over, according to the Appraisal Institute, while 24% are between 36 and 50 years old. Only 13% are 35 or younger.

Industry experts blame an increasingly inhospitable career prospect. Financial institutions used to hire and train entry-level appraisers, but few do now, according to John Brenan, director of appraisal matters for the Appraisal Foundation, which sets national standards for real estate appraisers.

This has created a market where current appraisers, mostly small businesses, fear losing business or reducing their own income as they approach retirement. Many have chosen not to hire or train replacements.

Read: How to tackle a low home valuation

The requirements to become a licensed residential appraiser have also increased over the past two decades. Before the early 1990s, a real estate license was often sufficient. Today courses and years of learning are required for certification.

And this year marked the first where a four-year college degree was required to work as a certified residential appraiser. (It only takes two years of college to get a license, but that limits the properties an appraiser can work on. Some states, on the other hand, only offer full certification, not a license.)

“If you come out of college with a finance degree, you can work for a bank for $ 70,000 [or] $ 80,000 per year with benefits, ”said Appraisal Institute President Lance Coyle. “As an intern, you could earn $ 30,000 and not receive any benefits. For some, especially those with student loans to repay, the choice may be easy.

“There were definitely easier career path options I could have chosen,” said Brooke Newstrom, 34, who apprenticed for Steinley Real Estate Appraisals earlier this year. She networked for a year and a half, called appraiser offices and attended professional conferences, before landing the job.

For home appraisers, business isn’t as lucrative as it used to be. Federal regulations in 2009 led to the rise of appraisal management companies, which act as a firewall between appraisers and lenders so appraisers can give an unbiased opinion on a home’s value.

But these companies take part of the fees, thus reducing the remuneration of the assessors. Some community lenders don’t use appraisal management companies, according to Coyle, but they’re often used by mortgage brokers and big banks.

The number of assessors appears poised to continue to decline, and as assessors continue to earn more state certifications, they could be more limited, according to industry experts.

For now, any shortage is likely regional, Brenan said. “There are definitely some parts of the country – and mostly some rural areas – where there aren’t as many assessors available to perform certain tasks as there were in the past,” he said.

Elsewhere, however, the decline in the number of reviewers is not felt as acutely. In Chicago, according to appraiser John Tsiaousis, it can be difficult for young appraisers to break in, but clients looking for an appraiser shouldn’t have a problem.

“I don’t believe they will allow us to run out of evaluators,” Tsiaousis said. “Some changes will be made [to the certification process]. When they’re done, I don’t know.

Longer waits, more expensive reviews, and quality questions

The effects of a shortage of appraisers could be significant for individuals on both sides of a real estate transaction, experts say.

Fewer reviewers means longer waits, which could delay a close. The delay means borrowers could have to pay for longer mortgage rate freezes, according to Sandra O’Connor, regional vice president of the National Association of Realtors. (Rate locks keep interest rates firm for specified periods of time and are typically purchased after a buyer with initial loan approval finds the home they want.)

Longer waits also affect sellers who need the equity in a sale to buy their next home. When they can’t close on the house they’re selling, they can’t close on the one they’re buying.

A shortage also means that assessments are likely to cost more, which some say is already happening in rural areas. Appraisal fees are generally paid by borrowers.

“Assessment fees in areas where there aren’t enough reviewers are higher than where there are a lot of people advocating for the cause,” said Steinley, who holds leadership positions at from the Appraisal Institute and the Association of Appraiser Regulatory Officials.

There is also a quality issue: in some areas, appraisers come from other states to assess homes. While there are guidelines for these appraisers to become geographically proficient, they might lack intricacies in the market, Coyle said.

Two appraisers assess a house after mold remediation. (Craig Steinley)

Craig steinley

And if the shortage is not resolved and lenders fail to have homes appraised by appraisers, lenders could ask federal regulators to relax the rules governing when traditional appraisals are needed, allowing more computer-generated analysis, according to Steinley.

Less expensive and faster automated valuation models are rarely used today for mortgage origination, Coyle said. They are sometimes used for portfolio analysis, or when a borrower needs to demonstrate 20% equity in order to stop paying for private mortgage insurance, he added. They could be used for low-risk home loans, Brenan said.

Currently, appraisers are required for mortgages guaranteed by the Federal Housing Administration, Fannie Mae and Freddie Mac. These mortgages represent about 70% of the market in terms of loan volume and 90% of the market in terms of number of loans, according to the Mortgage Bankers Association.

And computer-generated appraisals cannot match the accuracy of an appraisal made by someone who has seen the property and knows the area, according to many industry players.

The industry is starting to tackle the problem. Last month, the Appraisal Foundation’s Qualifications Committee held a hearing for comments and suggestions, Brenan said.

One of the options being discussed is to create a set of competency-based exams that could cut down on the time people spend as interns. That way, someone with a background in real estate finance could get certified faster, Steinley said. The board is also looking to further develop courses that would allow students to gain hands-on experience before graduation, Brenan said.

A good education is important “because real estate appraisal is hard to do and you have to get it right,” Coyle said. But the unintended consequences of the current qualifications are just too great, he added. “It’s almost like you have regulators trying to keep people out.”


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