Appraisal Industry: The Tide May Be Shifting

Appraisal IndustryWith all of the changes happening in the appraisal industry right now, I thought I would share this article I did for Working RE a little less than a year ago that detailed my personal journey. In the article I made reference to some of the positives in the appraisal industry:

Excerpt from the Working RE article titled Taking Success into My Own Hands:

There is a lot of negativity in the appraisal industry and without question, certain things need to change. However, there are also a lot of positives appraisers can focus on to improve their business.

The Appraiser Movement

Today, with the help of technology and social media, I feel the momentum may be shifting in the appraiser’s favor.  The title of the article was “Taking Success into my Own Hands”.  Now, I think there is a new appraiser movement that is taking success into our own hands.  There are new internet shows like Phil Crawford’s “Voice of Appraisal” and Dustin Harris’s “The Appraiser Coach Podcast” that are helping get the word out for on behalf of the residential appraiser.  There are public Facebook groups and private members only groups like “Appraiser Insider” that has not only helped my business, but completely transformed it.  You also have bloggers like Gary KristensenLori NobleTom HornBill CobbRyan Lundquist, and many more¹ who are helping educating real estate agents, homeowners, attorneys, and calling out injustices in the industry.

Just as recently as a month ago, after an AMC tried to demand the entire work file be submitted with their appraisal reports, the bloggers, appraisal shows, and Facebook groups got the word out and due to public backlash, essentially shut that down and within a week the company published a revision to the new requirement.  We also recently saw the first “administrative fee” of $5000 to a company for not paying “Customary and Reasonable Fees” in Louisiana³.  Individual state Coalitions like Illinois’ own ICAP, headed by current president Rick Hiton, are really making some positive headway with state legislators.  Multiple state coalitions are even getting together to discuss ideas and plans for the betterment of the appraisal industry.  Yes, the appraisal industry appears to finally becoming more united.

With what appears could be an appraiser shortage on the horizon, we are going to need some changes to the requirements to becoming an appraiser or  change how trainees can be used and thus facilitate more appraisers coming into the industry.  To that point, I recently received an email from a major national bank who refined its expectations regarding the involvement of appraiser trainees.  They no longer require supervisory appraisers to be physically present with trainee appraisers at all subject property inspections and driving comparable sales.  This will allow us to not only train the next generation of appraisers, but make it financially feasible to do so.  We have seen a lot of “monkey see monkey do” in negative ways with banks and AMC’s in the past, but this is one trend that I would love to see catch on.

I don’t pretend to know where the appraisal profession will be in 5 years with UAD concerns, appraiser shortages, AVM’s, reasonable and customary fees, etc.  There are many more battles that will need to be fought.  But again, a year later, with more public voices out there speaking on behalf of the real estate appraiser, I still think there is still reason for optimism.

Update On My Journey

Like many appraisers right now with rates near all time lows, I have never been busier.   My average fees have never been higher.  I have been able to increase my standard fee over 20% and was even contacted by one client to let me know they were increasing the standard fee without me asking.  I have also been able to leverage my website into more and more non lender work.  This allows my business to be more diversified and not have to worry about interest rates spiking or a major change in order volume from my best clients.  People will never stop getting divorced and never stop dying (divorce and estate appraisals).  Both are a major source of non-lender appraisal work. Working with clients for “pre-listing” or “pre-purchase appraisals” is one of my favorite types of assignments as it allows me to interact more with the client and really explain the appraisal process and how my opinion of value was determined.

I am continuing to reach out to other appraisers in my area and the Appraiser Insider group to discuss strategies and industry topics.  I just finished the second part of a 4-day “Green and Sustainable Buildings” appraisal course from the Appraisal Institute in Palm Desert, CA (the class is actually free as it is being sponsored by Build it Green²).  While currently there isn’t a big demand for valuing solar and other green residential homes in Chicago, I feel there may be in the near future and want to make sure I at least have a basic understanding.

If you have any thoughts or anecdotal evidence of where you may think the industry may be headed, please feel free to post a comment below to continue the discussion.


¹ Mike Turner, Michael Coyle, Jonathon Montgomery, Jeff Hamric

² These FREE classes will be offered again in Laguna in September.  Appraisers who complete the courses will have them name listed on the Appraisal Institutes Green Registry.

³ I was just forwarded an email from Pierce Blitch, III, IFAS from Georgia indicating that they too have completed a Fee Survey for Reasonable and Customary.  It appears their bill has passed both houses and was signed by the Governor.  More evidence that change is on its way!

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    I agree Paul. I think I started to see a shift when Phil’s show began and he brought attention to a movement that had already started. Appraisers must become united and have one voice AND take our business in our own hands. Thanks for being a part of the movement!

  • Bill Cobb

    Thanks so much for the mention, Paul. Together we are making a difference and are being heard. As a Louisiana Appraiser, I can testify the recent victory for closer to C&R fees was sweet! We need to get behind our Appraiser State Coalitions and support them. Paul, thanks so much for ALL you do to help improve our industry and for helping lead the way!

  • Mary

    Thanks Paul I did see that email about trainees, much to my surprise. Things are on the move for sure. I love Social Media it can be used to great advantage for all. Here in Georgia they are working on R & C fees required to be paid by AMC’s. Finally!

    I believe another shift in the tide is educating buyers, sellers and Realtors on what Appraisers must do when it comes to Lender requirements, it will be a win/win. I believe market value is no longer what a willing buyer and seller agree to, it is what will it appraise for given the parameters we are bound by and which a lender will approve. If we work with buyers, sellers and Realtors on this new reality, the tide will turn to more deals closing, less frustration over “Low Appraisals” and Pre-listing appraisals will become the norm. I too have focused my business around local Realtor referrals and Website building for Pre-Listing and Pre-Sale Appraisals. I am so very blessed with 50-60% of this type of business this year. Thanks for sharing your input Paul and your Journey.

    p.s. I was born and raised in the City where you have your business. Small world. Also Phil Crawford just added me to the FANTASTIC group of bloggers on his Voice of Appraisal Website. Thanks to BILL COBB’s nomination, I am honored to be included with You, Bill, Tom and the Others on his site.

  • Thanks for the comment Mary. I hear what you are saying about market value (and completely agree that some of the stipulations are pushing us that direction), but I hope that as professionals we will be able resist that urge to submit a report that satisfies the lender requirements but does not adhere to our/USPAP’s definition of market value. I also think some of the best/most competent appraisers are doing exactly what we are doing, and building out a non-lender business. I think that is leaving the rest for lender work, which isn’t doing anyone a favor either. I hope the market will sort itself out and as the best appraisers gravitate to the best lenders/clients, the rest will have to take notice and adjust their practices to attract better talent.

    A Park Ridge native?!?! Definitely a small world. My wife and I just moved here 3 years ago and LOVE IT!. Small town feel, but two blocks from Chicago city limits 🙂

  • Thanks Bill. I was so excited when I saw the C&R news coming out of Louisiana and couldn’t help but think you had a lot to do with helping your state get to that point. Seeing everything you do on social media is an inspiration!

    I couldn’t agree more in terms of state coalitions. I am lucky to live in a state that has tremendous leadership in our ICAP organization. People like TJ McCarthy and Rick Hiton have given so much of their time for the betterment of the profession and the individual appraiser.

  • Tom, I agree that Phil’s show is only building on the foundation that people like you, Lori Noble, Bill Cobb, and Ryan Lundquist started laying many years ago. The show is helping get the messages out to the masses and also let the regulators, banks, AMC’s know that we mean business and will not go quietly 🙂

  • Mary

    Paul, 100% agree and I know that professionals will not bend to lender requirements just to “fly under the lender radar” as I like to say, so that they do not have to deal with lender questions, comp reviews, etc. They will not risk non compliance with USPAP and loss of their licenses for any lender. Unfortunately some will let lender pressure rule and everyone must deal with that Reality. I totally agree that the Cream of the Crop are changing their business models to encompass Non Lender Business in a big way. And also totally agree what a shame it will be that the best will no longer be doing lender work! More to my point though…. Appraisals are supposed to represent market value, but what Realtors, buyers and sellers perceive as “market value” can be a far cry from what Appraisers find when they analyze the market and apply MARKET based adjustments and of course still comply with USPAP. Therefore, what a willing buyer and seller agree to can be swayed by that listing price which is actually not representative or close to Market Value. If we as Appraisers can help the public and Realtors to close the gap and to understand how and or why we must adhere as best as possible to things like Bracketing, Time, Distance, Location, Quality and Condition adjustments(SO Glad Fannie finally threw out Aggregate Guidelines. I was never a fan as I refused to make small adjustments just to fit comps into the neat and tidy 15% net and 25% gross adjustment guidelines… but I digress) then there will be far fewer sales that fall apart due to perceived “low appraisals”. I really hate that term BTW because we DO NOT Determine Value….The market Does if they are well informed! The end result in my opinion is that Realtors & Sellers will continue to call for more Pre-Listing Appraisals to avoid these issues. Most importantly, when I conduct Pre-Listing Appraisals, I do not cut corners (which I have seen done by other Appraisers on Pre Listing Reports) by the use of very limited short formats. I Use the GP form and MIMIC in most every way what I do for Lenders, numerous photos and all, because I know what most other Bank Appraisers will do with comp selection and adjustments. This way there are far fewer surprises come contract time. The Sellers and the Realtors really appreciate this too. I even had one Realtor tell me that he loved the report because completing his listing in FMLS was a breeze with all the details of the home in the report. (not found on those much more limited form versions out there).

    p.s. The reasons you stated about loving Park Ridge were exactly why my parents moved there. Glad you LOVE it as much as I did growing up there. Great town for sure. Take care and have a great week!

  • Thank you for the mention Paul and it has been fun watching your progress and following your lead. You’re a pioneer in the appraisal industry. I will keep following.

  • Thanks Gary! Your blog is as informative and valuable as any I’ve seen in the industry. Keep it up!

  • Ryan Lundquist

    Thanks Paul for the mention. It’s an interesting time in the industry. I’ll subscribe to your blog. I look forward to hearing your voice. Hope you are having a great day!

  • Kallen Kildea

    I’m interested in connecting with the appraisers out there who are readily embracing the changing industry and looking at AVMs as a tool to help get the job done faster and with more accuracy, not as a replacement for traditional appraisers. We know that even in a world where an AVM is doing most of the data crunching and valuation work, a human site visit and final review of the numbers and factors will likely always be part of the final valuation process. Verifying condition and quality, is a job that a computer will never be able to do. We should accept that advancing technology is changing the way that valuations are done for several reasons:
    1. A computer can evaluate thousands of transactions and determine trends.
    2. A computer can find true pedigree comparables.
    3. A computer can apply value to the factors and come up with a statistical value range.
    4. A computer can do all three of these things above more consistently, faster and with more accuracy than an appraiser, and without bias.
    At some point though, human eyes have to be put on the actual condition of the property and verify what is truly in place. An appraiser verifying what the AVM assumes and tweaking the final valuation based on the verified condition of the property is a reality that is coming. If this all drives down the price of appraisals, minimizes errors, and speeds things along that is not a bad thing, it is just a reality that the industry has to face. There are going to be plenty who go along with it and lead the change, and the rest will fall away. Fighting change, especially change driven by new technology, is foolish. The advancements in technology, accuracy and efficiency that I am suggesting will revolutionize the way valuations are derived, risk is assessed, and even PMI is priced. If we can shift the risk away from the individual appraiser and over to a much larger systematic AVM, isn’t that a good thing?

    A widely accepted AVM foundation would be a foundation from which all valuations could be derived, and, on average, would produce more accurate results and lower risk. Besides, why should one appraisers successful valuation be ignored by another?
    The current problem that AMC’s where created to resolve is the disconnect between appraisers and values and the inherent problems in truly ‘independent opinions’ that are not proved against an exact financial model and are not restricted to any degree by what other recent appraisers concluded by looking at much of the same data. A true AVM would be a centralized database housing all recent appraisal valuation activity, and by building upon past successful valuations would produce the most accurate and consistent valuations available. Currently though, the broad disconnect between appraisers and finite appraisal methods just isn’t acceptable with today’s technology, and it doesn’t provide the transparency or consistency that the lending industry needs to confidently move forward after the great recession.

    If you are in the industry and believe in the value of integrating appraisers with a centralized database then I’d like to talk to you, because I think that this is exactly what the industry is missing, and what AVM tools won’t solve on their own. A systematic AVM integrated with, and providing the statistically supported foundation for, a human appraiser approving and confirming the final output will statistically prove more accurate, more consistent and more reliable.

    Contact me if you are interested in discussing more, thanks.