Will There Be A Shortage Of Appraisers?

[Carnivore]

Brad,

I liked your last post. If inflation comes back in I see increased consumer spending and more refinaces on home vallues that will riise along with other products.

I also see something on the horizon that is not be discussed. The fact that an mortage back security with an honest professional FULL appraisal is worth more than any avm or insured BPO(what ever that could is?) is the silver lining. Investors are tired of the crooks(look at the stock market). Imagine a lender going the other way and demanding compliant appraisals and strick underwriting guidelines on everything else. Which in turn is a more stable garantee of profits with less risk to the investor. Sounds atractive to me.

Ipock recently posted the article on First Charter. If I was an investor I would be po'd also. Bad appraisals, assuming that they were all bad, are not good for our profession. We can and must clean that up. Funny they picked on a specific product to hve there problems. My guess is they have other hidden time bombs.
What has happened here is that this bank was more interested in its personal profits(ceo, cfo, upper level mgmnt) and did not care about their investors.

What kind of quality control did you say is used on AVM's and BPO's? How is this proven to potential investors?

 

[bradellis]

Charlotte,

First, you raise a very good point- a good appraisal ought to be worth more than an AVM or BPO. The investment community should recognize that in the quality of the portfolios they buy as MBS products.

Unfortunately, they are not getting them often enough.

Here is the basic methodology for testing an AVM: You take a book of loans for purchases (financing the sale not a refi). You compare what the AVM says to the sales price and the result will show the deviations. If they are within acceptable range, the AVM product, in general, is deemed to an adequate valuation.

Brad Ellis, IFA, RAA

 

[Travis McGee]

Brad-hello. I did mention AVM's briefly. They have been around at least 5 years, initiial fear of them caused some appraisers to leave profession. I disagree with thierwidespread use within 1 or 2 years- it would have happened already. They are too unreliable, and many homes now have mortgages over the 250 k deminum (although that could change too). Maybe in 5-10 years or so a very sophisticated model will be developed-who knows. But then again all fields are effected by technology.

The fear of AVM's has had the ridiculous effect of making appraisers keep their fees down. We are and never will be in competition with them. If that product becomes the norm, it will probably be appraiser assisted at some level, and the whole field will change.

I presonally don't think we will see rate hikes beyond a point or so for many years- because of the phenomenal growth of the real estate market as an investment tool- the feds know what's at stake with a large rate raise.

 

[Mike Simpson]

The issue of 2-3 week turn times for appraisals has little relevance when lenders are taking more than 60 days to close a loan WITHOUT an appraisal. Our lender informed us yesterday they'd be paying the interest & other associated fees due to their inability to close the loan at the end of this month! I've actually had a former processor tell me they routinely blamed the appraiser in these situations--think about it--we're not there to defend ourselves.

The AVM's & BPO's will work in lieu of an appraisal for now (it's all about risks), however, should something catastrophic happen to the economy...we'll all be in deep puppy poo! I never thought I'd see the day when $25-$50 BPO's would replace appraisals--it's terrifying, and I think appraisers should be exempt from having to contribute to the next bailout!

I believe there are too many appraisers now...otherwise there wouldn't be so many willing to 'hit the number' (cause & effect). Number hitters are the result of a shrinking pool of work.

-Mike

 

[Fred]

I agree with Brad. There will be an oversupply, especially in residential work, (even though I disagree with his deficit and interest theory). There are going to be fewer individual appraisers doing more appraisals per capita on a decreasing share of a growing market. There are going to be millions of residential valuations each week in the US, they are just not going to be done one at a time, by people who spend 25% of their work week in cars.

It's more a case of big corporations ‘Wal-marting’ the mom-and-pop shops out of business. If you look at the mortgage and sales volume the last few years, the number of residential appraisers should have doubled or tripled, but it did not. The reason is that no one is counting AVM companies as appraisers - and they are appraisers (regardless of how anyone wishes to interpret FIRREA or ASB semantics that are subject to change). I would say AVM already provides 100’s of times the number of valuations as individual appraisers. Another one went national just this week.

These companies provide important service, even at their current “inaccurate” levels of performance (and technology is going to improve the data). If the “average” value for a 1,000 AVM’s is the same as the average of the individual appraisals, then a company with a 500,000-loan portfolio can track their portfolio-wide LTV on a monthly basis, whereas they could never get 500,000 appraisals per year, no less 500,000 per month.

I believe that eventually individual appraisers will lose the accuracy debate. Perhaps for no other reason then there is a high volume of made-as-instructed appraisals floating around that will be counted as part of appraisal accuracy. But also, and last week’s thread on USPAP and adjustments, the AVM companies can answer reasonable question about adjustments and speak to things like error rate without throwing 25 years of file boxes full of “experience” in someone’s face and saying, here, you find it.

The biggest waste in residential appraising is driving around. CNN showed the war with some (still expensive) software. It would take a map of the Middle East and keep zeroing in until you were looking through the windows of a specific building. This, and in-home internet video has got to start replacing 100-mile drives.

I would be interested to know, what percentage of work time the typical residential appraiser spends traveling.

 

[Bob Ipock]

I believe that SOMEDAY there will be fewer appraisal orderd from rea, live appraisers. I am not sure, but do not think that will be soon.

As long as a lender can charge the BORROWER for the appraisal and yet the appraisal is for the LENDER'S protection and use.....they will continue to order appraisals.


In the next 12-36 months there is cgoing to be a huge amount of fraudulent, inflated and otherwise bad news appraisals coming to light. The newspapers will be running these stories until they beome commonplace. I believe that there will be an outcry for MORE and BETTER quality appraisals.

There is no downside for the lender ordering an appraisal. It costs them nothing and yet if they are pressured to obtain competent appraisals they will simply have to do so.

The deminius means little in my market. 82% of home sales are blow the diminius anyway (this is not a guess, this is the MLS statistic). The average sales price for my MLS for the last 12 months was $180,557.00 (average list price was $186,189.00).

In the short term (1-5 years) I look for an increase in demand for good, competent, honest appraisers who will keep lendeers who want to be honest from getting in trouble.

Again, in my area thre is no shortage of appraisers. Many are licensed at some level and not working in the appraisal field. There are many looking for appraisal work and unable to find it for whatever reason.

 

[Charlotte Dixon]

I agree with Pam. Once the feathers quiet down, we'll have plenty of appraisers. Locally, our appraiser classes are full. I have 2 trainees and judging from the applicants at our Appraisal Council Meetings, they're coming on strong. Every month there are 5-6 more.

 

[Leon Stewart]

The Appraisal Business doesn't allow for a training system that would benefit the Trainer or Licensee. It's not practical for a person operating a "one" person Shop to add a Trainee where he would have the responsibility for all of the trainee's work when the Trainer has to do his own work. In most cases the Licensed Appraiser will just be assigning work to the Trainee that they would normally do themselves.

What some Appraisers do is try to add a Trainee and use them as an Appraiser and not oversee all of their activities, which is an incorrect procedure, but they do it as long as they can get away with it.

I think Randy mentioned the 80,000 or so Licensed Appraisers currently on the Roster. If a survey could be made, I don't think any significant number of that 80,000 is flooded with work. Most of the ones who are overloaded are those individuals and firms who do the type of work that the Lender need to close their deals. Consequently a Lender will allow an Appraiser to run a 2 or 3 week backlog, knowing in the end he will get the product he needs to close. Rather than use more Appraisers to reduce the backlog to, say one week, thus allowing the Lender to close more deals and increase his bottom line. So it could be said, by the Lender concentrating on using the number hitters, they might be loosing money by not realizing their greatest volume by not including more Appraisers, Processors, Title People, etc., in the process.

leon

 

[Joshua Fookes]

Well I haven't seen a single trainee answer this two sided thread yet, so here goes.

Being a 26 year old, computer savey, analytical, techno gismo, geeky kinda guy, with a reverent honor towards God that gives me this craving for high integrity, I thought I would thrive in this appraisal environment. And I am begining to. Sure, I know I am a pup when it comes to this profession. But I think that youthful spunk has been helpful for my Mentor.

I have improved some of their efficientcy just by learning some of the techincal side of data gathering and input. However, that does not make me a good appraiser. That means I'm a guy whos not afraid of a computer. I would flounder if I did not have a supervisor who was able to teach me the art of appraising. My Sup is a Christian man also with high integrity and a commitment to teaching.

I think there is a shortage of good appraisers. But an over supply of inexperienced appraisers. That can have one of two effects. 1)The smaller number of good, honest, experienced appraiser can train up the younger ones to be good, honest, experineced appraisers. Or 2) the sweat shop, number hitters can take advantage of a trainee, and train up a number hitting lame duck appraiser.

This wave of trainees is the next generation of appraisers, and unless they are taught well, the future does not look good. I think standards need to be higher and supervisors need to be held more accountable. There needs to be a way to shut down a sweat shop, or make it so that a sweat shop cannot happen. Let me tell you that I learned very little from the school that got me qualified to take the state exam. And let me tell you that the state exam was breeze. That must change. I had my lisence and that was it. My supervisor, and my own hunger to learn is making me a better, more qualified appraiser. I'm not sure how many trainees out there are doing the same. They are not coming out of school in a condition ready to appraise, they are coming out of school with some fundamentals that need a lot of refining and guidance.

You experienced appraisers need to provide that guidance. But the states needs to make it harder for trainees to get liscences. I would have done a lot more to get my license if it was required. Just because there may be a high demand for appraisers, does not mean the states need to lower their standards to let more in. If money is able to be made at this profession, then people will jump through all the hoops to get it. So, if the states crimp down and put up more hoops, and the fees go up, we might have a good future system. Till then the quality and integrity is going to stem from the appraisers own since of moral obligation.

Yes in California, OREA is talking shortage, but if we were all making more money at this thing, there would be even more people coming into the appraisal profession. I don't think there is a shortage though, my Supervisor has 3 trainees (1 just turned in paperwork for full liscense), and two aspiring trainees, and just got 3 calls last week from people who want to be trainees. Can you say over saturation of lame duck appraisers who need training? The shortage is good, experienced appraisers.


That's enough from me for now

Josh

 

[Bob Ipock]

I think there is a shortage of good appraisers. But an over supply of inexperienced appraisers. That can have one of two effects. 1)The smaller number of good, honest, experienced appraiser can train up the younger ones to be good, honest, experineced appraisers. Or 2) the sweat shop, number hitters can take advantage of a trainee, and train up a number hitting lame duck appraiser.

Give this man a GOLD STAR! You have nailed it in one short paragraph!