Consider, for a moment, the humble real estate appraiser’s role in a typical residential transaction.
After the buyer and seller, counseled by their respective agents, agree on a price, after a title company reviews the deal and the bank agrees to lend the money, the appraiser is asked to weigh in.
He spends up to 10 hours measuring rooms, inspecting property lines, taking pictures and filling out a 40-page form. For all of that work, he is paid about $400, minus a fee charged by the appraisal management company that assigned him to the job.
If the appraiser’s number matches the price agreed to by the buyer and seller, all is good.
Unless, of course, the deal goes bad and the appraiser is sued for providing an inaccurate value. Then he faces all kinds of legal troubles, potential loss of his license or certification and possible civil fines.
On the other hand, if his number comes in low, the appraiser could be pressured to reconsider so the deal gets done. If he declines, he might not be hired the next time.
Is it any wonder veteran appraisers are getting out of the business in droves? And with the threshold for entry getting more difficult, it explains why young people are ignoring it altogether. And what will happen to the industry when there are not enough appraisers to meet the demand?
“They are going to become dinosaurs,” said one real estate broker and appraiser, with more than four decades of experience, who asked that his name not be used.
According to the Real Estate Appraisal Institute, the number of people certified or licensed to do home appraisals has declined by 23,000, or 28 percent, since 2007, and is expected to continue to decline by 3 percent annually for the next decade.
Part of the blame, local appraisers said, can be pinned on appraisal management companies. They arrived on the scene about a decade ago and became middlemen who take a cut of the fee.
Ray Geiger of Upper Macungie Township is an example of the changing nature of real estate appraisers. He hasn’t done a lending-related appraisal in 15 years, preferring instead to focus his practice on clients who “want to know what it’s worth” for purposes other than purchase.
At 63, with more than 25 years in the industry, David Feaver of Allentown is one of the veterans still doing residential appraisals in the Lehigh Valley. Like Geiger, he prefers to confine his work to projects unrelated to mortgages, such as providing valuations in cases involving foreclosures, divorces and lawsuits.
“A lot have dropped out and not a lot of new people are coming in,” Feaver said. “The rest of us are swamped. For the last 18 months, I’ve had more work than I can handle. I’m turning a lot down.”
Meanwhile, his fees have been stagnant. He’s considered raising them, but is afraid of pricing himself out of the market.
“The only work I’m getting is the tough ones,” Feaver said. “When two or three automated models can’t agree on a value, they call me.”
So far, the looming shortage of real estate appraisers hasn’t hurt the housing industry in the Greater Lehigh Valley. Some lenders, such as Penn Community Bank (the result of a recent merger between First Savings of Perkasie and First Federal of Bucks County), have maintained their in-house staff of appraisers.
“I wouldn’t say we are actively game-planning [for a future shortage], but we’re monitoring the situation closely,” said Steve Murphy, senior vice president for residential and commercial lending for Penn Community, which expects to write between $120 million and $150 million in new mortgages this year.
Murphy said Penn Community, like other banks, is relying more heavily on computer models to determine property valuations. That works well in densely populated areas where there are plenty of comparable sales to analyze, but not so well in suburban or rural areas where properties tend to be unique and require the special skills of an appraiser to determine accurate values, he said.
While veterans are abandoning the industry, an even bigger problem is the lack of newcomers. Not only are educational requirements now more rigorous, new appraisers also must serve at least 2,500 hours as an apprentice. That means it can take years before someone can do an appraisal on his own, if he can find an appraiser willing to let him be an understudy.
And starting next year, appraisers will be required to undergo mandatory background checks.
Geiger said the decline in new residential-real estate appraisers will have other effects. In the past, mortgage appraisal work was the training ground for bigger and better things such as legal work in tax assessment and eminent domain, he said.
“We’re not creating that training ground for people anymore,” he said.