Appraiser Shortage Lie & Propaganda

AI Appraiser Shortage Narrative is at Best Propaganda & at Worst, a Lie

AI research piece is at best propaganda and at worst, a lie.

The following CSBS article essentially written by the Appraisal Institute which is being distributed by lenders – continues to misrepresent the idea that the number of appraisers is falling and no new appraisers are coming into the profession.

Notice how CSBS tracks the number of appraisers from the peak of the housing bubble? If this organization’s or the Appraisal Institute’s intentions were honest, they would show the trend before the housing bubble as well. In this piece, they show that credentialed appraisers have fallen 21% in 10 years which is far less than Appraisal Institute membership. There are actually more appraisers now per mortgage origination than back then. Why? Because despite record low rates, mortgage origination volume has fallen since 2008.

That my friends is the missing context here. In other words, the CSBS/AI research piece is at best propaganda and at worst, a lie.

appraiser supply credential

Here is the Appraisal Institute’s (I mean CSBS’s) summary of observations (with my comments appended):

  • Some rural and underserved areas do not have enough appraisers. That’s been the case for one hundred years and only became problematic when AMCs became dominant and typically pay less than half the market rate.
  • The National Registry of Real Estate Appraisers does not accurately reflect local shortages of appraisers. And it doesn’t show surpluses, nor does it reflect non-free market business practices of the AMC industry that AI National so dearly loves.
  • The Title XI waiver process is unclear, lengthy, and underutilized. This is a bizarrely desperate and a made up reason that sounds impressive but says nothing.
  • Congress acknowledged with the passage of the “Economic Growth, Regulatory Relief, and Consumer Protection Act” that obtaining appraisals for certain rural transactions are an issue and that an avenue for relief is needed. This a wildly misleading statement of what this act actually is. According to ABA: to qualify lenders must show that three appraisers were not available within 5 days beyond a reasonable time frame (determined by the bank) for an appraisal. Appraiser licensing and credentialing processes create barriers to entry. Name one! We’d have a lot more doctors if we didn’t require an education and experience.

Can these reasons be any more self-serving and dumb?

Jonathan Miller

Jonathan Miller

President & CEO at Miller Samuel Inc.
Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state and federal courts.
Jonathan Miller

Latest posts by Jonathan Miller (see all)

Jonathan Miller

Jonathan Miller

Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state and federal courts.

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29 Responses

  1. Mike Esser on Facebook Mike Esser on Facebook says:

    “… to qualify lenders must show that three appraisers were not available within 5 days beyond a reasonable time frame (determined by the bank) for an appraisal…” 5 days from order placement to report delivery?

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    • If there is no consensus on what a ‘reasonable’ fee is how are these self interested morons going to determine a reasonable time for availability?

      When I came into the business in 1986 as an MAI Candidate, there was a one to three month waiting list just to set appointments – not for report delivery! When prevailing fees were from $250 to $275 it was common for clients to offer $500 or more to an appraiser willing to work a weekend to get a quicker result. Naively, I didn’t think that was right to take work out of order at the time.

      While rare, sometimes the delay in appointment scheduling was only two weeks with the appointment being set for the 3rd or 4th week. While this was pre license period, when licenses first opened up it was reported we only had around 7,500 appraisers statewide. We went up to a high of over 25,000 and I’m told we are back down to around 12,000+.

      With normal turn times from 5 to 10 WORKING days (no weekends) now; neither my own experience over 32 years, nor the graph above demonstrates a shortage. Just the opposite. During the slow turn times I noted above, lenders wanted 3 years experience before they would allow a new appraiser on their lists. Downey S&L was an exception – allowing listing after only 1 1/2 years of co signed reports to them. The only real impediment was MAI dominated bank and S&L ‘Chief Appraisers’ refusal to accept work from non designated appraisers with less than 3 years experience. Back then apparently experience was a marketable commodity able to break the entry barriers of the AI (AIREA then) or Society.

      AI controlled markets back then. Mainly by convincing lenders that no one other than an MAI owned shop could possibly produce decent work. The Appraisal Society (later merged with AI) fought the notion. AI appears to be attempting to return to that 1980’s model with ‘highly trained’ commercial and industrial appraisers (MAIs) now operating large multi state and national appraisal management companies and appraisal mills for single family residences.

      Oddly, MAI’s are notoriously bad at appraising SFRs with their C&I mindsets. Many just can’t switch to the metrics required for one where purchases are purely return related and the other is emotionally based. It’s partly why we see so much of the idiocy requiring ‘scientific proof’ for adjustments, rather than experience derived market evidence.

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      • chris says:

        Well said !!! I had the same problem with commercial appraisers trying to appraise residential, some of the worse reports I had ever seen. They think being on a busy street is a positive in residential….lol  and never gave anything for site size or amenities. I don’t think they knew how….lol….just the income approach please.

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  2. Ross Grannan on Facebook Ross Grannan on Facebook says:

    Bait and switch, standard corporate speak to rid the financial system of that pesky quality control. The bankers never learn a damn thing, it’s all about short term profit.

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  3. Bill Johnson says:

    The truth doesn’t seem to matter to those in power.

    When the typical loan takes 43 days to close, if ordered at the beginning of the process, how can a 7, 10, or 20 day appraisal delivery time delay the loan process?

    When the Gov. says they are going to implement PIW in part due to cost saving measures in the home buying process, why do they quote $500 appraisal fees when we know 80% of the time an AMC is involved where they steal 25 to 60% of that fee.

    When my area of practice reflects on average $40,000 in agent/broker commission fees ($800,000 x 5%), please tell me Mr. Gov. how an appraiser grossing $325 and netting $200 for 10 hours of work is the problem in the home buying experience?

    If they say there are 73,000 individual appraisers, and its known that only 40,000 individuals have submitted work through the governments appraisal tracking portal, there’s no shortage of appraisers, but rather why are 33,000 choosing not to participate under the current working environment?

    One other thing to consider Jonathan, is that with PIW, they tell us the need for an appraiser has been eliminated 10% of the time.

    Seek the truth.

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  4. Jeff Weeks says:

    How about allowing appraisal firms run their business and quit having lenders dictate who is on their approved list. Let apprentice appraisers get to work without having their hands tied. If you’re going to allow a realtor do an inspection how can you explain that they will not allow an apprentice. It’s all about control. But they will soon realize how much smoother it will be to just let appraisers do their job

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  5. chris says:

    We can’t afford to train appraisers while the fees are so low. And why are fees so low…..AMC’s. they don’t want more appraisers, they want all the reviewers to work on weekends for peanuts.

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    • Peanuts and 2 day turn times.

      I just quoted an old client from 2007 an sfr fee of $550 for a non complex, conforming FNMA transaction. I used to charge him around $400 to $425 then for SFR work & $4k to $10K for C&I work. His response – that’s not a problem. The owner of the company (now semi retired) wants & trusts me to do the work.

      The VP always used to call me and find something to challenge me on. I never avoided him, and always had the answer he needed. Eventually we got down to typos. He said “I had to call you on something” or they think I’m not doing my job. From that point on even if I caught them all, I’d leave at least three typos in every report just to see if he was paying attention. To this day I type ‘hte’ instead of ‘the’ often.

      Apparently the privately held company went bankrupt after having used a cheaper appraiser for around three years on much larger deals than they fund now. A series of bad loans with even worse appraisals took this former mid range player down. Now they are a much smaller operation. I’m happy they survived. They were always a great client. Despite spell-check I suspect the new assignment may have a few ‘htes‘ in it.

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  6. Anna R Todaro says:

    Looks like all that extra edumacation has caused AI to forget basics like supply and demand.

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  7. powerbottomlogan says:

    Can we all agree that clear capital is the real problem? $261 offered for a complex 1004 yet they charge the borrower $550? Every time I receive an order like this I pdf it and send it to my state congressman. These lies and deceptive business practices need to be exposed in every state. Please flood your state representatives email inbox with examples of appraiser abuse. This is ultimately causing the borrower undue harm.

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    • Bill Johnson says:

      You could always move to CA where Valuation Connect just offered me $525 (Refinance) for an assignment where the property just sold last week for 2.4 million. Keep in mind, as of 3:35 P.M today the due date is 11/02/2018 by 3: P.M (3 DAYS including a holiday). Really Valuation Connect, 5,000+ sf, 3+ acres, pool/spa, tennis courts/basketball courts, putting green, solar panels, guest house, and an indicated producing avocado grove. Who cares if the owner is a high up in a fortune 500 company, with lawyers on call ready to pounce on my insurance that they would want me to include.

      Keep your friends close, but your enemies closer.

      Seek the truth.

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      • chris says:

        I look at it like this, they can ask…. And why do they need it back in 3 days, because they’re shopping around to get the lowest bidder.

        And I really think they just do that to make us all think our competitors are accepting fees just a little higher than that, it’s all bull….

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        • Bill Johnson says:

          The agent/broker commission for the purchase last week was over $120,000, but yet its the appraiser (in this case $525), who is the problem ($$$), in the home buying experience. Considering known government appraisal fee schedules in my county (VA fees) are $600, please tell me how how a $525 offer is C&R for this assignment. What a joke.

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          • Baggins Baggins says:

            Before middle management meddling, and junk fee application in the improperly co mingled appraisal fee, determining the reasonable compensation rate for appraisers (which was the standard appraisal fee billed to consumers) was relatively simple and straight forward.

            Survey your panel of appraisers or request fee schedules from them. The lowest cost for standard service which the majority of appraisers would accept is the standard fee. The standard fee is not what only the most aggressive lowest priced corner cutting outsource using appraisers may be able occasionally to complete the job for.

            Logan I can not agree, regrettably. Remove that one, another will take its place. The problem is the financial incentive created to defraud consumers with improperly co mingled fees in the ‘appraisal fee’ pool. Distinctly different services require distinctly different fees, disclosed separately. Again, if the amc service had value, why can’t they charge for that separately and why won’t the lender pay for that, it’s a lender service primarily which appraisers easily do without and are obviously not receptive to, half of all licensed appraisers refuse to work under such tentative and inconsistent terms.

            What’s your fee and turn time?

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          • I don’t base fees on estimated value or sale price alone BUT having said that, it IS an indicator of anticipated or possible complexity…and I DO base fees on that.

            In my area anything that requires a certified license level is going to have premium (by me). That means complex OR where the transaction amount is over $1,000,000. If it’s a million+ tract, then maybe (rarely) $750 could be ok, but more likely in the $1,000 to $1,500 range. Anything in 2 to 3 million ranges will tend to be higher. Over three million will definitely be higher because it’s one of the thresholds E&O asks about in quoting annual fees. It won’t ever be less than $1,500 and often will be quoted in the $2500-$3500+ range.

            $525? That’s BELOW my $550 minimum sfr fee for non complex fnma! A fee that I am increasingly raising to $650 to keep pace with all the new bells and whistle costs being demanded.

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    • PBL – Agree, and great job sending orders to Congressman. May want to also send copies to Jeb Hensarling (R-TX) as well as state board that regulates C&R fees. Congressman Hensarling is the one that drafted replacement bill for Dodd Frank. Best we can hope for is inclusion of similar appraisal language. Maybe copies of orders to OCC?

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  8. Baggins Baggins says:

    I’m available at $500+ standard full order billing rates, minimum one week turn time expectations, preferably two. Have room for one or two direct lending clients right now.

    All that I need to be able to engage with a lender is; a reliable workflow, upfront stated and consistent fees, sufficient time to complete the job, and a properly qualified licensed appraiser manager I can turn to on a regular basis.

    If the lender wants to assure they do not engage with me, all they need is; to place bidding requests for everyday run of the mill orders, a middle man company raking a portion of my fee, only send me complex work the discounters would not accept, excess technology fees clearly over what competitors charge, nitpicky underwriters whom are not discovering anything tangible, demand 48 hour turn times, and have someone with absolutely no real estate or lending experience ‘managing’ the distribution of appraisal orders.

    I’ll leave the shortage of appraisers argument to you guys. I can however make one argument with certainty, this industry has a severe lack of qualified appraisal distribution department managers whom are appropriately qualified and currently hold active appraiser licenses.

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    • Dan Johnson says:

      Right on, good comment Baggins

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      • Baggins Baggins says:

        Thank you. Staff turnover at assignment departments continues to increase. They’re finally getting a clue what a dead end position that is if they do not actually hold an appraisers license.

        What kind of person pretends to be a qualified manager of professionally licensed individuals without having a license themselves? And what kind of lender hr department would make that decision in the first place, they should all be replaced with people who know what they are doing.

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        • chris says:

          Because they want $12 /hr workers, not appraisers worth their salt.

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          • Baggins Baggins says:

            A favorite retort; Quiz your distribution staff and see how many of them have aspirations to increase their position and become professionally licensed appraisers themselves. If nobody raises their hand…

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          • Hal Gearhart says:

            The only reputable appraiser’s earn designations with the Appraisal Institute.

            You’re a damn fool if you don’t take advantage of that organization.

            You only have one life be the best…

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  9. Vincent R Simon on Facebook Vincent R Simon on Facebook says:

    There’s only a shortage when the offer for the assignment is, how low can you go ..

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  10. Bentley Rainwater on Facebook Bentley Rainwater on Facebook says:

    They just need to change their name to the Crony Institute.

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  11. Tom D says:

    hey mike, i waited to the last moment to get certified. i’m in pa. i couldn’t have waited any longer. my cert number was 672. wow, now that was a shortage. i also voted to merge the society with the mai. i soon realized that the institute was worthless & my hard earned golden SRA would become worthless.

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  12. Hal Gearhart says:

    Quite bitching: If any of you want to be the best in the World at appraising real property you need to take the time, spend the money to join the Appraisal Institute. Earn through classroom experience, testing, pier reviews, meetings, writing a demonstration report and comprehensive examinations.. Only then will you be competent enough to be the best appraiser in the World. Become an SRA OR MAI OR BOTH.

    Even when you grow older you qualify as an “expert witness” because of your credentials.

    Good luck, Hal

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    • Baggins Baggins says:

      Designation Resources – AI Designation Requirements

      If AI wants to attract new appraisers they’ll need to actually do something to protect the integrity of the distribution process which has been all but torn to shreds in a system of backwards rewards for a minimum of the past decade.

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    • Where the AI takes the approach of “Quit[e] bitching” to address appraisers concerns?

      Best in the world is ancient history; aside from being completely unsupported by anything other than self proclamation. SOME MAIs are good but they certainly have no world wide claim of superiority over any ASA or many other disciplines, or even independent non designated appraisers.

      Being infamous for my own terrible typos I won’t comment on an experts misuse of pier where clearly peer was meant. We all do it. Even the ‘best’.

      Hal, I’m really trying really hard to turn over a new leaf and not be disagreeable when I disagree BUT the sentence “Even when you grow older you qualify as an “expert witness” because of your credentials” is a steaming pile of pony loaf!

      THIS is exactly why the MAI designation no longer means much to anyone outside of the AI! You do not ever qualify as an expert witness because of your (inferred) AI credentials. Never. IF one becomes an EW it is because of their own individual knowledge, relevant skills, specific subject matter experience, and perceived integrity…not their initials.

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Appraiser Shortage Lie & Propaganda

by Jonathan Miller time to read: 2 min