Where have all the appraisers gone? And Why? - by Shaun Fitzgerald

Fitzgerald Appraisals" width="144" height="180" /> Shaun Fitzgerald, Fitzgerald Appraisals

The National Registry of Appraisers indicates that the number of appraisers has declined significantly – from 101,768 in 2007 to 81,512 in 2015; that’s a 20% decrease. Why?

Surely, the amount of available business shrank as a consequence of the 2008 financial meltdown. But things are much healthier in the mortgage markets, so that alone does not account for such a substantial decline. The education and experience guidelines have become much more stringent, and that must account for less people entering the business. But still, 20%? Most attribute the decline to the inability of a professional appraiser to make a living. New regulations are part of the problem. Appraisers report that it now takes an average of 8 hours to complete a FNMA appraisal form that once required only 5 hours. FHA is all but requiring appraisers to be home inspectors; an appraisal report essentially requires the appraiser to “certify” that all systems are in satisfactory operating condition. Is an appraiser expected to be an electrician, plumber, HVAC expert, appliance repairman? The risk of declaring that all systems perform properly increases the appraiser’s liability considerably. Not only is this scaring away appraisers from this work, it is also scaring lenders; JP Morgan/Chase has withdrawn from all FHA lending.

TRID is another problem. Reporting requirements that the lender must meet combined with compressed timeframes for the completion of all paperwork are adding to an appraiser’s liability. Get it done quick, get it done right and get it done cheap is the message being sent to every profession in the mortgage lending chain. My response is “pick two”. Not only that, if the scope of work changes, just eat the lost time and the lost revenue? If the appraiser decides to charge more for a complex assignment – waterfront, waterview, etc. – has USPAP been violated? If an appraiser and the lender negotiate to change the fee when the complexity is discovered, does that violate RESPA?

There are also changes in the marketplace that put more pressure on the appraiser. CoreLogic reports that 48.1% of homes in the US lost value last year. Fortunately, that is not true for most of Massachusetts, but it suggests that it could happen here too. Appraisers are again at further risk if they fail to note such a change in their own market; things look good right now, but change is inevitable.

Now, add the fact credit standards are easing. When credit is less important, collateral valuation becomes more important. And that falls on the appraiser. Yet the appraiser must now work for fees similar to those that existed ten or more years ago. Consequently, appraisers – residential practitioners in particular -are pursuing other options. Some are upgrading to the General Certified license category so that they can avoid residential assignments; some are discontinuing work from Appraisal Management Companies (AMCs) that require them to share 20-50% of their fee; some are obtaining designations from reputable appraisal organizations; many are searching for work from non-lender clients.

All this just adds to the problem for the lenders. There are now fewer appraisers working for lower fees. Quality suffers, so lenders are paying for somewhat expensive analytical software and systems to “review” the conclusions of the form-fillers. And now, yet more regulation. The “customary and reasonable” requirement of payments to appraisers has now reached the courts. Louisiana has just ruled in favor of appraisers with regard to higher fees. Perhaps appraisers and lenders alike should avoid yet more regulation by demanding and paying higher fees for a higher level of professionalism. As the Folgers Coffee guy, John Arbuckle, used to say: “You get what you pay for!”

Shaun Fitzgerald is the owner of Fitzgerald Appraisals, Easton Mass.