The Decline of the Appraisal Industry: An Unsustainable Future

[Yuanyin]

The Decline of the Appraisal Industry: An Unsustainable Future
Once a cornerstone of real estate transactions, the appraisal industry is now facing an existential crisis. A closer look reveals a troubling disparity between the compensation appraisers receive and the escalating demands placed upon them. This unsustainable imbalance is threatening the viability of the profession.

Stagnant Pay Amid Rising Costs
When I started in the appraisal business in 2002, a standard appraisal cost between $325 and $400. Fast forward to 2024, and the fees I receive from appraisal management companies (AMCs) range from $400 to $450, with $500 being a rare high. On occasion, AMCs even try to pass off $350 fees to this day. This amounts to an average pay increase of just 17% over 22 years. In stark contrast, the cumulative cost of living has risen approximately 74.27% over the same period, according to the Consumer Price Index (CPI). Using the CPI inflation calculator, $350 in 2002 equates to $613.80 today. Yet, the average fee appraisers receive from an AMC for an appraisal today is around $425, a far cry from what is needed to keep pace with inflation.

This stagnation in pay stands in sharp contrast to the steadily increasing fees charged to borrowers. The disparity between what borrowers pay and what appraisers earn highlights systemic issues in how the appraisal profession is valued.

Increased Workload and Liability
While pay has stagnated, the workload and liability for appraisers have grown exponentially. Engagement letters now come with a never-expanding list of requirements. Additional policies, such as revised Reconsideration of Value (ROV) procedures, introduce more time-consuming steps without corresponding increases in compensation.

Moreover, scrutiny on appraisers has intensified significantly with the use of lender Automated Valuation Models (AVMs), the Uniform Appraisal Dataset (UAD), and soon, lender-built AI models. Appraisers face greater potential for being labeled biased, increasing the risk of professional liability. They are expected to address every conceivable factor influencing a property’s value for fees appropriate for 20 years ago. To top it off, they must complete these tasks within 48 hours or risk being marked late and seeing their rating with the AMC decline.

A Comparison with Other Trades and Professions
The disparity in pay and expectations becomes even more apparent when compared to other skilled trades:

• My neighbor recently hired a plumber to replace two shut-off valves under a pedestal sink. The fee was $550 for less than 30 minutes of work.
• I had new flooring installed, which took one worker two days. The LABOR cost was $2,350, the most competitive of three quotes. (This was in December 2024.)
• Painting a vacant 950 sq. ft. home with two colors (white ceilings and near-white walls) cost $2,450 - excluding baseboards or trim. I supplied the paint, and two painters completed the job in two 8 hour days. (This was also in December 2024.)
• My sister-in-law wedding photographer charges $3,500–$5,000 per wedding. An 8-10 hour shift, with image editing outsourced to an editor in Latvia for cents on the dollar. This doesn’t include additional charges for wedding books, framed images, etc. A job paying upwards of $100k a year, requiring far far fewer hours than an appraiser making an equivalent wage.

In contrast, appraisers undergo hundreds of hours of classwork, pass rigorous tests, and complete thousands of hours of apprenticeship training. Once licensed, appraisers drive 30–40minutes one way, measure a home, complete a detailed interior and exterior analysis of the property, scour MLS for data collection, research each comparable, analyze market conditions, and reconcile to 1, 2, or 3 approaches to value. This labor-intensive process, coupled with significant liability, is conducted for around $400, often with a 2–4 week wait to receive payment.

The Unsustainable Model
The appraisal industry operates on a model that undervalues the expertise, time, and the liability involved in the profession. While other trades or professions command higher fees for equally and often less complex tasks, appraisers face mounting demands and stagnant compensation. This disconnect is driving seasoned professionals out of the industry and discouraging new entrants. Without systemic changes to address pay disparities and reduce administrative burdens, the appraisal industry will continue to decline, leaving a critical gap in the real estate process.

The Role of AI in the Future of Appraisal
As the appraisal industry struggles, AI is poised to take on a growing role in the valuation process. Property inspectors may soon upload data, including detailed notes and photographs, to AI-driven models. These models could analyze physical conditions, anticipate market reactions, and generate supportable adjustments based on vast data sets already being compiled. While AI may offer efficiencies, it is unlikely to replicate the nuanced judgment of a licensed appraiser -- today. In the future, however, it will. Since AI cannot form an opinion of value, its outputs may ultimately produce a most probable price or a price range, with lenders adjusting loan terms based on the provided range.

The growing reliance on AI will more than likely diminish the role of human appraisers, reducing the demand for traditional appraisals. It is probable and my opinion that Fannie Mae and Freddie Mac will embrace replacing human appraisers as soon as it is feasible. Given the current fee structure, which lags behind the cost of living and falls far short of other professions, reducing new entries into the field, this shift may occur sooner than expected and could become a necessity for the mortgage market. After all, who else is gonna do it?

Yuanyin

 

[Trihard]

What's going to happen is that AVMs will eventually crash the real estate market, largely due to systematic abuse by lenders who prioritize speed and cost savings over accuracy and reliability. In their pursuit of higher profits, lenders have leaned heavily on AVMs, despite their inherent limitations, leading to inflated valuations and unsustainable market trends. By the time the damage becomes evident, there will be no appraisers left to provide an independent and nuanced perspective, as the industry will have driven them out through poor treatment, low fees, and increasing administrative burdens. So they will have to remake the AVM's again.

The irony is that once the collapse occurs, the very institutions that sidelined appraisers—lenders and the GSEs—will deflect blame. Appraisers, long treated as scapegoats for market inefficiencies, will once again be the target, even though they had little to no involvement in the flawed AVM-driven system. This blame-shifting will provide cover for the GSEs and lenders to seek massive taxpayer-funded bailouts, claiming the need to "fix the system" they themselves broke.

Appraising has often been relegated to the lowest tier of the financial ecosystem, treated as an inconvenient necessity rather than a vital pillar of the housing market. Despite being a cornerstone of risk management, appraisers are often undervalued and dismissed by an industry that prioritizes speed and profits over accuracy and due diligence. This disregard stems from a fundamental misunderstanding of the appraiser’s role, coupled with systemic devaluation of their expertise. Moreover, there is no help on the way. This industry is really awful in every way, shape and form.

 

[J Grant]

While I disagree that AI might be the super program its spin master tech barons like to portray, the OP's post is, unfortunately, true, at least on the res lending side.

The reality is that res mortgage lending comprises the bulk of work available for res license appraisers. As long as the AMC's current payment model exists, and a sizeable portion of the dwindling lending work flows through AMCs, it is a double negative wrt making a sustainable living,
Those of us with lender clients who do not use an AMC are doing better, but our volume is also precious and impacted by Fannie/Freddie's decision to use WAIVERS.

Overall, I would not recommend anyone who stays in the field with a Rres license, who has over 10 years left in a future working life, or who relies on it for more than part-time income. I would never recommend the field for a res license for a young person. A few younger people will enter it anyway, and if they stick it out, perhaps might make some kind of living since a skeleton crew of appraisers will be needed - it just is no longer a viable field for most.

Commercial licenses fare better, but they are also impacted by a loss of residential work and encroaching AI.

God, I hope we don't get the inane "Adapt or move on " advice. There is no viable way to adapt to a severe cut in income combined with escalating demands and over-the-top scrutiny. Add in the stakeholders recently made it more probable that parties will submit unpaid, time-consuming ROVs, and the increased climate of possible lawsuits to make the field even more toxic and demoralizing.

 

[Fernando]

The Decline of the Appraisal Industry: An Unsustainable Future
Once a cornerstone of real estate transactions, the appraisal industry is now facing an existential crisis. A closer look reveals a troubling disparity between the compensation appraisers receive and the escalating demands placed upon them. This unsustainable imbalance is threatening the viability of the profession.

Stagnant Pay Amid Rising Costs
When I started in the appraisal business in 2002, a standard appraisal cost between $325 and $400. Fast forward to 2024, and the fees I receive from appraisal management companies (AMCs) range from $400 to $450, with $500 being a rare high. On occasion, AMCs even try to pass off $350 fees to this day. This amounts to an average pay increase of just 17% over 22 years. In stark contrast, the cumulative cost of living has risen approximately 74.27% over the same period, according to the Consumer Price Index (CPI). Using the CPI inflation calculator, $350 in 2002 equates to $613.80 today. Yet, the average fee appraisers receive from an AMC for an appraisal today is around $425, a far cry from what is needed to keep pace with inflation.

This stagnation in pay stands in sharp contrast to the steadily increasing fees charged to borrowers. The disparity between what borrowers pay and what appraisers earn highlights systemic issues in how the appraisal profession is valued.

Back then we had higher costs with photo development costs and FEDEX costs. Still the fees today are lower given inflation and higher opportunity costs in better pay in other professions.

Increased Workload and Liability
While pay has stagnated, the workload and liability for appraisers have grown exponentially. Engagement letters now come with a never-expanding list of requirements. Additional policies, such as revised Reconsideration of Value (ROV) procedures, introduce more time-consuming steps without corresponding increases in compensation.

Moreover, scrutiny on appraisers has intensified significantly with the use of lender Automated Valuation Models (AVMs), the Uniform Appraisal Dataset (UAD), and soon, lender-built AI models. Appraisers face greater potential for being labeled biased, increasing the risk of professional liability. They are expected to address every conceivable factor influencing a property’s value for fees appropriate for 20 years ago. To top it off, they must complete these tasks within 48 hours or risk being marked late and seeing their rating with the AMC decline.

Back then we had fewer forms to worry about. We didn't have that 1004MC to deal with, no ANSI to confuse us, no UAD sh*t, etc. Less to worry about and less tracking by watchful Fannie Mae.

A Comparison with Other Trades and Professions
The disparity in pay and expectations becomes even more apparent when compared to other skilled trades:

• My neighbor recently hired a plumber to replace two shut-off valves under a pedestal sink. The fee was $550 for less than 30 minutes of work.
• I had new flooring installed, which took one worker two days. The LABOR cost was $2,350, the most competitive of three quotes. (This was in December 2024.)
• Painting a vacant 950 sq. ft. home with two colors (white ceilings and near-white walls) cost $2,450 - excluding baseboards or trim. I supplied the paint, and two painters completed the job in two 8 hour days. (This was also in December 2024.)
• My sister-in-law wedding photographer charges $3,500–$5,000 per wedding. An 8-10 hour shift, with image editing outsourced to an editor in Latvia for cents on the dollar. This doesn’t include additional charges for wedding books, framed images, etc. A job paying upwards of $100k a year, requiring far far fewer hours than an appraiser making an equivalent wage.

In contrast, appraisers undergo hundreds of hours of classwork, pass rigorous tests, and complete thousands of hours of apprenticeship training. Once licensed, appraisers drive 30–40minutes one way, measure a home, complete a detailed interior and exterior analysis of the property, scour MLS for data collection, research each comparable, analyze market conditions, and reconcile to 1, 2, or 3 approaches to value. This labor-intensive process, coupled with significant liability, is conducted for around $400, often with a 2–4 week wait to receive payment.

We don't have a wedding planner and my wife was stressful in squeezing all the activities within several hours to keep videographer cost down.
Considering the stress, last night we decided to pay another hour at $300/hour.
Many jobs not needing college or passing tests earn better pay than appraisers.

The Unsustainable Model
The appraisal industry operates on a model that undervalues the expertise, time, and the liability involved in the profession. While other trades or professions command higher fees for equally and often less complex tasks, appraisers face mounting demands and stagnant compensation. This disconnect is driving seasoned professionals out of the industry and discouraging new entrants. Without systemic changes to address pay disparities and reduce administrative burdens, the appraisal industry will continue to decline, leaving a critical gap in the real estate process.

The Role of AI in the Future of Appraisal
As the appraisal industry struggles, AI is poised to take on a growing role in the valuation process. Property inspectors may soon upload data, including detailed notes and photographs, to AI-driven models. These models could analyze physical conditions, anticipate market reactions, and generate supportable adjustments based on vast data sets already being compiled. While AI may offer efficiencies, it is unlikely to replicate the nuanced judgment of a licensed appraiser -- today. In the future, however, it will. Since AI cannot form an opinion of value, its outputs may ultimately produce a most probable price or a price range, with lenders adjusting loan terms based on the provided range.

The growing reliance on AI will more than likely diminish the role of human appraisers, reducing the demand for traditional appraisals. It is probable and my opinion that Fannie Mae and Freddie Mac will embrace replacing human appraisers as soon as it is feasible. Given the current fee structure, which lags behind the cost of living and falls far short of other professions, reducing new entries into the field, this shift may occur sooner than expected and could become a necessity for the mortgage market. After all, who else is gonna do it?

Before there has always been talk of computers replacing us. I wasn't worry because I couldn't imagine a computer can do what we do. But as AI improves and replacing many jobs, the day that computer will replace us will eventually happen. Hopefully not in my lifetime and considering retirement is coming near for me, it will affect me less.

Yuanyin

 

[Terrel L. Shields]

The one solution is impossible. That is to simply not accept low fees. If all the appraisers so desperate that they accept hybrids for $100 and 1004s for $290 less tech fees...what do you expect? We are voluntarily shooting ourselves and worse, shooting all our peers as well. If you are so desperate that you are not doing a reasonable fee for the work done, then perhaps you should change careers. But I doubt many of the low-ball appraisers are on the forums, don't have an idea that a lot of us set our own fees PERIOD, and they blithely go on thinking everyone else is doing it and are unwilling to hunt a better job...well what can I say?

For a lot of appraisers, you need to be working for the CAMAs, assessors, and bank "credit" departments. Or, maybe as an insurance underwriter, right of way landman, or something similar. I know several appraisers who became loan officers (like real bank loan officers not mortgage brokers), but I have known a number of appraisers who went to work as a reviewer or evaluator for a bank. It paid far better than they used to make as a fee appraiser.

 

[Terrel L. Shields]

Did I mention FEMA inspectors?

As of Aug 6, 2024, the average annual pay for a FEMA Public Assistance Specialist in the United States is $64,398 a year. Just in case you need a simple salary calculator, that works out to be approximately $30.96 an hour. This is the equivalent of $1,238/week or $5,366/month.​

 

[J Grant]

In my opinion, some are better off entirely getting out of the RE field. RE has always been a cyclical field, and in my opinion, it is getting leaner with who can make a living from it, including lenders, RE agents, title agents, etc. The volume is contracting on res side and increasing purchases by LLC companies or cash buyers further reduce the need for loans, add in the mix the many websites stealing business from brokers

Dog trainers in my area charge $100 and up for private sessions. Hair stylists, especially colorists, can make great money. And for a guy, what a great way to meet women. Nursing, the medical field, etc

Correction officer is a tough job, but their starting salary is higher than appraiser salaries in some cases, and the jobs offer sign-on bonuses and good benefits. Not the best job out there but for some folks, it seems to offer a secure future.

Law enforcement has many specialties in the related field of Criminal Justice. The military, if the right age, look for fields with a future -

 

[Fernando]

Did I mention FEMA inspectors?

As of Aug 6, 2024, the average annual pay for a FEMA Public Assistance Specialist in the United States is $64,398 a year. Just in case you need a simple salary calculator, that works out to be approximately $30.96 an hour. This is the equivalent of $1,238/week or $5,366/month.​

Fast food workers in CA make $20/hour.

 

[George Hatch]

I think it would be foolish to benchmark a long term trend off of a high-volume point in the market such as occurred a couple years back when the demand outstripped the supply. By the same measure, equally foolish to benchmark the long term trend based off what's been happening in the lower-demand for services which has occurred since the interest rates increased.

If you'll recall some years back when the interest rates first started dropping below 7%, each rate reduction set off a new wave of sales activity and refi activity.

As far as the AVMs go I suspect there's a limit to how much better the commercial versions can get beyond where they are right now. It's not the analysis component that's holding them back but the lack of well-qualified datapoints in their database. They know the details of the transactions themselves but not necessarily enough of the specifics of the property attributes. Which apples are red, which are green, and which apples sold for land value.

To my knowledge, the ONLY database that would have access to the majority of the PDRs and prior appraisals is the Fannie/Freddie database. There are only a couple of the others that are handling 5% (ea) of the transactions and all the rest are handling less than that. Corelogic might be getting some appraisal data in but that percentage is limited, too. As in, not enough of a percentage to improve their performance when compared to just using public record info.

And before someone gets going about values and adjustment factors in prior appraisals being irrelevant because it's dated, that's not the info the AVMs need. They can ignore dated transaction values the same way appraisers generally ignore it. What the appraisers and the AVMs can use are the property attributes; and more generally, how appraisers have previously drawn their market areas in order to appraise those properties. THAT information can be used to qualify the datapoints from the current datasets.

My point being that the commercial AVMs still can't directly compete with the appraisers on any but the low-LTV transactions because none of them or their holding companies are handling enough appraiser-qualified or PDR-qualified data to be significant to their analyses.

Not to mention, I don't think any of the commercial AVMs are at all viable for the 2-4 market. I'm not at all sure that Fannie's AVM can compete with appraisers on those. Those datasets are so much smaller and include more variables, not the least of which are the incomes, rent controls and rental surveys that appraisers have to consider when appraising a 2-4.

TLDR, I don't think the 1-4 business is going to end any time soon. Some of the incumbent appraisers are going to retire or withdraw from the market. And other appraisers will get starved out , starting with those appraisers who are not responsive to the changes in the avg degree of complexity or the increasing demands of the lenders and GSEs as to development and reporting. But it won't be anywhere near all the incumbents.

There's still room for good appraisers, but the quickest/easiest assignments won't be coming back; not at the previous scale. Nor will the dumbest or most "difficult" appraisers be able to effectively compete in those market conditions.

 

[Alsie35]

My take (pure speculation just for fun, not based on any inside knowledge, but one possible scenario for the future):

Once the PAREA Appraisal "homunculai" are created in sufficient numbers, I expect them to become compliant "monkeys working for peanuts" hired by the big national AMCs that have established their "special relationships" with Fannie (per news of a couple of years ago). At that point the fee appraiser model dies a slow death by starvation/retirement.

Because at that point there will be "monkeys all along the chain" doing inspections, forwarding data to other "monkeys" to collate and finally to the PAREA homuculai who will dutifully fill out the new form and sign it, not really understanding much about the appraising process. Appraising as we know it will then be dead, and there will be no more appraisers who actually understand the entire process from start to finish. It will have essentially been "dumbed down" to nothingness. Drowned in a sea of meaningless data points.

How that will affect the RE markets I leave up to your speculation. Whatever that effect is, it will 100%, no-doubt-about-it, NOT be any more accurate that it has been under the "Fee Appraiser Model". Will it be horribly worse as some fear? I have no idea. But it WILL be very different and WILL be more of a mathematical game (with all of the pitfalls that brings).

And, by that point, I will (hopefully) be happily retired and not paying any attention to something that has been an interesting and rewarding way to make a living, but is of no intellectual interest to me whatsoever. Its been a great gig, give it a few more years to wind down ....

... I'm out.