Falling Out - More Appraisers Quit

[Proactive]

What will the appraisal profit center look like with $550 charged to consumer, $39 AVM and $25 photo-inspection fee?

That! is why it is going in that direction. What you and Terrel are referencing is a reduction in supply, a reduction in demand will keep fees and the industry sliding downward.

Supply and demand is all there is and demand MUST lead supply.

This is the way appraising ends
This is the way appraising ends
This is the way appraising ends
Not with a bang but a whimper.

(With apologies to T.S. Eliot)​

 

[Walter Kirk]

If the decline in appraiser numbers continues, and I'm sure that it will, the lenders will claim that it will be necessary to use AVM's in all cases. The lenders can then charge $500 for a $10. AVM.

 

[Joyce Potts]

Guys, if the AVM's are using data as far back as two years what good are they? I Zillow and run a CoreLogic AVM on every appraisal my office completes just for s&g's.

In stable markets, AVM's have a higher confidence level. In stable markets appraisals were *****d as much as possible, for the most part. For those appraisers who are left, hopefully, they'll realize that pulling the three highest sales and backing into their interpretation of Fannie guidelines will have exited the building along with Elvis. There is and should be much more thought and analysis going into a typical residential appaisal. Even estimating the site value based on sales, extraction or allocation method needs to mastered if those left truly want to survive and perhaps even rise to the top. The easy money is GONE as far as I'm concerned, so the form monkeys have two choices. Exit the cage or go back to school.

 

[Terrel L. Shields]

My slow down was the year new construction started not selling...by that time farm folk realized they couldn't sell their land to a WalMart middle manager turned land speculator for $30K per acre, chicken producers over-produced, and houses were not flipping... I was slower for 18 months..no more.

I have not had a break for months - maybe 2 full weekends since May 2010. I am constantly behind and if I took no more assignments for the remainder of the year I could easily keep busy. I had to tell some people the other day that the report they wanted may not be finished when I promised it...which was Nov 30th. I am working today ... I worked yesterday. I will finish up another in about an hour. The third commercial report I will finish late tonight or early tomorrow. I will set the fee. They didn't ask. There is a wad of reports on the other desk to log in. Yep, it is REOs. Small commercial that I don't like to do. And minerals.... I spent several thousand dollars to meld my geological skill and my appraisal skills into a niche. It didn't happen overnight. I took a class in 2001 and another in 2003. Industry classes I didn't even get CE credit for. I bought books and subscribed to a magazine that costs $1100 a year...ouch. I invested in me.

I took the time to get a niche specific website up, not a generic one. And in 2004 I made the plunge to market CPAs and Lawyers.

There is no shortage of work. There is a shortage of cookie cutter residential secondary market work which some folk seem to think comprises 99.99% of all appraisal work in the world. Let me clue you in. Fannie mae and Freddy Mac as we know them will disappear. It may take a while but sooner or later they will disappear.

What I see are a lot of appraisers who are unwilling to hone their skills. Too costly they say.. "can't afford it."...OK. That's a good excuse not to get a degree. Let your teenager convince you they should just drop out of high school. Can't afford that either. You can go to work at Domino's for peanuts for the rest of your life.

I see few appraisers willing to invest in themselves. Perhaps they realize it's a bad investment. But it isn't a bad investment in the knowledge and skills. It is a bad investment in your attitude and unwillingness to learn, improve, and have pride enough to promote those skills to the marketplace.

There is a lot of room for CGs. Virtually all of them are over 50, most over 60. You can make it. Specialize and get that CG before 2015...

Yep, the feds may get in such a crunch they have to let Brokers become appraisers without credible appraisal skills. But that is only because we have a lot of appraisers who are not standing the heat and have gotten out of the kitchen. For their sake, I hope that is the right move. But I think a lot of folks could stay and could improve their skills and see their incomes rise with it.

 

[David Mescon]

What will the appraisal profit center look like with $550 charged to consumer, $39 AVM and $25 photo-inspection fee?

That! is why it is going in that direction. What you and Terrel are referencing is a reduction in supply, a reduction in demand will keep fees and the industry sliding downward.

Supply and demand is all there is and demand MUST lead supply.

The bruiser is spot on. The UAD serves a multitude of purposes. First and foremost, it is a vehicle to deliver man-on-the-ground data to "them," which will then be utilized to reduce the demand for "us," i.e., we are being asked to dig our own graves. This data will be used to "improve" AVMs, which in turn will then lessen the demand for appraisals. Next, it will become a weapon to be used against appraisers. The GSEs will continue to exert ever mounting pressure upon banks to buy back bad loans. The banks will deflect this pressure toward appraisers because appraisers generally don't have the resources to mount adequate defenses. Compliance with the UAD forces residential appraisers to put a lot of data into neat little boxes. As the quantification of some of these data is tenuous, at best, the resulting potential for disproval rises exponentially. Basically speaking, if they wanna getcha, for any reason, they will now have another strong weapon with which to do so. I'm not the paranoiac type, but I do my best to be pragmatic. The segue from the UAR to the URAR, way back when was intended to standardize form appraisal, to some degree. Although the older forms were lacking in many ways, they allowed us a certain latitude with regard to neighborhood and property ratings. The interpolative effect of checking, say, both good and average for a particular element of either the neighborhood or property characteristic rating grids was useful. As time has progressed, these ratings have become more black and white. Implementation of the UAD has made the quantification of these elements even more specific in some ways.

It has been my personal experience that few commercial appraisers make good residential appraisers and vice-versa. Although, of course, there are exceptions, they are relatively few and far between. Unfortunately, many of the "rules" that govern the appraisal of residential real estate have been shaped primarily by commercial appraisers, most of whom have only a limited understanding of what they are doing. It's easy to see how this happened - first off, for a variety of reasons commercial appraisers have generally wielded more power within the profession. The typical commercial appraiser, tends to be more intelligent than the typical residential appraiser - not necessarily any smarter, but able to assimilate and utilize a greater amount of technical information, more rapidly, than the typical residential appraiser. This doesn't make them any better as human beings, just more well suited to certain types of work. Remember boys and girls, more intelligent does not directly equate to smarter, so please don't get your panties in a bunch over my choice of vernacular. The typical residential appraiser, on the other hand, tends to be more intuitive. This degree of intuition, and the willingness to both rely upon and utilize it in their work is what gives the typical residential appraiser their edge in the appraisal of residential real estate.

I am a highly experienced residential appraiser, and my background in residential appraisal work is both extensive and varied. I am also a highly experienced commercial appraiser. I excel in only a few types of commercial appraisal work - I am only mediocre at the rest. Despite my significant commercial appraisal experience, I must define myself as a residential appraiser. I am not "eminently qualified" in both disciplines. Most commercial appraisers who think they are excellent residential appraisers are sorely mistaken. Because they tend to be highly intelligent, AND smart, they think they know better than the typical residential appraiser, but unfortunately many of the principles which rule the world of commercial appraising do not rule the world of residential appraising. Most of us who have made a career out of residential appraisal are not particularly well suited to commercial appraisal work - I say this because I have seen it demonstrated over and over throughout the years. This incessant powerplay between the two sectors is absurd and serves no constructive purpose.

Commercial appraisal is largely quantitative. By its very nature, it must be so. Residential appraisal is largely qualitative, and, by its nature must also be so. The ever increasing pressure put upon residential appraisers to apply techniques more well suited to the appraisal of commercial real estate is diluting the process. Arguably, simple regression analysis has some limited place in the appraisal of residential real estate, but it is, limited. The use of multiple regression analysis in residential appraisal is just plain farcical, in almost all instances. Paired sale analysis is dandy - in theory, but in practice is nearly always a joke. The good residential appraiser has a big box full of useful tools, and knows when to use each and every one. In practice, however, the majority of residential valuation is based largely upon intuition and common sense - attributes which good residential appraisers have in spades. There is no better or worse here, just what is. I would espouse the different but equal doctrine here folks.

Sorry to ramble on so long and stray so far off the topic of the OP, but I needed to kill a little time before my next required nap.

 

[Ca Ar Independent]

we are being asked to dig our own graves.

This is SPOT ON! I used these exact words the other day to explain how it feels to be mandated to write a UAD report. The non-appraiser person just looked at me in shock? Really? such strong words! It is what it is...and it's not a joyous process.

 

[Jim Hill]

I hope you are right!

What in the future for appraisers?

That depends who you talk to.

I think if the markets do stabilize over the next few years and more appraisers drop out and look for other work you just might see lenders using AVM's more then they are right now.

I know that many appraisers think the residential market may come back and maybe our fees just might increase but I am not sure lenders want to give away anymore money then they are right now.

I really hope that I am wrong and that others are right on this point.

I still keep the license even thought my wife asks me why everyday.

Jim Hill

 

[DTB]

There is no shortage of work. There is a shortage of cookie cutter residential secondary market work which some folk seem to think comprises 99.99% of all appraisal work in the world. Even if it's only 75% and I think it's larger, that's too large a segment going to crap. Let me clue you in. Fannie mae and Freddy Mac as we know them will disappear. Something similar will take their place, do you see any great reformers out there to make a drastic change? It may take a while but sooner or later they will disappear.

What I see are a lot of appraisers who are unwilling to hone their skills. Too costly they say.. "can't afford it."...OK. That's a good excuse not to get a degree. Let your teenager convince you they should just drop out of high school. Can't afford that either. You can go to work at Domino's for peanuts for the rest of your life. How much would one make owning a Domino's for the rest of your life. You seem to sell appraiser's abilities short on this one.

I see few appraisers willing to invest in themselves. Perhaps they realize it's a bad investment. Maybe not a bad investment, but there other superior investments. But it isn't a bad investment in the knowledge and skills. It is a bad investment in your attitude and unwillingness to learn, improve, and have pride enough to promote those skills to the marketplace.

There is a lot of room for CGs. Virtually all of them are over 50, most over 60. You can make it. Specialize and get that CG before 2015...

Yep, the feds may get in such a crunch they have to let Brokers become appraisers without credible appraisal skills. But that is only because we have a lot of appraisers who are not standing the heat and have gotten out of the kitchen. Most people have a finite period of income production, 4,5 to 10 years for subpar earnings are probably enough to wreck a lot of people. For their sake, I hope that is the right move. But I think a lot of folks could stay and could improve their skills and see their incomes rise with it.

I appreciate your personal situation but it does not reflect the great number of residential appraisers.

 

[DMZwerg]

I appreciate your personal situation but it does not reflect the great number of residential appraisers.

Yes it does.

CRs are still only "trainees" compared to what appraisers were before licensing. OK, in a guild structure CRs would likely be Journeymen at best, having not completed their "master work". CG's are the true "full" appraisers and anyone who is not working towards that either needs to seriously think about it or try to be content with where they are. Same applies to those sticking with mortgage work rather than trying to expand into non-mortgage work. His point is that residential mortgage work is no longer a valid specialty for most appraisers and that to thrive an appraiser needs at least one specialty.

Note that in a guild structure less than one out of four were masters (often only 1/20 or less) and the rest were journeymen or apprentices. The problem post licensing is that half-trained apprentices were given license to start their own firms on nearly equal terms with masters (and their firms), at least for mortgage work, often driving out masters that specialized in that type of work. Thus the majority of appraisers are ill-prepared for the current situation, let alone the future, and don't comprehend what went wrong and how to remedy their personal situations. Terrel gave advice on how to proceed and it is good, solid advice IMnsHO.

 

[The Warrior Monk]

I agree with Terrel.

One thing I think we'll see in the future is the ratio of CGs to CRs increase in favor of CGs. If both require four-year degrees, then it makes sense to take a few extras courses to get the CG.

I'm not the pessimist that others are when it comes to AVMs, BPOs, etc. The reason is that if an appraisal is needed, an appraisal has to be performed. "Alternative valuations have been around a long time, even before licensing; they're not new. I also don't believe that they're simply going to toss out the appraisal requirement. The reason is that it is difficult enough to sell MBSs. Getting rid of the appraisal requirement means more risk, and the market won't absorb that without the appropriate rate, especially in the current market.