Albert Franke III, Advisra Consulting, LLC

Eighteen years ago, I departed on a 10-month journey with three colleagues, Alan Hummel, SRA, Frank Lucco, SRA and Brad Lindley, SRA, in an attempt to figure out the future of residential appraisal. The memories came rushing back as I was re-organizing some old files a couple of weeks ago and came across our research. It was 1998 and many residential appraisers were uncertain about what the future had in store for them. Automated valuation, client consolidation, stagnant fees, turn-time pressure and emerging technology contributed to their collective anxiety. The Appraisal Institute commissioned a study, later known as The Residential White Paper, to define the state of the industry and to draw some conclusions as to where things were headed. The thought was that it would assist its residential members in preparing for what was coming in the next five years, and also aid in planning for relevant course work, training and designation requirements. So it was that we spent over 1,600 hours interviewing appraisers, client groups and captains of industry to figure out where we were, how we were perceived, what we wanted to become and where we were headed. With 20/20 hindsight, let’s take a look back at a few of our findings and recommendations.

Workload

In 1998, we found that 80% of the appraiser’s work was lending-based and that 67% of his or her clients were local. (We also found that 64.3% of all statistics are totally made up). In 2016, residential appraisers are still heavily dependent on lender clients, but there was a major shift away from local lending clients with the advent of appraisal management companies (AMCs) several years ago. We predicted users of appraisal services would continue to move to one-stop shopping but didn’t quite envision the dominance and pervasiveness of AMCs. With the rise of the AMCs came the inevitable abuses, leading to regulation post-subprime crisis and Great Recession. As one byproduct, take comfort that fees are now reasonable and customary, whatever that means. While fees have increased somewhat, when inflation and additional assignment requirements are accounted for, the hourly rate hasn’t changed much. We recommended that residential appraisers obtain the needed skills to diversify their client base. Something about eggs in a basket as I recall. That advice remains relevant today.

Technology

In 1998, the World Wide Web had only been in existence for five years. E-mail was something that we still were getting used to. Netscape and AOL opened this vast new cyber wonderland with a screeching dial-up connection. We watched in awe and frustration as content downloaded as quickly as grass grew. The looming Y2K bug triggered fears reminiscent of the killer bee scare of the ’70s (each was a non-starter). Appraisers were technologically challenged by today’s standards. Sure, you were running the early forms programs on your Compaq and that jitterbugging dotmatrix printer made reporting oh so high-tech when you finally got the type to align with the boxes and lines. Digital photography was in its infancy and you thought you would eliminate your photo costs once and for all until you realized your Kodak (remember them?) DC-whatever photos were of myopic mirror, Hubbard space telescope quality. Let’s not forget the first generation color inkjet printer that produced results indistinguishable from an 80-year-old’s forearm tattoo. George Jetson had nothing on you. Today, it’s all about your device. Your phone is your mobile communications center, camera, flashlight, navigator and research tool. We zip around the Internet mining data and reports are delivered in a nanosecond as a pdf. Adobe quickly cleared the clutter of proprietary EDI systems. Almost gone are the days of thumbing through dog-eared sales books at each town hall and attending old home week in the vault with fellow appraisers, with so much data online. Although we predicted the use of jet packs by now, with tongue firmly planted in cheek, drone use in appraisal is a reality. All in all, technology has improved some aspects of the residential appraiser’s work life but with that technology has come increased expectations for better, well-supported analyses using the plethora of information out there. As it should have. This was one fairly obvious prediction, although we thought the timeline would be more accelerated than it turned out to be.

Friction

Newsflash: In 1998, appraisers were generally perceived as friction in the real estate transaction. I am less than happy to report that in 2016, not much has changed. Further, we found that residential appraisers were not recognized as professionals. It’s not clear that any ground has been gained on this front over the last 18 years either. Much of this had to do with the onset of licensing and certification, legitimizing the illegitimate in some cases. The certification criteria pendulum has swung in the other direction, leaving in its wake the chirp of summer crickets rather than the next generation of successful residential analysts.

We saw increased educational and licensing standards as a way to elevate the industry, not anticipating the adverse impact of unforeseen regulatory and economic forces. Combine this with an aging demographic and other factors, and you have a withered supply of qualified individuals. That said, in 1998 I believed that there would always be demand for well-trained, competent residential appraisers and I still believe that today. The best algorithms still can’t testify in court nor can they readily identify obsolescence. French author Jean-Baptiste Alphonse Karr first said, “the more things change, the more they stay the same”. That was 1849. The same holds true of the residential appraisal industry in 2016.

Albert Franke III, SRA, MRICS, is president of Advisra Consulting, LLC, Milford, Conn.