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Appraiser’s Life: How Busy Are You?
by Ed Cline, SRA, AI-RRS, GAA, RAA, MNAA
Was 2016 a better year for you than 2015? With all the hype about an appraiser shortage, all of us should have had a banner year in 2016 and 2017 should be following suit, right? How busy are you?
I have an appraisal firm which services western Penn. (Pittsburgh) and eastern Oh. (Youngstown). Our firm experienced a decrease in volume from 2015 to 2016; we were down roughly 13% in Penn. and 20 percent in Oh. from 2015 to 2016. This year, 2017, is starting out slowly and if it keeps at this pace it will be slower than 2016. After looking at our volume I reached out to other appraisers in my market and they ALL experienced a decrease in volume. One of our client contacts, who we have had a great relationship with for years, recently moved to a new company. Eager to continue the relationship, we were put in contact with the new AMC which this new company deals with. So, as any good appraiser does, we contacted the AMC. We were unhappy to hear that this AMC pays $275 for a full URAR but sometimes they will go “all the way up to $300”… lucky us. They also demand an extremely quick turn time for these ridiculous fees.
For a reference point, the VA pays $450 in our market. Not only does this AMC pay poorly but we consider them to be a slow pay; that is that you must pester them to give you the money you’ve earned. To be fair to this AMC, they are not the lowest paying one in our market; we still receive requests to do a full URAR for $250. This is the same fee we received when I started in 1986, over 30 years ago. It does not appear that they are familiar with Customary and Reasonable fees from Dodd Frank. Can you believe at least one AMC spokesperson had the audacity to claim publically recently that there are appraisers who are not treating AMCs fairly? A lot of AMCs have been treating us unfairly for decades.
To be fair this is not true of every AMC. In 2016, while reviewing our monthly volumes, we noticed that a good client just disappeared. And like we do, we contacted the client to make sure we didn’t do anything wrong and to see if there was some need for improvement. This client informed us that they were happy with our work, however, we were on reserve status. They told us they simply had too many appraisers and needed to cut back on their list and we were not the only firm to be put on reserve status. Obviously, we are in a market that is over saturated with appraisers willing to work for extremely low fees and quick turn times. These low fees, ridiculous turn times, and the extreme decrease in volume over the past year are undeniable proof that there is an oversupply of appraisers.
I am sure you are thinking that there is no way you can conclude that there is a nationwide oversupply of appraisers based on two regions (cities). You are correct that two regions may not be reflective of the entire county. And then shouldn’t the opposite be true? We have “experts” continually pointing to as many as 10 cities stating that they are proof that there is a nationwide appraiser shortage and therefore the minimum requirements for a residential appraiser should be greatly diminished. All their evidence proves is that there is a shortage of appraisers in those 10 cities. I am confident that my two regions are not the only areas where there is an oversupply.
Meeting with the AQB
We attended the public meeting of the Appraiser Qualifications Board (AQB) in St. Louis (November 18th, 2016). I took one of my trainees with me following my recent story in Working RE on trainees so that the Board could have an opportunity to actually talk with someone who is currently going through the process. It appeared to us that there was not a single person in the audience who was in support of the proposed changes as they were presented to lower the standards for appraisers. If I remember correctly there was only one other full time residential appraiser there. – From what Ed and Matt remember this is a true statement.
Both the AQB and the Appraisal Foundation stated that low fees are an impediment to attracting our next generation of appraisers. They also stated that it is their responsibility to do what is in the public’s best interest first and not to try to influence fees. I agree that low fees are a big problem and that their duty is to the public interest but I do question their position on not influencing fees. What the Foundation and especially the AQB need to understand is that their decisions always affect fees. If they continue to move forward on the “alternative path,” code name for decreasing the standards for a residential appraiser, they will greatly increase the supply of appraisers, most of whom I would consider to be underqualified. This will most likely put a halt to any modest increase in fees that appraisers in some parts of the country are experiencing, and more importantly, it will allow “questionable” AMCs, who pay fees that I received 30 years ago, to continue to ignore Dodd Frank by refusing to even consider paying customary and reasonable fees. Conventional wisdom says that we can’t compete for top college prospects with companies who are paying graduates $80,000 or $100,000 or more right out of college and therefore we need to get rid of the “Barriers to entry” that are now in place. Guess what? Stagnating and possibly decreasing fees are not attractive to new appraisers either or to the top ones with decades of experience. I am sure that there are a few recent college grads who may make this type of money, but I think most are having trouble finding jobs and end up taking anything they can find.
On the other hand, if the AQB does nothing and leaves the current standards in place- that have only been in effect since January 2016, it will also affect fees. This will keep the nationwide supply of appraisers in balance. As the free market reacts, fees will reach an equilibrium that will allow us to hire the best next generation of appraisers possible. I am not talking about large fee increases from the AMCs who pay us fairly but I do anticipate a large increase in fees from the AMCs that ignore customary and reasonable fees that Dodd Frank requires. Is that such a bad thing?
No matter what camp you’re in, appraiser shortage, no shortage; those who want to lower the standards or keep them as is, we all share the belief that some, if not all of the problem is low fees. I love this profession and have never woken up one day not wanting to go to work. I can tell you without a doubt that I would not have been as successful in any other profession as I am as an appraiser. This is a great profession let’s spread the word.
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About the Author
Edward Cline, SRA, AI-RRS, GAA, RAA, MNAA is the owner of Ed Cline Appraisals, a busy appraisal office with 10 appraisers and three trainees in Beaver Falls, Pennsylvania. He is a Certified General appraiser in Pennsylvania and Ohio. He performs both residential and commercial appraisals and is a licensed Real Estate Broker and the owner of Premier Property Management Services. Cline is a licensed Pennsylvania contractor and holds a certification in lead abatement. In addition, he is a certified FHA 203k consultant and an active real estate investor.
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by T. Brooks
File a complaint with the FTC against Corelogic, I did !-
I completely agree with Ed. It is as if the AQB took an “alternative path” to Econ 101 and missed the basics. It is obvious that low compensation for the amount of effort required to become a certified appraiser limits the number of new appraisers. Making it much easier to become an appraiser will lead to more appraisers, but that will only drive down the fees resulting in fewer and inferior appraisers in the long run. So if the goal of the AQB is inferior appraisals, they are on the right path!
However, the barrier of entry that is rarely discussed, but is the key to having more and better appraisers is the barrier that appraisal firms face in hiring trainees. Putting the fantasy peddled by self interest groups, that real world training is not necessary to protect the public trust aside, there are large barriers of entry to building a competent appraisal staff. Any supervisor will attest that properly educating a trainee takes far longer than simply completing the appraisal yourself. Not only does the supervisor now have an additional time commitment, but he must pay for the privilege of sharing his knowledge in the form of splitting that $300-400 fee between himself, the trainee, staff, commercial space, insurance, computers, software, etc. So where you may have made $400 an appraisal working out of your home, you may now be netting $200 and spending more time. Unless there is some big payoff down the road, Econ 101 and common sense tells you this is a real bad investment. Many people, like myself, took the risk realizing that in about four years you may have a productive employee that would be a net positive to your bottom line. Sadly with the market changes forced upon the industry by HVCC and then Dodd-Frank that tilted the playing field in favor of AMCs who will happily accept the work of any certified appraiser willing to accept their fees, it makes the barrier of entry to a trained appraisal staff even higher for your local appraisal firm. This substantial barrier is the real reason that the number of new appraisers is limited.
If the AQB was concerned about the real barrier of entry and sought trained appraisers that would protect the public trust, they would seek the elimination of the onerous regulations upon your local appraisal firms created by Dodd-Frank. Since that is highly unlikely for a number of reasons, the AQB should consider other ways to reduce the barrier of entry to a trained appraisal staff for your local appraiser. The easiest and most effective would be to INCREASE the number of years a trainee is required to have before they become certified. This would increase the likelihood that the supervisory appraiser would get a reasonable return on his investment. Encouraging the industry to approve offices (more specifically supervisory appraisers within offices) and not each and every appraiser within an office would make a big difference. Encouraging the industry to allow inspections by trainees without the supervisor present would also greatly lower the barrier. Contrary to what many “experts” believe this would create better appraisers as the supervisor (or approved) appraiser would have the full responsibility for the appraisal and not just the lower level certified appraiser. This would also restore the traditional business model where the owner or more experienced appraisers can leverage their knowledge and contacts to solicit business and perfect the work process while the newer members learn and perform the more basic tasks appropriate for their knowledge and skills.
Unfortunately the AQB seems to think that the only way to increase the number of appraisers is to decrease their quality. This position is in direct conflict with their stated goal.-
Has anyone talked about the “Walmart” of the amc’s? Core logic is buying up everything. They purchased Rels Valuation recently. All my high end appraisals stopped coming in. I was getting between $500 to $1,000 for them. Yes I once got a little over $1,000 for an appraisal from Rels. They sent me an appraisal recently for $250.00. I told them to go F.. themselves. I am done taking sh… t from Amc’s and the banks, Core logic is a monopoly and I plan on contacting my Congressman and Senator to bring it to their attention. That will probably go nowhere. I read they are buying Mercury network that Alamode sold to someone else, just a few short months ago, now Core logic. I bet that’s just a coincidence? Even Alamode is part of the problem. How much you want to bet Core logic offers to buy Alamode, if they haven’t already yet. I’ve read many appraisal articles that say we appraisers are still going to be around in the future and that appraisers have been saying, forever, we’re not going to be around much longer and we’re still here. I think I see the writing on the wall, people. The appraisal industry is set up to fail now more than ever. The banks have been trying to get rid of us ever since I can remember. They can’t stand paying for an appraisal that they are furious they are required to have. I was also a mortgage broker so I got to listen to mortgage brokers and the underwriters. They hate us and the fees. I’m a realtor also and I get to hear about the appraisal industry through them as well. They hate us too, but if you’re an appraiser you already know this. Yes, I know when they are being quoted or recorded they talk about what an integral part of the industry we are. Right, sure, we got it. I thought several years ago when I heard about the lack of appraisers, the low fees, the ridiculous college degree requirements, that’s a real nail in the coffin. When they get out of college they will be starting out at the same point a none college grad will be. They are not learning anything in college that will help them be a better appraiser. They will just have a huge debt and wasted 4 years of their life, unless you want to party and goof off for 4 years then go work for a big corporation? Then that piece of paper will get you through the door. But I thought this is not good? I also read about UAD and the banks taking all our work and data and compiling information on all the homes in the country, and we are not to worry that’s not to get rid of us. Sure, OK. I read banks and maybe FANNIE are going to use AVM’s instead of appraisals for refi’s. That’s the start of it, right there. Next it’s for purchases and then they will send someone out there for $50.00 to do a quick inspection and photos, no licensing or certification necessary. Has anyone checked to see if any banks are connected with Core logic or other AMC’s? Do any of you remember in 2008 the banks asked congress for permission to buy up real estate brokerage companies, like ReMax and Century 21, eventually all of them? Then the big crash came before their ruling and congress quietly said Uuuummm Naaaahhh. The Banks will be back, asking again, to own everything. I thought I read a few years ago about a bank buying an AMC? So now they are talking about lowering standards to be an appraiser. I see a pattern here, do you? Are we going to be here? I think so. I don’t think lenders will be our clients anymore. On rare occasions. I think we will have to find other, better ways to make money. I think if we all stood up and said no!!! We are not going to appraise for these low fees, the banks would go to congress and say, see, we can’t work with these guys. Their unreasonable and that’s why we need you to get rid of the appraisal requirement. Look at all this data and programs we have to value real estate. Here is an alternative we have been working on for years. Please, take a look at it and approve it before the economy collapses. It’s cheaper for the consumer. And Congress would pass it and get rid of the appraiser. Here’s some info for you. I’m working on a sale and the mortgage for a $300,000 purchase. I spend maybe 5 hours total on the sale end and will make $9,000 to $18,000 for this. That’s 3 to 6 percent if no other broker is involved. On the mortgage end I want to make a total of 3% on the front and back end, if you can still do that? I spend a total of 10 hours working on this file, as a mortgage broker, about 1 long work day, but spread out over a few weeks or month time, so that’s $9,000 for the mortgage broker for 1 days work. Then the AMC comes in and offers the appraiser $250.00 or even $350.00 (a fee from 13 to 15 years ago). So that’s 10 to 15 hours on an appraisal, today with all the BS to go through including appraisal reviews, call backs from the brain dead and ignorant, additional comp request and so on . I know some of you still do “quickie” appraisals and get away with it. I do reviews, if they will pay $350.00 to $500.00 to do them. So who really works the most on a deal? Who really does have the most stress and liability for their work? Who has so many rules, regulations and ethics to follow in this deal? Whose work is more detailed, reliable and requires more education to complete? I think it’s the appraiser? For a F…ing $250.00? So you go ahead and take this crap. Take your $250 to $350 for an appraisal. I’m not. I’m standing up for reasonable appraisal fees. There are no customary fees with all the added work, over the past several years and they’re still adding more Sh…t. The 1004MC? That’s a joke. Anyway, been to the grocery store lately? Are you paying customary prices their? No!! They’re not even reasonable, in my opinion. I haven’t even brought up inflation or time value of money for the $350.00 I got 15 years ago and how I can’t even buy now what I could then. It feels like things cost 50% more today, on most things, to me? I have been saying residential realtors are on the chopping block too, for years. Just wait for the next real estate melt down and there’s no appraisers to blame and the banks point to realtors and congress makes a few new rules and BAAM!!! Someone has just taking over the real estate sales business, for the good & protection of the people/consumer, wink, wink. Zillow is now letting buyers sell their houses on their site without an agent. With all the data that has been collected over the years by appraisers, realtors, google and the like, why would one need an agent or an appraiser, for that matter? It’s only a matter of time before they all merge or sell their data to/with each other and create a new and better way? A Realtor’s biggest tool is the internet. If Zillow and the like can just find a way to make the local MLS system irrelevant they will have pushed most of the realtors out of the game. I listed a property a few months ago only on Zillow & Trulia for 2 weeks. I got no response from anyone on those sites. NONE, just calls on my sign in the front yard. I was trying to save a friend 3% commission on a buyer’s agent. So the seller said I don’t have time for this. I need to sell now! So I listed it on the MLS. I had a scheduled showing in under 1 hour and 3 more by end of business and 10 more by the end of the week. So the local MLS and realtors are still “King.” Sorry for the doom and gloom. I’m only taking appraisals for $500.00 and up. I used to do 1.5 a day or maybe 2 appraisals if I pushed it, 5 days a week for $350.00 a pop, at a minimum. Some I got paid more for. That’s $525.00 to $700.00 a day. That’s $136,500 to $186,000 a year, all me no assistant or employees. That’s 15 years ago!!! I had control over my appraisals. I had control over my business and life. If a lender wanted another comp or listing? Sure that’s another $75.00 per comp. Oh, never mind they’d say. They don’t care about the work, only the money. But I had control. Ohh those were they days!!!! Now we are slaves to punk kids that know nothing about an appraisal or real estate; or some computer checks our appraisal and I spend the next 2 hours, for free, trying to figure why their stupid programmers have no common sense and I get charged $10.00 to give them the appraisal. They call it a technology fee. Yeah right my assssss!!! They are trying to find a way to skim money off the appraiser to either make more money for themselves or quote better rates to lenders. I sometimes fantasize about getting my pilots license and dropping in and saying hi. Anyway we won’t go there. So higher appraisal fees is my answer to help us appraisers out. I’m going to sell real estate more and switch over to commercial sales. I’m going to take my vast real estate knowledge and use it for my benefit, not those scum bag amc’s and lenders. I’m going to invest in real estate (already have been just more now). I’m going to flip properties, work with real estate investors and look worldwide for business opportunities that relate to real estate. I am going to continue to work for myself. FOR ME!!! I could never work for someone again. All of you low fee appraiser’s out there. I understand your dilemma, but I think you are part of the problem. I think you should stop taking this crap and take back control of our industry. Our industry is weak, our leaders and leadership are weak. We are not organized or have the numbers and money like the NAR. That’s the National Association of Realtors, for all you new college grads. Sorry to make this so short. I had so much more to say, seriously. Good luck-
How do you get AMCs to pay more for your efforts? Band together and stop working for a short spell. DEMAND more money. The appraisers in Hawaii did this. I’m not going to tell you what we get in the PacNorWest; but it’s way more that $250. The only way you’re going to get more is by a “Stop Work-sit down”. The biggest problem is that there are knucklehead appraisers who will think: “Sure let them stop working in hopes of more money; I’ll take it all and make more by volume”. This is EXACTLY what is killing you. The knuckleheads need to realize that they can garnish more and work less, instead of working more for slightly more. Until this happens, NOTHING will change.-
by Rich Lagerstedt
In the most simple terms possible, Appraisers are doing this to themselves. As long as there is the “take any fee” mentality the low fees will continue. I just received a fee & turn time request for a full appraisal for a rural property in Vermont. The offer was for $275, and the turn time was for 5 days (2 of which were a Saturday & a Sunday, so realistically a 3 day turn time). I responded back to the AMC with “You are offering $275 for a full appraisal with a turn time of 3 days in a rural area. Is this a joke request?” and sent it back.-
I have been “cherry picking” for the past 7 or so years. I let the cheap ones go-I know others will take them. They get backed up with the low fee requests to the point they can’t produce a reasonable turn time. By keeping my fees higher (minimum $550, typical $625-$675) I get the ones that pay better because I can produce a reasonable turn time.
Am I as busy as you? No, I am not. I am busier. I turn down nearly as much work as I take in. As well as, my fees are doing nothing but going up. Those fees are going up not at my request, but rather the AMC’s I deal with, and their client(s), are increasing the fees on their own accord. The best piece of advice I ever received in this profession is don’t be afraid to fire clients.-
Of course low fees are the root cause of nearly every problem in this industry. The rest are mostly red herring. For the first time, I started to think that the AQB was slave to the lenders and lobbyists when I saw their new “ideas.” After all, lower barrier of entry means lower barriers after entry – basically a whole new generation of low-fee workers. The higher bar was good and will cause some pain, but could you imagine if the lawyers decided to cancel the BAR association and all of their regulations because it was tough for some billionaire banks for a few years?
I am in Colorado, which is one of the places where there is a supposed “appraiser shortage.” Just like the other areas where there is a supposed “shortage,” there is no actual shortage of appraisers here, rather too few appraisers who will work for cheap. This has been said many time and is still accurate.-
The problem in SW Pennsylvania is that there is a lack of homes for sale. This is creating bidding wars and buyers who want to buy, but can’t find the house they want. I’ve taken myself out of the lending end of appraising until the climate gets better. Just waiting for Republicans to do their thing with Dodd Frank, but they might be on the side of cheap appraisals and big bank profits.-
by Greg Baker, MAI
Ed, Great take on the ebb flow of the appraisal work and stated “by non-appraisers” perceived shortage. Just like the overall market, all Real Estate is local, so are the individuals in the profession, fees, turn times and attractiveness. The worst thing that can happen is lower the requirements/standards on experience.-