JUST AS THE MORTGAGE INDUSTRY HAS GONE THROUGH WIDESPREAD changes during the past eight years, the appraisal industry is dealing with similar upheaval. Facing an identity crisis, the appraisal industry is trying to figure out how to effectively serve the financial industry while navigating the increasingly complex regulatory climate.
That will not be an easy task given the appraisal industry is dealing with issues on all sides--investors, federal regulators, lenders, appraisal management companies (AMCs) and state boards.
Taking an honest look at the industry today means accepting that the fiercely independent nature of the appraisal industry has resulted in missed opportunities to be a part of shaping regulations, legislation and investor policies.
The fact is the state of the appraisal industry as it stands today is not a positive one, in my view. Appraisers and appraisal management companies face an uphill battle regarding how to work together toward a common solution that will benefit everyone from appraisers to lenders.
In addition to all of that, the industry is trying to figure out how to attract new talent into the business and keep pace with technology advancements.
Let's take a look at a few issues the industry faces and what can be done to address them.
New licensing and trainees
Getting licensed or certified as an appraiser is not for the faint of heart. The testing requirements--2,000 to 3,000 hours of field experience (depending on the license or certification) and 150 to 300 classroom hours--take more than two years to complete and include an apprenticeship position with an active appraiser.
To make matters even more complicated, a recent change in lending requirements that does not allow a trainee to inspect a property on his or her own has caused issues with trainees being able to find a supervisor with whom to work.
Some appraisers think if they have to physically walk a trainee through every step, then why not just complete the appraisal themselves and keep the entire fee for the assignment? This issue, as well as education requirements, has created a large barrier to entry for new people trying to become appraisers.
Possible solution: Adjusting investor guidelines to allow trainees to inspect the property and comparables without a supervisor being physically present would be a start. That would attract new talent to the business and refresh the supervisor and trainee relationship. Lob by state boards to allow field experience hours to be completed when working in an appraisal function either at an AMC or directly with a lender in a review function. These changes would help bring in new talent and training opportunities and attract a consistent, fresh class of new appraisers.
Question of accuracy
Several industry and academic studies have questioned appraisal...