Tips for Training New Appraisers

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Tips for Training New Appraisers
by Mike Lay, Appraisal House USA

As a seasoned appraiser, should you train a new appraiser or not? That is the question!

For an appraiser, this is a defining question that will impact your business for years to come. Do you train someone to help build your business, or are you just wasting time because you will be training a future competitor? Most appraisers have a strong opinion, either way.

Prior to the Home Valuation Code of Conduct (HVCC) and the subsequent diminution of fees, this was a relatively simple question because the money was there. So, if you wanted to build your business and had the taste for it, at some point, you brought on trainees. In six months of expending time, effort and expertise, a trainee could become a contributing member of your team, assisting you and producing enough revenue to offset their cost and hopefully adding to your bottom line. With a little luck, they would work for you for five or more years—maybe even decades—before going out on their own and starting their own business, and maybe returning the favor by training their own recruits. Some even stayed longer, taking over the business and providing a source of ongoing revenue for years after you retired.

From a trainee’s standpoint, there were good reasons to stay with the appraiser who trained you after becoming licensed. The supervisor was the salesman; they went out and sold their services, developing long-term relationships with lenders and brokers. They also paid for office space, computers, copiers, software, etc., and managed the day-to-day operations.

To step out on your own was a much bigger commitment back then. You had to develop your own customers, pay for your own software and computers, deal with the billing and collections, and all of the other chores that go along with being a business owner.

With implementation of the HVCC in 2009 and the associated rise of the AMC model for lenders, the dynamics changed drastically. Even after Dodd-Frank was implemented in 2010 to try to clean up the lax rules of the HVCC, the AMC model was fast and loose in those early post-recession years. If you had a license, you were welcome to complete a report, competence and/or geographic competency be damned in many cases. If it was on the right form and had a licensed appraiser’s signature, it was good enough. And if the appraiser was willing to take $200 for completing a report that the AMC could charge $500 for, even better. This was a boon to newly minted appraisers. Previously, the cost and effort of going out on their own was somewhat daunting. After Dodd-Frank, any licensed appraiser could sign up with a dozen AMCs and be swimming in orders—provided they were willing to work cheap and fast.

In my opinion, this had a huge impact on the profession. With no barriers to hanging out their own shingle, what was the incentive for the trainee to stay long enough to make a meaningful contribution to the appraiser’s business after becoming licensed? Why work for a 60% fee split when they could get the whole fee? Costs were fairly minimal by this point: a PC, software, internet, and insurance. From the supervisor’s standpoint, they just spent two years and many, many hours getting someone up to speed, and as soon as they could really contribute, they were gone. So what was the purpose of training someone who was going to leave as soon as they got their license? Training someone became a Sisyphean task—it got you nowhere. About two years ago I had a potential trainee tell me that he was looking for a sponsor so that he could “get his hours, get licensed and then move to Houston to go into business with his brother-in-law.” His pitch was “I won’t be competing with you in Austin.” Needless to say, he wasn’t what I was looking for.

Add to that the requirement from many lenders and AMCs that the assigned appraiser had to be the one to complete the order, not another appraiser at your firm, and many of the appraisal firms saw no benefit to bringing on a trainee.

Those who consider a trainee fall into two main camps. One thinks: “I will keep hiring trainees and hope that some will stay with me, allowing me to build my business.” Others believe: “What is the point of wasting so much time, energy, and money training someone who will immediately leave and become my competition?” A handful will only hire family members who they trust to carry on their business. While all these points of view are valid, I believe there are things that an appraiser can do, and not do, to contribute to the profession and build their business while at least minimizing the issue of training future competition.

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Don’t Be a “Mill”
That’s right, don’t be an appraisal “mill.” Most states allow you to train up to three people at the same time, and more in certain circumstances. I can understand that if they are staggered, training one for 12 months until they are relatively self-sufficient, then adding another, can be an excellent way to grow your business. But I’ve also seen shops where “trainees” are hired in bulk as “typists” or “researchers,” and then after a month are given a day or two of instructions on how to measure and inspect a house, and then essentially turned loose. State enforcement bureaus are overworked and understaffed, so the risk is minimal, and the rewards are great if you can get away with it. I remember a shop in my town back in the early 2000s that had over a dozen “trainees” at the same time, all under one appraiser. I’ve talked to some of those people over the years. One told me he has never used Excel—he doesn’t know how! I asked how he determined his adjustments and he said, “paired sales,” but when pressed, he admitted that he just made up numbers that seemed to work. Another said he always adjusts $2,500 for a bathroom because that is what his supervisor told him to do since “that’s a number you can’t get in trouble for.”

It’s my belief that if you are running that kind of an appraisal shop, all you are doing is showing your trainees how to do the same. Their goal becomes to work the system and make a ton of money doing the bare minimum, rather than learning how to do their job well for the long haul. The end result is that few trainees in that environment get an adequate level of instruction and end up out on their own, knowing less than they should. They, in turn, train another group in the same fashion, and the “brain drain” continues.

Good Housekeeping
Make the work environment something that a trainee would want to continue being a part of. Times have changed. I’ve heard stories from appraisers who were paid nothing for months until they were up and running and could contribute, so they would wait tables or tend bar at night and work all day. Or that they would work 100 hours a week for a $1,500/month stipend from their supervisor for the first year. The thinking was, “If you want into this business, be prepared to suffer for a while.” In most areas, that doesn’t work anymore. The labor market has been tight for the past few years even before the COVID–19 pandemic. Provide a reasonable base salary for a reasonable workweek, like any other employer would do.

Create a welcoming environment. Try to be positive; despite the dozens of calls from lenders and AMCs and angry Realtors every day—show the trainee the good side of the business. Make them better than you are. If you aren’t an Excel expert, it benefits both you and your trainee to invest in some online Excel training. There are also numerous online classes available for data analysis that you may not have time to take, but you can provide for your trainee, who then might help you figure out how to improve your reports. Are you a little bit of a technophobe? Still using graph paper to sketch? Ask them to learn a sketching program on a mobile device or data analysis programs that are on the market. Encourage them to learn, not just take what you say and do as gospel. It seems to me that “bosses” tend to lose trainees as soon as they get licensed, but “mentors” tend to keep them.

Road Forward
Create a long-term path for your trainees. Maybe this is the trainee who will eventually become your partner in the business. And when you retire or semi-retire, he or she can take over, and you will still get some residual income as a partner. Why just close the doors when you could be getting a dividend for your life’s work while you are fishing, playing golf, or laying on a beach?

Don’t get frustrated. Not every trainee will work out. You won’t really know the person you hire—their habits, work ethic, honesty, commitment to the job—until they have been with you for a while. If the first one doesn’t work out, commit yourself to trying again in a few months.

The most frequent question I hear from many appraisers during this current boom is, “What is the best way to go about hiring and training an apprentice appraiser?” We all know how we were trained, but is that the best way going forward? Where do I find someone? Should I do the same thing my supervisor did when I was trained 20 years ago, or is there a better, more efficient method?

Taking the step to actually hire someone is a “freeze” point for many who don’t have time to think of all of the ramifications of that single act of adding an employee. It’s easy to get some resumes and choose one, but that triggers a lot of work and worry: providing a regular paycheck, paying taxes and reporting to state and federal agencies, adding them to your E&O policy, buying and setting up a PC, providing office space, getting MLS access, getting software licenses, etc. It can be daunting.

Once you get past all that and have a warm body in the office, what is the best way to train them? Should they just shadow you all day every day, looking over your shoulder as you research and type reports? Or do you just have them do research and type reports all day for a few months? How do you keep them busy all day while you’re trying to spend two to three hours putting together a report that only takes them 45 minutes to research and type up? When can you send them out by themselves and really begin saving you time?

To answer these questions, we are launching a short survey in Working RE asking things like, “Where did you find your trainees?”; “How do you compensate them?” and “How many hours do they work?” We are hopeful that the results will give you some insight and clarity into taking on a trainee. I encourage every appraiser to give something back to our profession by training a new generation of high-quality appraisers. If you have ever trained a trainee, please take the survey at WorkingRE.com/trainees. The results will be shared with all appraisers in the industry.

About the Author
Danny Wiley is Freddie Mac‘s Senior Director of Valuation for Single-Family Credit Risk Management. He is responsible for Freddie Mac’s collateral risk management and its valuation team. He is also responsible for innovation in collateral risk analysis. This article is reprinted from Freddie Mac’s blog.

 

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