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Appraiser’s (Changing) Role
Q&A with Mark Verrett, Chief Innovation Officer at Accurity Valuation
The appraisal industry is currently facing a number of challenges and growing pains as powerful stakeholders (e.g. Fannie Mae and Freddie Mac) pursue appraisal waivers, bifurcated valuations and question even the very necessity of flesh and blood appraisals. With so much uncertainty around the direction of the profession, words like “change” and “the future” are the new buzz words of the industry. Everybody is talking about what is coming next and how to prepare for it.
At the heart of the issue seems to be the increasingly central role that technology is playing in the profession. To better understand how technology is and will transform the role of the appraiser, Working RE sat down with Mark Verrett, Chief Innovation Officer at Accurity Valuation. Verrett is a second generation appraiser, focused on modernization and efficiencies in the real estate space, and is a leading voice on innovation within the appraisal industry.
WRE: What do you see as some of the biggest challenges facing appraisers today?
Verrett: While I still complete mortgage appraisals today, my perspective on challenges facing appraisers goes beyond daily practices to focus on the direction of the profession. Appraisers in the residential space will continue to have strongholds in niche markets such as consulting, green valuation, etc. for the foreseeable future, but I think the single biggest issue appraisers in the mortgage space face is relevancy. Appraisers will be hard pressed to find their place given the coming changes in the mortgage profession.
I have read articles in Bloomberg, Forbes, and USA Today predicting the industry’s move toward automation and away from the appraiser. Immediately after the sub-prime mortgage crisis, I remember first hearing the conceptual term “desktop economist” from those who were thinking about what the future of appraising might look like. The term soon became synonymous with “bifurcation,” which brings us to where we are today. I don’t think professional stakeholders have quite figured out how to optimize bifurcation and the accompanying changes that most acknowledge need to be made. Appraisers as a group rose to success because of their strong opinions and by not being easily swayed. Because of that, I think we are prone to resist change. When the stakeholders are certain that modernization is necessary but appraisers hold firm that change is bad, the question becomes: how do we stay relevant if things are going to change?
And the profession has other concerns. I have seen surveys of appraisers who no longer wish to bring their family members into the business. While anecdotal, I have seen numerous trainees go through the painstaking process of licensure only to leave the profession. The reason is that the quality of life they observed of their mentor is not for them. Another big headwind in keeping a healthy number of entrants coming into the profession is how difficult it is to incorporate a trainee into a practice profitably. It seems like today’s job seekers are searching for something different than what we all found attractive in appraising.
WRE: You mentioned optimizing bifurcation, what do you mean by that? How can appraisers benefit from appraisal bifurcation?
Verrett: FNMA and Freddie Mac are seriously exploring bifurcation and it has raised quite a bit of concern. For more than a decade, appraiser trainees on residential mortgage assignments have been disallowed from inspecting a property without a supervisor present, and from signing the left side of the report. More than 12 months ago, both GSEs openly stated that this practice was no longer disallowed. Despite appraisers now being allowed to use a trainee according to the GSEs, we found that many lenders resist enabling trainees from playing a significant role in inspecting the property and signing off a report.
The GSEs simultaneously have arrived at a conclusion to bifurcate the appraisal process by splitting up the inspection and the value analysis, with openness for allowing non-appraisers to perform the property inspections. As it appears now, the issue of speed is not solved in any way by this type of bifurcation, since the appraiser won’t even know they have an assignment until well after the inspection is complete. Unintentionally, over the last decade, the regulatory environment has taken away the residential appraiser’s ability to pioneer their own bifurcated process by not allowing trainees working under their direct supervision to inspect and sign reports as a contributor. I believe strongly that the profession needs to encourage the appraisal firm concept to implement the bifurcated process to meet the profession’s growing need of speed and flexibility. Accurity has spent years pioneering this process and is rolling that process out nationally where it is permitted. I am excited to see positive momentum in this direction on many fronts.
WRE: How can appraisers adapt to meet the profession demands?
Verrett: I think there are several ways to adapt to these challenges. The first is to work toward diversifying your practice away from 100 percent mortgage business niches. Our firm is a leader in green valuation, rural valuation, valuation consulting and litigation support and we help our offices diversify into those spaces. However, this solution isn’t for everyone.
To directly take on the challenges facing appraiser relevancy in the mortgage space, significant change is required. Appraisers need to unite to create a like-minded national voice that is not rejecting proposed changes for the profession, but rather working with stakeholders (regulators, lenders, clients, etc.) in conceptualizing, testing, tweaking, and ultimately modernizing the appraisal process on the mortgage side. The appraisal community has a tough assignment in their role in this modernization. To be useful in the discussion, we need to challenge ourselves to be creative and open-minded, yet diligent in maintaining or, even better, improving the quality of the valuation being produced. I think it is extremely important for appraisers to listen and understand the needs of their clients and to creatively develop solutions that meet those needs.
It is notable that to date many innovators proposing concepts to modernize the space are technology companies with new software or apps. Presently, I don’t think appraisers are considered to be good candidates to participate in developing new and innovative ways forward. Appraisers need to join that innovation space as the future users/ implementers of the technology, as well as to provide critical input and buy into the solutions proposed.
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As I listen to stakeholders and observe other industries that have experienced extreme modernization or disruption, I see a demand for speed. If we listen and observe closely we can see that all alternatives that are proposed or in use, that call into question the relevance of the appraiser’s role, relate to speed. Other countries have arrived at an appraisal process that results in much faster valuations than we see here in the USA. It is critical for the appraiser to adapt because it’s what the public demands.
WRE: As Accurity’s Chief Innovation Officer, what role do you think innovation plays in the appraisal profession?
Verrett: Chief Innovation Officer is likely an uncommon title in any appraisal organization, yet both Fannie Mae and Freddie Mac for years have had “innovations teams” that consist of industry stakeholders, conceptualizing the modernization of our profession. Traditionally, I have not seen appraisers having a seat at that table and we believe strongly that this is to our detriment. Like all industries over the last 20 years, the real estate and appraisal industries have changed. For appraisers to stay relevant, it is critical that we stay involved in that modernization conversation with a cohesive voice and open mind.
I think the appraiser’s role in this modernization movement is to do what we do best, preserve the public trust. We must be leaders in finding ways to meet the foremost need of the profession, which is speed, while ensuring that our valuation product stays reliable. I think with the availability of data and new technology, it is well within our grasp to do what was unthinkable even a decade ago. Appraisers need to find innovative ways to deliver our irreplaceable analysis and opinions with improved support and at lightning speeds. I hope that it goes without saying that this concept is only applicable to most properties that exist in the country.
If appraisers can solve the profession’s primary need of speed, I think opportunities abound for us. Leading the way and being part of the disruption of our profession is extremely exciting and on its own solves the relevancy issue for new job seekers.
WRE: How can appraisers use technology to their advantage?
Verrett: It is easy for an experienced appraiser to automatically equate quickness with lower quality. I think the appraiser’s challenge today is to prove that this isn’t true. With available technology we are proving that it’s possible. Being completely mobile is critical. Making full use of available tools to process data quickly and thoroughly is also a must. At this point, I believe that mobility and the use of data tools is a requirement in each appraiser’s practice. The challenge ahead is to maximize the use of those tools to increase efficiencies, improve the quality of analysis and deliver those results in hyper-quick speeds. Beyond data tools and mobility, I see technology as being able to be leveraged to assist and support the appraiser along their value analysis process. A team appraisal approach is a term coined to describe this process. The team approach can be difficult to develop and implement in a typically sized residential appraisal firm (1.5 people is that last number I saw estimated), not to mention that it runs contrary to how most appraisers work, with complete control end to end. It is critical that we partner together to explore and implement these efficiencies that can be employed not just in one market, but across the country. That coming together is largely our firm’s mission.
About the Author: Mark Verrett is a second generation practicing appraiser, focused on modernization and efficiencies in the real estate space. Mark was recently named the Chief Innovation Officer for Accurity Valuation, one of the nation’s largest appraisal firms. Mark was selected to serve the Appraisal Institute nationally as 3rd Director of Region VIII and is a leading voice in innovation within the appraisal industry.
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