Blah, blah, blah. That’s what people tend to hear when we start talking about issues facing the appraisal industry. But here’s the deal. What happens to appraisers can absolutely impact the public AND the entire real estate industry. Let’s take a minute to consider some current trends. Any thoughts?
Some important appraisal issues going on right now:
- Turn-times & 30-day escrows: Many Appraisal Management Companies (AMCs) order an appraisal and expect the appraiser to turn around the finished product in seven days or less. It seems like the better AMCs give appraisers more time whereas the worst ones expect reports in only 3 or 4 days. Here’s the thing though. Appraisers in Sacramento and many parts of the country have been turning down an avalanche of work every single day because AMCs are asking for unrealistic turn times for today’s market. Just the other day a colleague told me he literally turned down 19 appraisal orders in one day alone because he couldn’t meet the deadlines. It seems like seven days has been the benchmark of a reasonable turn-time, but that’s not doable right now for many appraisers. Remember, turn-times are not written in stone and they should change according to the market. Moreover, if nobody accepts the appraisal report because the due date is too fast, it will eventually get to someone who may not be an ideal candidate to appraise the property. Thus a quick turn-time rule ends up catering to whoever is going to get it done faster (and maybe cheaper). On a related note, appraisers being so busy can cause escrows to slow down, which means it can be far more difficult to close in only 30 days. Keep in mind though appraisals are often one of the very last things ordered during the loan process, and that’s surely part of the problem in closing escrows more quickly.
Increasing fees: For years many appraisers have dealt with below-market rate fees from lenders because of Appraisal Management Companies skimming off the top. Well, lately fees have been increasing, and you’ve probably noticed that if you work in real estate. The increase is a byproduct of appraisers being very busy, the fee market changing after years of being stale, a shortage of appraisers willing to work for low-paying AMCs, and many appraisers having left the business over the past 10 years. A few years ago AMCs were in control and appraisers were desperate to get approved to be on their panels, but these days AMCs are desperate to get appraisers to work for them. For more thoughts on fees, check out Jonathan Miller’s Housing Notes from a few weeks ago (scroll to the bottom of the post for some really sharp commentary that influenced some of my thoughts above). Also, I wrote an article for Working RE magazine recently called The True Cost of Low Fees, and it helps show just how much of a financial impact there is when fees are below market rate.- Letting trainees inspect: If you didn’t know, before becoming a full-fledged appraiser you have to train under a supervisory appraiser. In California, a trainee actually has to do 2000 hours of work under a supervisor (and have a 4-year degree if the trainee wants to eventually get a certified appraiser’s license). Anyway, many lenders have actually not allowed trainees to sign appraisal reports or inspect properties alone without a supervisor. On top of already lower fees from AMCs, this has created a real lack of incentive for existing appraisers to train the future generation of appraisers. It’s understandable that lenders require a certified appraiser to do the bulk of the report and inspect the property, but if trainees are not allowed into the mix under the supervision of a trainer, there is going to eventually be a big shortage of appraisers. This will only cause longer turn-times and higher fees. Seriously, this is a huge deal and it would be wise for real estate organizations to get behind this point to advocate for appraisers and pressure lenders to relax their short-sighted regulations.
- Replacing appraisers: There have been a number of recent articles about lenders eliminating appraisals or even potentially allowing real estate agents to do BPOs in lieu of appraisals. For those who don’t like appraisers, this may sound like welcome news, though the truth is any new valuation system would inherit all the problems we have in today’s system. It’s easy to think the grass would be greener and consumers would save money on expensive appraisals, but we’ll still have issues with turn-times, fees, valuation disputes, pressure to “hit the number”, skill level, interpreting the market, choosing comps, making adjustments, etc…. To me this issue reminds me of people who say we need to just get rid of all politicians. As much as that sounds appealing (particularly for some candidates right now), it wouldn’t solve the problem because we’d still need new leaders to take their place. Maybe that’s not the perfect comparison, but do you catch my drift?
I hope this was interesting or even helpful.
Questions: Which points stand out to you the most? Agents, are you seeing any of these trends in your escrows? Loan officers, what are you experiencing? Appraisers, anything you’d add?
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Thank you for the article Ryan. I too think the trainee not being able to inspect is a big part of the fee and turn-time problem. Why can a doctor send the nurse in to examine a patient, but an appraiser cannot send an assistant out to inspect a house or the comparable sales with any Fannie Mae form appraisal report? That seems silly. Personally, I think it is easier to train an assistant to go out and measure a house and take notes off a checklist of items then it is to train an assistant to do the analytical parts of the appraisal that require more judgement and experience. However, fix the fees and everything else will fix itself. Fees are up and now I’m already getting calls almost daily from appraiser trainees wanting work. I just started a new trainee. Have you got one in the works yet Ryan? We all need to do our part 😉
Thanks Gary. Really well said on the inspection vs. the analytical part. I tend to agree. There is a state process for trainees to become appraisers and it would be great for lenders to bless that process by cooperating with it. Like many regulations though, this is very likely a reaction against the system being abused and very poor training happening over the past 10-15 years. In the “good ‘ol days” there were appraisers who had 10+ trainees that they were teaching to “hit the number.” That’s not a good thing, so I can see why lenders are hesitant about trainees doing work. But now appraisers in my state at least are limited to having only three trainees. It would be great to see Fannie Mae be the heavy here. I have been getting calls from trainees too, though as of now I am not hiring. Thanks for the prod. 🙂
Gary, I happened to talk on Facebook today with a Realtor from Portland and he told me the average turn-time for VA appraisals is about 8 weeks. He is understanding of longer turn-times, though he says sellers seem to put a bias on VA offers right now because they know the escrow may be longer. I thought that was interesting.
That is very interesting to hear Ryan. I guess that explains why the VA just increased appraiser fees from $500 to $780 in Clackamas County, Oregon.
Love the post Ryan!
I tried to enter the appraiser program last year and just missed the deadline for avoiding the new education requirement. I was NOT about to go back to college to get my 4-year degree! ;))
It was interesting, when I interviewed with a potential Supervisor, she informed me that I did better in the interview than the other candidate, but because he had a 4-year degree they had to choose him over me! ;))
Every since I’ve been curious about the future of new qualified Appraisers getting onboard, especially if the pay is going to decrease or the industry dies a slow death due to technology and other reasons you’ve mentioned.
Wow Bev, I had no idea you were considering the appraisal field. Thanks for sharing. The irony is the 4-year degree does not even to be in anything remotely related to real estate. The stiff educational requirements are nice in one way in that they could potentially raise the bar for attracting qualified candidates (theoretically), but then again a college degree doesn’t prove intelligence or knowledge of real estate by any stretch. One of my big concerns is the profound inequity in educational requirements when comparing appraisers and agents. While I appreciate the desire to raise the bar so to speak, my sense is the educational pendulum may have swung too far.
It’s going to be interesting to watch the profession unfold. That’s for sure. Thanks again. I always appreciate your take.
I’m still so fascinated with what you do Ryan!
It’s why I was sooo thrilled when I discovered your blog!!
I still wish I could enter the field but the timing just isn’t working in my favor! 🙁
But I get to live vicariously through you now…thank you so much!! ;))
Thanks Bev. 🙂
Some good points Ryan, but as I have commented for years on other sites, the issues facing appraisers today can be federal, state, regional, city, AMC, lender specific, etc. The expected turn time today in San Diego is still 5 days, with many companies moving the finish line up to reflect 24 to 48 hours post inspection. If you schedule the inspection on day two, they demand delivery on day three or four (24 to 48 hours), or you risk having them deduct points from your score via their internal scoring matrix. Instead of recognizing the local market like they should and adjusting/extending due dates before the orders are sent out, lenders are keeping things at 5 days, but are asking us to research the property and to provide our due date. They want us to spend 30 minutes of our time doing the research (for free), but will sell us out if someone else can get it done an hour earlier. Try spending 30 minutes a pop on 4 to 5 assignments (without success), then please tell me how appraisers always gets paid for our work. This lack of market recognition (need for extended due dates), professionalism, and disrespect of our time contributes to the dissatisfaction of the appraiser.
As it relates to fees, one must be careful to not paint the industry with a single brush (increasing), but rather again, things must be looked at on a local level. If to say there is a very small upward trend in gross fees in my area (as compared to last year), fees are still on average down from 10 years ago. The gross fees do not take into consideration the increase in scope of work, liability, the increase in business expenses, nor on a local level, the increase in overall cost of living.
Got to go.
Thanks Bill. I appreciate your take very much. Thank you for the practical examples too. I totally agree with you that lenders need to give more time to appraisers. A 5-day turn-time is really short. Of course turn-times tend to range depending on the AMC or appraisal department ordering the appraisal.
You are right that not all markets are increasing and turn-times are not crazy everywhere either, though from appraisers I’ve talked to across the country, articles I’ve read, and feedback from others, I think it’s safe to say the general trend is fees have increased. Now are fees really consistent with the amount of work required and increased liability? That’s a different story and certainly a reasonable question to ask. That’s where every appraiser has to answer that question and choose clients wisely.
Regarding fees, I find there is a range of fees offered in my market. I have a good idea what fees are from the lowest-paying AMCs out there and I also know the fees from better AMCs / appraisal departments too. With that being said, I would only encourage my appraiser friends to find clients who want good work.
Ryan, you are an invaluable resource in your field! Even though you are across the miles, and I get about 100 junk emails a day, yours never get deleted. I read each with anticipation. I’ve seen all the difficulties you mention.
If there is indeed something Realtors can do: this is a huge deal and it would be wise for real estate organizations to get behind this point to advocate appraisers and pressure lenders to relax their short-sighted regulations; What would that be?
Thanks so much for your posts and keep up the great work.
Cindy Vedder
Thank you Cindy. You are too kind. That makes my day to hear (especially after a very long day today). 🙂
I’m not sure what advocacy would specifically look like, though I would hope Realtor organizations and other voices would speak up when/if the issue does come up. Lenders need to take a wider view of things, so hearing concern from the real estate community can go a long way (theoretically). If anyone has specific action steps or pathways to more fully talk about the issue, I’m open ears. The appraisal industry unfortunately is not very unified, so it can be challenging to get information out there. That’s why I believe it can be very powerful to have NAR and state organizations begin to talk about the issue. It wouldn’t be a bad story for an upcoming magazine issue either (that’s a hint for their writers).
You bring up a lot great issues facing appraisers these days. It is difficult to get new appraisers to enter the market when the barriers to entry are so difficult. Not only for the trainee but for the trainer. The financial rewards just aren’t there and they need to change. They are asking more and more of appraisers but not willing to pay more.
I’m not really sure if this will change in the future because they are working on lowering the requirements in order for AMC’s to hire and deploy their own appraisers, however that opens up a whole new can of worms because it can question the appraisers bias in the appraisal due to their getting paid by the AMC. It will be interesting to see how it all unfolds.
Excellent points Tom. If there are too many issues with independent fee appraisers, that could certainly push banks and AMCs to beef up their in-house appraisal department. It’s amazing how these things work. Thank you.
Very informative. Thanks for the great read!
Very informative. Thanks for the great read!
Hey, I would love any info. I am a newly licensed Residential appraiser in San Diego. I am yet to get a single appraisal. I have varied fees and turn times with AMCs. During training I mainly did standard SFR and Condo appraisals. Really not much income or multi family. Yet AMCs have been sending me very odd ball appraisals which I do not have much or no experience with and don’t feel comfortable accepting. Am I on my own here or is this normal? Any advice on AMCs that can give me more standard appraisals?
Hi Nick. Thanks for reaching out. I appreciate your honesty too. I might recommend finding some local appraisers you can collaborate with for 2-4 units properties. I think getting that part of your training is a good move so you can complete these assignments. In coming years as Fannie Mae does more appraisal waivers (presumably) there is going to be a need for loan appraisers to know their stuff and be able to handle more difficult assignments. If you are only licensed though and not certified, it may be an uphill battle to find lenders to work with. I don’t say that so you lose hope.
Anyway, as far as lender work I have found direct lenders and local companies to be much better to work with in terms of fees and stipulations. I don’t really have advice for AMCs that will give you standard work, though I imagine you could sign up and say you only handle condos and single-unit properties. I could certainly recommend some AMCs that might be good to connect with (not entirely sure they all cover California as a whole though of course). Send me an email if that’s relevant.
Thanks again Nick.