Computers eliminating “boots on the ground” residential appraisers.
An historian once quipped, “I cannot predict the future, but give me six months and I’ll tell you why it was inevitable.”
Residential appraisers who work in the mortgage arena began to experience the sea change when UAD arrived amongst much fanfare in September of 2011. Years of portals, hard-stops, and overrides have settled into an uneasy routine.
We’ve already seen changes to closing docs as a result of TRID (TILA RESPA Integrated Disclosures). That adventure began in November 2013. Washington DC, never content to maintain any level of consistency has already changed TRID to KBYO (Know Before You Owe). Whatever.
Under its new policy announced October 24, 2016, Freddie Mac will waive appraisals in lieu of an appraisal alternative in a host of situations, including first-purchase loans. There’s serious talk in Congress of raising the de minimis from $250,000 to $500,000.
The writing is not only on the wall but in big, spray-painted balloon letters for everyone to see. The future for appraisers specializing in residential mortgage work is coming to an end. No bang. Not even a whimper.
In 1991 I attended an NAIFA seminar that offered a grim view of the residential appraiser’s future. At that time there was talk of neural nets eventually phasing out residential appraisers by… 1996. That never happened in the same way that my generation was never provided jet-packs like we were promised when I was ten. Twenty years later, however, we’re edging closer to that promised reality of computers eliminating “boots on the ground” residential appraisers.
The Other Front
I flew down to St. Louis for the November AQB meeting at the Embassy Suites. As you know, since January 2015, all certified appraiser applicants are required to have nothing short of a Bachelor’s Degree before upgrading. Currently, the AQB is pondering alternatives to the Bachelor’s degree requirement. Significantly, they are only seriously considering walking back the Bachelor’s degree requirement for certified residential appraisers while maintaining the degree requirement for certified general appraisers.
My personal request was that they eliminate the Bachelor’s degree requirement from both categories. Why would I suggest such a thing? For years the AQB has operated under the premise that any degree is better than no degree. My point to them was that, here we are, twenty-five years after licensing began and we are still no closer to a Bachelor’s Degree program dedicated to real estate valuation than we were in 1991. Other countries have such a program of study. Why don’t we? How can someone holding a Bachelor’s Degree in Middle Eastern Studies or Philosophy be considered to be better qualified to become an appraiser than someone, without a degree, who has been actively working as a real estate professional for ten years or more? In 1979, when I attended real estate classes at junior college, I was told that soon there would be a course of study just for appraisers. Here it is, 2016, and I’m still waiting.
Since 2007, Illinois has watched 838 or (27%) of its certified residential appraisers exit the profession. Where did they go? They retired, mostly. After all, the average age of an appraiser in Illinois is approximately 58. During that same period, 902 or (70%) of our trainees have disappeared. Where did they go? Most were unable to find a supervisor or were unable or unwilling to complete a Bachelor’s Degree program. The average age of the 2016 class of Illinois trainees is 34. These are second-career people. They finished college, if they went at all, a decade ago. They’re not going back. There are those who hold that there is a perceived loss in the number of licensees in appraising. If Illinois represents a microcosm of the profession, then the loss is real.
Even when you look at California, our most populous state for licensed appraisers, the most casual observer can see the dramatic shift. In November of 2005 there were 18,854 appraisers in the golden state. Compare that to 2016 when that number is down to 10,852. That’s 8,000 California appraisers (42%) in eleven years…gone. The rest of us cannot ignore the demographics of this profession. The existing appraisal population is hovering around 60 years of age, nationally. Trainees, overall, if Illinois is any indication, average between 30 and 45 years of age. We’re not getting any younger in either category and fewer are entering the profession. Without a dedicated valuation program we can’t even begin to guess from where the next generation might come…if they come at all.
In any event, neither the market participants nor the federal government have any interest in preserving the residential real estate appraisers as we recognize them today. In 2013 and 2014, Illinois saw 56 applicants successfully upgrade to a certified credential. This year, that number has fallen to 33. Applications for the trainee credential have fallen by 94.56% since 2005. Since June, only two individuals have taken the Certified Residential exam. Two in a state this large. This is the new normal for appraisal in Illinois.
In time, most, if not all residential valuations will be performed by algorithms. They won’t be any good…but they’ll be good enough. My question remains, “when was the last time an algorithm walked through someone’s house?”
In St. Louis, the AQB repeatedly asserted that whatever their decision is on the degree issue and other things, it will have nothing to do with the appraiser population in the US.
Fine. Then keep doing what you’re doing. In ten years or less… it probably won’t matter anyway.
By Brian Weaver, Coordinator Editor of IllinoisAppraiser, Appraisal Management Company Coordinator for the Illinois Department of Financial and Professional Regulation (IDFPR)
Source Illinois Appraiser Newsletters – Volume 10, Issue 1 – January 2017