This was given to me by Clayton Scott of Penrith Loans.
Now I understand…
A good client called me recently in need of an appraisal just outside of my Portland service area. I had a little extra time that day, so I said I would check around and see if I could find someone to help them. Even after calling five or six different appraisers, I was unable to find anyone willing to take the rural appraisal assignment. Most of the appraisers that I called are booked up for two to three weeks and are only servicing their best clients or are cherry picking the easier or higher-paying assignments. This anecdote suggests a shortage of appraisers.
The number of appraisers has been declining since the 2007 real estate market collapse. According to the Appraisal Institute Research Department, the number of active appraisers in the United States dropped by roughly three percent each year from 2008 through 2014. The decrease was smaller in 2015, but it is noteworthy that 62% of appraisers are over the age of 50. Of the total number of appraisers, a mere 1% are under the age 25.
I researched Oregon appraiser statistics back to 2010. The total of active Oregon appraisers mimics the national trend, falling from 1,601 in year 2010 to 1,377 by year 2015. The number of Certified Residential Appraisers has remained nearly constant since 2010 (losing only 15), but the total of Licensed Appraisers has plummeted more than 50% in that time. There are currently only 69 Registered Appraiser Assistants training to become an appraiser.
I believe there are several factors creating a shortage of appraisers.
· There is strong demand for appraisers due to an active real estate market that is bolstered by an improved economy and continued low interest rates.
· Appraisal fees have not kept pace with inflation. Ten years ago, the typical appraisal fee in the Portland area for a standard lender appraisal was $400 to $450. I no longer accept assignments at these fees, but this remains the payment offered by the majority of lender and AMC clients.
You would think that supply and demand would increase prices and balance the market. However, such market forces have not worked in favor of appraisers because by receiving assignments from only a few larger appraisal management companies, appraisers have less power to negotiate higher fees. Additionally, appraisers are often required to accept a client’s (management company’s) fee structure prior to being able to receive assignments from them. The result is that appraisers accept lower fees but often turn down more difficult jobs.
· Appraisal report requirements and oversight have increased since the last real estate market collapse. Appraisals that I do today take at least twice as long as the same report would have taken prior to 2007. This is despite advancements in technology and is caused mostly as a result of having to show and explain everything that in the past might have only remained in the work file or would not have been an issue.
· Appraisal liability has escalated since the 2007 real estate market collapse. Appraisers have increasingly become the target for lawsuitswhen a homeowner fails to pay their mortgage.
· It is more difficult to become an appraiser. If you want to make money as an appraiser, you must be at least Certified Residential. The Certified Residential Appraiser now requires a bachelor’s degree and 2,500 hours of experience over a minimum of two years. Working for two years as a low paid Appraiser’s Assistant after paying for college is the most difficult hurdle for many.
· Not many appraisers will train assistants. Only about 5% of appraisers in Oregon have an assistant and not all assistants will survive to become appraisers. Some of the reasons that appraisers tend to be unwilling to accept assistants are listed here.
o Assistants are employees. I am not an employment tax expert, but it is my understanding that an appraiser assistant is an employee and cannot be an independent contractor because the supervising appraiser has too much control over their schedule and work. Most appraisers are home businesses without the infrastructure to handle employees.
o Liability is increased when training an assistant because if the assistant make a mistake, the supervising appraiser is fully accountable.
o Assistants are very limited in what they can do to assist in the appraisal process. Lenders will typically not accept an appraisal where the assistant was the only one who viewed the subject property and the comparable sales. This means that even if the appraiser is paying the assistant a small wage, the gain in productivity might not be commensurate.
The problem of few appraisers is complex and likely will continue in the next year. However, I believe that there is promising technology on the horizon that will make individual appraisers much more efficient and permit them to handle larger volumes of work with fewer people. Additionally, any increase in interest rates will likely reduce the number of homeowners refinancing and relieve some of load on appraisers.
These are the most common myths about home appraisals and their role in the home buying process.