Mortgage

The two biggest challenges plaguing the appraisal industry

LRES: "The appraisal industry is aging"

There are two major challenges that the appraisal industry is dealing with, largely due to an onslaught of legislation. 

In an interview with HousingWire, Scott Pickell, vice president and chief appraiser at LRES, discussed recent hurdles appraisers are facing, focusing on compliance and new appraisers.

1. Compliance

One of the first appraisal management company issues that Pickell noted is state compliance.

“[State compliance] is a very large issue we deal with. Dodd Frank requires all the states to be licensed in the future, but not all of them have come up with the requirements,” said Pickell.

At the end of April, housing authorities announced new minimum requirements for state registration and supervision of appraisal management companies.

With the new rule, states may elect to register and supervise AMCs, but there is no penalty if a state chooses not to establish a regulatory structure for AMCs.  

However, in states that have not established a regulatory structure after 36 months from the effective date of this final rule, any non-federally regulated AMC is barred by section 1124 of Title XI from providing appraisal management services for federally related transactions.  

But if a state adopts a regulatory structure for AMCs after this 36-month period, it can lift this restriction. 

Another issue that Pickell said he sees is that there has never been a true definition of customary and reasonable fees.

“We are waiting for some government authority to finally define that. They are getting closer and closer to that, which is a positive,” he said. “The appraisers are to be paid customary and reasonable fees. It’s an area that has always been a hot-button issue.”

Pickell explained that appraisers should be paid the same as before all of the regulations came about, not less.

“Now I think we are finally getting some legislation that will force the hand of everyone, but ultimately the consumer pays.” He added that this increase would be about $100-$200 for borrowers.

2. New appraisers

The appraisal industry is aging. It has been an on going challenge for a few years, but it is getting larger and larger. There are more appraisers leaving the industry than joining the industry. Something has to happen,” said Pickell.

“They need to change the barriers to entry and how it is structured. They need to so we can open this industry up to a whole new generation,” he added.

Right now, the average age of an appraiser is about 58 years old.

So why aren’t more people joining the industry?

The process to become an appraiser is long, with little pay.

First, Pickell explained that individuals need to get licensed as an appraiser trainee and have a certified appraiser with them. Then, they need to have about a year and a half of training hours.

“If I am an individual appraiser out there and am willing to train someone, I don’t have money to pay him or her what they are worth. They only have so much disposable income,” said Pickell.

Plus, one trend that he is seeing is that most appraisal companies in the industry are run by families. People are okay with training their kids and taking them around, but how long will that go on?

Most Popular Articles

The housing market faced uncertainty in March, but now ‘it’s a circus’

The housing market faced a lot of uncertainty when COVID-19 caused the real estate industry to pause under shut-downs, but low interest rates and the desire for more space have turned this year into a boom time for real estate agents.

Oct 21, 2020 By

Latest Articles

Lone Wolf Technologies plans to accelerate growth with investment from Stone Point Capital

Stone Point Capital has purchased Vista Equity Partners’ stake in real estate software company Lone Wolf Technologies. Stone Point will become Lone Wolf’s lead institutional investor, powering the next phase of its growth and expanding its product offering, the company said.

Oct 23, 2020 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please