There’s a growing problem in the real estate industry — beyond ever-climbing housing prices and inventory shortages.
In short, the system is clogged. With a healthier economy, low unemployment and the Brexit effect causing interest rates to dramatically decline, every month of 2016 has felt like peak homeselling season.
While all the movement is a positive to the industry at large, we’ve some issues at the transactional level. The issue comes with the appraisers — both buyer and seller have their hands tied until an appraiser can evaluate the current value of their home.
Currently, there is a nationwide appraiser shortage with no immediate solution in sight.
How did we get to this point?
The Appraisal Institute reported 2,000 fewer appraisers from 2015-2016. Those currently in the profession will look to retire in the coming years as the average age of appraisers across the country is 53.
Additionally, fewer and fewer people are opting to enter this line of work. In Colorado, for instance, only 52 new appraiser licenses were granted and/or certified in the state for 2015, while 2016 is looking to close out with a dwindling number of only 32. This includes the major metropolitan areas of Boulder and Denver, which are consistently listed as top growing cities in the U.S.
The shortage is becoming such a noticeable problem that industry experts are starting to ask the question — are appraisers, as they operate today, going extinct?
How it happened
There are fewer appraiser apprentices coming into the field today for a couple of reasons.
One theory points to the commitment-phobic stereotype associated with millennials. As the age group overtakes the workforce, the hours needed to advance into a certified or licensed appraiser role may be greatly responsible for keeping them at bay.
In order to earn an official license, an appraiser must spend 2,000 hours under the wing of an experienced appraiser. Furthermore, a certified appraiser must spend 2,500 hours spread across two or more years to get a license.
As for current appraisers, well, the rush in demand for their services leaves little time for them to train anyone.
To top it all off, appraisals in general are taking longer to complete. On average, a full eight-hour workday is typically spent on one estimate.
What all this means for the homeseller is higher costs and longer delays. Mortgage brokers in the Seattle area are citing cases where clients under pressure to close on a house ended up shelling out $2,000 for a home appraisal that typically goes for $625.
As the number of appraisers falls in the wake of growing demand, there are solutions, and it means revamping an age-old system.
In order to play the game in today’s digital day and age, real estate, like all industries young and old, needs a big technological push. The industry is crying out for disruption, and one answer that is currently being largely underutilized is drone technology.
For instance, using drones to fly over and photograph a space instead of the age-worn drive by requiring manpower and more hours in the day.
Embracing technology also has the added value of winning back consumer trust, with machines doing the estimating versus man.
Fraudulent appraisals were a large contributing factor in the economic crash in 2008. Houses were selling for much more than they were worth, and that meant the banks took huge losses in the foreclosure process. As a result, we now have much stricter regulations in place for appraisers to get licensed and certified.
While stricter regulations were meant to protect the consumer, it has kept new appraisers away and caused the industry to stagnate.
The Appraiser Qualifications Board is currently looking into changing the revised restriction criteria in hopes of persuading more fresh talent to enter the field. Some of the options that the industry is tossing around include eliminating the four-year degree requirement before appraisal school and shortening the amount of apprenticeship hours.
While the problem has been identified and steps are being taken to help solve it from a high level, there are personal initiatives customers looking to sell their home in the immediate future can take to alleviate their pain.
- Think ahead. Contact the property’s mortgage lender in advance and ask them to put in an appraiser request early.
- Ask around. Putting trust in an appraiser is important; not only can they tie up the buying/selling process, but they also control the ultimate price point the property is quoted for. Take advice from those who have been in the same shoes and can offer valuable feedback and references.
- Come prepared. It helps speed up the process to ensure an “Appraiser’s Package” is put together ahead of their visit to the property. The package typically includes plats, surveys, deeds, covenants, HOA documents, floor plans, specifications, inspection reports, neighborhood details, recent similar-quality comparables, detailed list and dates of upgrades, remodels and costs, and energy-efficient green features.
- Show them the money. Like everything in the home buying/selling process, money is a key component in housing appraisals. You want an esteemed appraiser whose estimates are proven responsible and reliable. The current average national cost for property appraisers is around $300.
2017 will be a pivotal year for the housing market all around. Expect changes on the horizon to address, and hopefully improve upon, current faults in the industry.