The Appraisal industry is at a crossroads! With the high, ongoing regulation changes in the conventional lending appraisal world, Fannie Mae and the GSEs have applied pressure on appraisers like never before. Like FIRREA and USPAP before them, HVCC, Dodd-Frank and the dominance of AMCs (Appraisal management Companies) has caused most appraisers heads to spin. Excellent, very professional, experience and good appraisers have left the industry. For the first time since licensing went into full swing nationally, the total number of Certified and Licensed Appraisers has dropped below 100,000 nationwide. The small numbers of new-blood potential certified & licensed appraisers considering coming into the industry are now balking at what was once a viable opportunity and profession. Some are finding their way into the working appraisal world and they are doing a good job. They bring fresh and incredible technology with them. The problem is that the incoming numbers are not enough. It is not keeping up with the numbers of appraisers leaving the industry due to normal retirement or the not so normal, inability to make a decent living as they once did.
With the new CU Collateral Underwriter program launched by FNMA 1/26/2015, their appraisers are now being subjected to critical review by computer generated analysis of each report. Part of the program allows Fannie Mae to present the appraiser with 20 computer generated comps and asks the appraiser to review and analyze each to see if they are better comps than those used; then provide comment. This takes time to be done right. The Fannie computer selects comps using Census tract blocks. What appraiser searches by census tracts? We search by neighborhoods, market trends and like properties. With the dawn of the CU, more appraisers see it as more work, less money and will leave the industry.
The crossroads I spoke about earlier is the strong evidence that today’s licensed and certified appraisers have decided to take one of two paths. #1 and the most common is the Fannie Mae conventional loan appraisals. Those choosing this path have a very big task ahead of them. They must learn; study and operate according to Fannie Mae’s heavy regulations and any new ones they make up in months and years ahead. These appraisals in large part are ordered by AMCs and not directly with the appraisers. Of course the middle-man AMC provides an order management service for banks and lenders so they charge a hefty fee. This fee comes out of what was previously the appraiser’s fee. Now those appraisers get a portion of the fee charged to the consumer.
With over regulation and lower fees, some of the more experienced appraisers have opted to take path #2. I am one of them. Path #2 is genuinely a desire to serve the public in a professional and fair manner. Real Estate ownership is likely the largest purchase ever made by most Americans. It is very important that these real estate owners are treated fairly and receive professional appraisal reports which they can trust and rely upon. An appraisal should and must be a true reading of market activity with strong due diligence, analysis, reconciliation and reporting. It should not be a knee-jerk reaction by appraisers out of fear of being removed from a list and being put through the ringer for regulation infringements. Sure, smart appraisers can learn to put everything in nice little boxes in the report; make sure they know that using high sales in the subject neighborhood presents more risk to Fannie (even if the subject is equal to those high sales). My fear is that the over-regulation will directly create conservative appraised values to reduce risk to the GSEs but that is NOT appraising.
Get a true and fair appraisal. I am here for you. I can be found on Path #2 which pretty much covers everything except Fannie Mae/ GSE Appraisals. Beware of Path #1 Fannie Mae appraisers who sometimes jump over onto path #2 when orders may be slow. Don’t allow treadmill appraisers to bring bad habits and fears onto your property. It may end up in less than accurate results…