The topic may seem peculiar at a time when mortgage originations are down from the heyday of the early 2000s, but if the issue isn’t addressed now, a shortage of qualified residential appraisers could have a dampening effect on the mortgage market at precisely the moment when it is trying to regain its past vibrancy.
The residential real estate industry has undergone significant change in the past nine years. Many of these changes were implemented in reaction to a wide variety of conspiring factors that led to the decline of the housing market. All sectors of the industry experienced regulatory impact and legislative pressure, and the appraisal profession was no exception. Some of these changes have produced unintended consequences that have resulted in a decline in the number of active residential appraisers. Concurrently, due to economic and logistical challenges, these changes have prevented development and implementation of a viable process through which new appraisers could enter the profession.
The decline in the numbers of appraisers entering the profession can be attributed to many factors including (but not limited to): qualifications and licensing requirements, the economics involved in training, and unwillingness on the part of some financial institutions to allow trainee appraisers to perform services. The most significant obstacle for many trainee appraisers is completing the 2,500 hours of required experience to achieve Certified Residential status, after the education component has been completed.
This is not a quarrel with the current licensing requirements; in fact a process for well-educated, well-trained appraisers to enter the business is vital. The real impediment appears to be the lack of a viable process for the trainee appraiser to actually gain the required practical experience.
The challenges noted above identify a pressing need for a workable appraiser training solution. A concept paper developed by Forsythe Appraisals, in conjunction with other notable banking and appraisal experts, can be found at: Training the Next Generation of Appraisers and S.T.A.R.T: Standards To Assure Responsible Training. Our proposed approach is twofold; offering both a short-term and long-term solution. The recommendations outlined inthis paper would provide a less restrictive path for entry into the profession while increasing the quality of new appraisers and helping to increase the standards within the industry.
Lenders: A Key Piece of the Puzzle
Lenders are an integral part of the solution! In order to garner client trust in the participation of trainees on any valuation assignment, they need to be assured that trainees are receiving proper supervision. A system needs to be developed for a “gold standard” that defines the expectations and obligations of all parties participating in the development of the report whenever trainees are involved. This uniform standard would require documentation and auditing of the parties to reassure clients that all proper and appropriate procedures are being followed.
This program would require coordination and cooperation between lenders, management companies, appraisers, professional associations and societies, academia, regulators, and any other relevant stakeholders in the real property valuation process.
Any such program must fit the needs of all three constituents in the appraisal: the Trainee Appraiser, the Certified Supervisor/Mentor Appraiser and the Client.
- Must be allowed to progress, throughout the training period, to increasingly higher levels of independent assignment performance
- Must have an economic incentive to come into the profession
The Certified Supervisor/Mentor:
- Must have technical competency
- Must have skills to train and mentor
- Must have an economic incentive to take on a trainee
- Must be assured the assignment is completed competently and credibly
- There must not be any economic disincentive to allow use of a trainee
The short-term solution explores options within the existing framework for field experience. The goal is to create a multi-faceted training program that is approved by users of appraisal services, and applied uniformly to all appraiser trainees throughout the United States. The result of the program would build user confidence through required audits of the trainee work-product and increase reliability of trainee-completed reports.
The long-term proposal examines prospective integration of the Appraisal Qualification Board (AQB) educational and experience requirements into a four-year internship and degree program. Upon successful completion, the student will be able to perform as an independent fee appraiser with Certified Residential level of licensure and a professional designation.
It is widely acknowledged that implementation of these changes will necessitate the cooperation and joint efforts of many entities, organizations and individuals. An open-minded approach to resolve the challenges for appraiser trainees will be required to provide assurances that the public and the mortgage lending industry will be served by well-educated, well-trained, and highly competent appraisers.