Seems like they’re dropping out of site. It’s almost epidemic, as if there is some new infection that’s wiping them all out. This is a trend that we’ve noticed for some time, as early as 2005, long before the HVCC, the collapse of WAMU, or the current default crisis. Maybe the best appraisers started intuiting the current mess while it was brewing and just decided to pack it up.
Appraisers have, by far, the most stringent licensing and continuing education requirements in the real estate industry. If real estate or loan agents had to obtain half of the experience and education that appraisers do, we’d likely have 80% fewer licensees. That might no be such a bad thing. It would sure raise the standard of practice. Imagine a real estate or loan agent having to log hundreds of hours of experience, supervised by a broker, before qualifying to take the license exam. Appraiser candidates will now also be required to have a college degree or equivalent. How many wannabe agents would give up, get out, or not even bother? You’d have to really be dedicated, just like an appraiser.
You can’t get rich being an appraiser either, at least not any more. The cost of doing business is foreboding and growing each year: multiple association fees, redundant data source subscriptions, MLS fees, heavy E&O policies, 96 hrs continuing education every 2 years, etc. At the same time, compensation is diminishing every year.
Since the mid-80’s or so, a standard residential appraisal report would cost a consumer about $350, usually paid directly to the appraiser at the time of inspection. Since the mid-2000’s, twenty years later, the same report can cost the consumer between $450 and $600, paid to a third-party appraisal management company. Of this, the appraiser gets paid about half, maybe $250, sometimes a lot less. Hmmm . . . let’s see: consumer cost up, compensation down, more expenses, less pay, more liability . . . no wonder appraisers are vanishing. Oh, did we mention more liability?
Certainly there are players in every facet of the housing industry that contributed to the current crisis, and there have been some shady appraisal outfits, but the appraisal industry has unfairly fallen victim to the great blame game. Appraisers are subject to more intense scrutiny, litigation, restrictions and regulations than ever before. Banks have forsaken them, reduced their fees, or mostly passed them off to the management companies mentioned above. It’s not like appraisers were the ones lying about their income on the loan applications, or writing ridiculously overpriced purchase offers, or convincing buyers that they could afford a home loan with 90% of their monthly income and still get enough cash back to buy a new Escalade.
This year, at a time when property valuations are critical to the housing recovery, we’ve seen a lot of sub-standard appraisal reports, almost all of them performed by unlicensed apprentices, and their inexperience is obvious. Reports are full of inconsistencies, errors and contradictions. The result is that more good purchase contracts are failing. Of course, apprentice reports are supposed to reviewed by, and their work supervised and signed-off by a licensed appraiser, but the quality control is lacking. It’s the equivalent of having real estate agents writing contracts or unlicensed loan agents writing loans without the required supervision of a broker. Of course, that never happens, right?
Government intervention, although well intentioned is just making the situation worse, as it usually does, but that rant is better saved for another time. You certainly can’t blame appraisers for hanging up their spurs. I think I would, too. I know of a number of very qualified, experienced appraisers that have done just that. I miss them. I miss the quality of their work. The whole economy misses them, too. We’ve got a long road to recovery if we keep dumbing down the industry.