The Appraiser Shortage Myth Part 43

[Deleted member 130081]

As I said before, we take no "cut" from the borrower fee. I never see the borrower fee. The appraiser charges me. I charge the lender. I have no relationship with the borrower (expect in very rare cases like PMI removal). What I charge the lender is based on my agreement with that lender and has nothing to do with what the fee the lender passes along to the borrower.

I'm calling BS on that one. If the borrower does not pay your fee, then why are they charged for an appraisal? That's not far from saying an employer does not provide your pay because they use a payroll service.

 

[Michigan CG]

I guess no one wants to discuss if these people in COW states are hiring trainees including their kids.

 

[Evincere]

Now that a certain margin has been eaten up by the AMC, there is no more room left to support a trainee. So, the argument that continues to be made that the low-ball appraisers are incompetent is in my view a poor conclusion. I think many competent appraisers can afford to do a simple 1004 for $250, maybe even $200, but that doesn't leave any money left over for anything else. Now the same group that has eaten the margin for themselves, is complaining there may be a shortage of labor looming. Reap what you sow is what I think.

Succinct considering the topic. The seemingly only answer to the alleged shortage problem is.....LOWER THE STANDARDS via alternative experience requirements which in and of itself will never address or provide a solution to the lack of new trainees. Basically, seasoned appraisers are being asked to subsidize a trainees apprenticeship but expect no financial incentives - or else.

 

[J Grant]

The lender "pays" SL ,( by deposit/check/) but the money for the lender to pay SL came from the borrower. ( borrower paid appraisal fee at time of application)
Here is the question I would appreciate having answered:..

A) the borrower pays $550 appraisal fee to Bank X . The Bank X engages SL for appraisal management. SL finds an appraiser to do the appraisal for $300. Does SL charge the lender $250?

B) the borrower pays $550 appraisal fee to Bank X . The Bank X engages SL for appraisal management. SL finds an appraiser to do the appraisal for $350. Does SL charge the lender $200?

 

[hastalavista]

Well, what you seem to ignore, is where does the money come from to support that lower fee? This thread after all, is about the shortage of appraisers.

I'm not ignoring anything. I thought the data was self-evident but I'm happy to spell it out.
In the COW states, where there the demand for mortgage work exceeds the supply of appraisers, fees have gone up significantly. I don't know about you, but I think there is enough margin in a $600 to $1,000 appraisal fee to support the training of appraisers.
In CA and FL, where the supply of appraisers exceeds the demand such that appraisers are doing work for $300 or less, the margin isn't there. But there is an over-supply as things exist, no?

Earlier I asked if you (I should have made that a general statement) had attended any regulator presentations.
Now, I'll ask in general, has anyone really put together an appraiser trainee program? Well, guess what.. I have.
I had an employee manual and handbook.
Trainees were hired as employees and worked the first 30+ days in the office to understand the ordering process and basic property research process. They were also exposed to finished reports; what they looked like and what the content expectation was.
I took them out to train them on how to measure a house. Interestingly enough, this was usually where the first drop-out cut occurred. Some people could not get comfortable with how to measure and inspect a property (or, I wasn't a good trainer).
From there, they would work with me (or another assigned appraiser) on reports.
At a point, they were sufficiently trained to inspect on their own (basic house; I work in an urban/suburban market so basic homes are a plenty). After a couple of years, they were able to get their own license; most, at that point, opted to become an Independent Contractor.
Training appraisers was personally and professionally satisfying. And, after the initial investment of time and money, my firm grew because of it. With rare exceptions, most of the appraisers continued to take work from my firm even when they had their own clients (which I encouraged them to get). I never was worried and never had (to the best of my knowledge) a trainee "steal" a client of mine. And, my attitude was, "Well, if a newly licensed appraiser can steal a client of mine, I have bigger problems than that!"
But a good training program is a lot of work. I could have generated more money in the short term by just doing the work myself. The break-even point came (for me) just about when they were able to upgrade. If I did my job correctly as an employer (made it attractive to continue to work with me at my firm) then I would reap the reward. It worked for me and I'm glad to have done it. I wouldn't want to take it on again because I'm getting too old to work those kind of hours (I'm working more than I want to right now! LOL!). But there are plenty of other competent appraisers, with the ability to put together a good training program who can do it as well if not better than I did.

Now I'm not sure how long the COW states have been getting the higher fees? At least a year, but I don't know if it has been 2-years. But taking on a trainee is not something most should consider to do on a whim.
Not everyone is set-up in their business model to take on a trainee.
Some don't want to do it, period.
For the rest who are interested and want to do it, I'm sure they are trying to gauge how long this imbalance will last. I wouldn't blame anyone for taking a wait-and-see attitude while reaping the higher fees now (and I don't consider that higher fee to be a windfall; they are being paid for the work they are doing based on the demand for their work. As should we all). Lastly, even if 50 appraisers today decided to take on trainees tomorrow, we probably wouldn't see that impact for at least 12-months (the point where a trainee can do the inspection on their own and put together the basic components of the report); and that impact wouldn't be significant but incremental over the next 12-24 months.
By the way, as I understand it, many lenders will not take on an appraiser on their list (either direct or via their agent, an AMC) until they have 3-5 years licensed or certified experience. So as it stands, taking on a trainee now is a 5-7 year commitment (at least from the trainee's perspective if they want to get residential mortgage work).

Again, I don't think I ignored anything.
Where the competition is fierce and it affects fees, there isn't going to be a lot of training going on. Where demand is high and fees are higher, the margin necessary to pay for training exist.

But if you see it differently, I'd like to hear it.

 

[TRESinc]

2). Yes, technically SL pays that low bid appraiser "their" fee of $250, but SL also refused to pay 10 other qualified appraisers available for the order "their " fees, of of $285, $300, or $310 or $325 or $350 or $400. The borrower paid, perhaps $500,so the incentive for choosing the lower bid appraiser is because SL makes more profit from the differential

so you are mad at them for doing the exact same thing you are doing - selecting work based on the profit margin. pot, meet the kettle.

 

[Evincere]

I built a firm around non-lender work. There is far more work available than most appraisers even dream about. What many lack is the ability to really run a business and do the marketing it takes to get that work. Lenders view appraisals as commodities they are required to buy. Anyone who really wants to make money in the appraisal business should focus on those who want appraisals rather than those required to obtain them.

If I asked you what your marketing budget was for 2017, would you have an actual figure that you came up with last year when you were developing your business plan for this year?

The topic is Appraiser shortages but the above response is a marketing issue. Its a tangent that deflects the real issue. That Appraisers can do all types of work within their license limitations is a given but how does marketing for non lender work address this alleged shortage? It doesn't. All that (you suggest) does is redirect a business plan away from Lender to non Lender work and no appraiser should have to choose between the one or the other when qualified to do both.

The more Appraisers (are encouraged to) drift away from Lender work the more the shortage myth will be proclaimed. Which, may actually be to the benefit of those screaming shortages so as to change licensing requirements.

 

[Deleted member 130081]

What illegal tactics are you alleging? Comparing prices is not illegal. In fact, it is the norm. As I have said many times before, appraisers make a living by analyzing comparable market data - but many do not want that done with the services they provide. I agree that AMCs poll labor, and it is the data from that polling that some do not like.

If you want to use an oil company example, then it is the appraisers who are the oil company, because it is the appraisers who provide the service that is purchased, and it is the appraisers that set the market rates that the buyers of those services have to pay. Just look at the COW states to see that. If AMCs controlled pricing the way some claim, then why have fees in those areas gone up 100% or more over the past two years? Do you think it was AMCs or lenders who said, "Gee I think appraisals in Portland should cost $900?" No, it was the appraisers in that market who drive fees to that level.

LOL. Well as far as I'm concerned you dig your own hole of credibility the more you write. I tried to point that out in another thread where you jumped Marion and now I will point that out here. I NEVER charged you were doing anything illegal - you jumped to that. As far as I know (could be wrong), there is no law against pooling labor - lol - we have unions in this country to fight that fight. The Standard Oil reference was an illustration that could also be applied to labor (and why I advocate for an appraiser union). Funny you term appraisers as labor in the first paragraph and then as something else in the second, but can’t seem to see the correlation I was making, evidenced by your ridiculous anecdote of how appraisers are the ones like Standard Oil in this case. I now wonder if you even understand why I brought up Standard Oil. I will say this, to say appraisers are a collective labor force the way Standard Oil was a monopoly is about the most ridiculous thing I have heard in my life (or at least this week). As far as what you (AMCs) are doing as the norm, again you dig your own hole. Please provide examples of how pooling labor in the US, on the scale and fashion that AMCs do, is as you say it "the norm". Might be the norm among AMCs, but not the norm in typical free-market industries.

And for the record, I have never once said or even hinted I think AMCs control pricing, what they do is pool labor against itself in a fashion that mimics a monopoly on the labor side, subsequently resulting in abnormally low fees.

Let me say it another way and let’s test if you’re human and/or capable of broad thought. Human beings, if hungry enough, will cheat, kill and eat each other, in matter of days, not years. If you want to continue to take the stance that AMCs do not exploit that fact to the fullest, go ahead. It aint illegal, but it aint moral either.

 

[Deleted member 130081]

I guess no one wants to discuss if these people in COW states are hiring trainees including their kids.

LOL. Sorry. I have started a thread or two and its always annoying when the thing gets way off track. However many of the arguments being made are relevant to the issue/question at hand. JG posted she thinks it might be appraisers are happy to capitalize on the moment and don't want to train competition when the shortage in their area is working out well. I would tend to see that as a very plausible conclusion/guess.

 

[Eli]

Do commingled fees exist? Let's start there. Time to complete an appraisal and how the professional can do better with more time or whether they are competent are different problems.

I'm not ignoring anything. I thought the data was self-evident but I'm happy to spell it out.
In the COW states, where there the demand for mortgage work exceeds the supply of appraisers, fees have gone up significantly. I don't know about you, but I think there is enough margin in a $600 to $1,000 appraisal fee to support the training of appraisers.
In CA and FL, where the supply of appraisers exceeds the demand such that appraisers are doing work for $300 or less, the margin isn't there. But there is an over-supply as things exist, no?

Earlier I asked if you (I should have made that a general statement) had attended any regulator presentations.
Now, I'll ask in general, has anyone really put together an appraiser trainee program? Well, guess what.. I have.
I had an employee manual and handbook.
Trainees were hired as employees and worked the first 30+ days in the office to understand the ordering process and basic property research process. They were also exposed to finished reports; what they looked like and what the content expectation was.
I took them out to train them on how to measure a house. Interestingly enough, this was usually where the first drop-out cut occurred. Some people could not get comfortable with how to measure and inspect a property (or, I wasn't a good trainer).
From there, they would work with me (or another assigned appraiser) on reports.
At a point, they were sufficiently trained to inspect on their own (basic house; I work in an urban/suburban market so basic homes are a plenty). After a couple of years, they were able to get their own license; most, at that point, opted to become an Independent Contractor.
Training appraisers was personally and professionally satisfying. And, after the initial investment of time and money, my firm grew because of it. With rare exceptions, most of the appraisers continued to take work from my firm even when they had their own clients (which I encouraged them to get). I never was worried and never had (to the best of my knowledge) a trainee "steal" a client of mine. And, my attitude was, "Well, if a newly licensed appraiser can steal a client of mine, I have bigger problems than that!"
But a good training program is a lot of work. I could have generated more money in the short term by just doing the work myself. The break-even point came (for me) just about when they were able to upgrade. If I did my job correctly as an employer (made it attractive to continue to work with me at my firm) then I would reap the reward. It worked for me and I'm glad to have done it. I wouldn't want to take it on again because I'm getting too old to work those kind of hours (I'm working more than I want to right now! LOL!). But there are plenty of other competent appraisers, with the ability to put together a good training program who can do it as well if not better than I did.

Now I'm not sure how long the COW states have been getting the higher fees? At least a year, but I don't know if it has been 2-years. But taking on a trainee is not something most should consider to do on a whim.
Not everyone is set-up in their business model to take on a trainee.
Some don't want to do it, period.
For the rest who are interested and want to do it, I'm sure they are trying to gauge how long this imbalance will last. I wouldn't blame anyone for taking a wait-and-see attitude while reaping the higher fees now (and I don't consider that higher fee to be a windfall; they are being paid for the work they are doing based on the demand for their work. As should we all). Lastly, even if 50 appraisers today decided to take on trainees tomorrow, we probably wouldn't see that impact for at least 12-months (the point where a trainee can do the inspection on their own and put together the basic components of the report); and that impact wouldn't be significant but incremental over the next 12-24 months.
By the way, as I understand it, many lenders will not take on an appraiser on their list (either direct or via their agent, an AMC) until they have 3-5 years licensed or certified experience. So as it stands, taking on a trainee now is a 5-7 year commitment (at least from the trainee's perspective if they want to get residential mortgage work).

Again, I don't think I ignored anything.
Where the competition is fierce and it affects fees, there isn't going to be a lot of training going on. Where demand is high and fees are higher, the margin necessary to pay for training exist.

But if you see it differently, I'd like to hear it.

That has nothing to do with an oligopsony or antitrust law or state law regarding appraisal practice.