Much has been made of the fact that the mortgage industry faces a near-future shortage of appraisers. There is little doubt that the loss of appraisers through attrition in the near future will exceed the number of incoming candidates. In fact, there have already been instances of extended turn times in states like Colorado, Oregon and South Dakota. The trust and integrity of the very system our industry relies upon for securing residential loans is at risk.
The worst part is that very little is being done to fix the major underlying cause of our industry’s appraiser shortage — namely, the barriers of entry to a career as a residential appraiser.
To be clear: I am not in favor of lowering training standards. As a certified appraiser, instructor and owner of a nationwide appraisal company, lowering standards would have devastating consequences and only make access to truly qualified appraisers even more difficult. Yet the current system has become so flawed that is no longer capable of producing and sustaining the number of qualified valuation experts our industry truly needs.
Poorly-valued real estate decisions were a major contributing factor behind the failures of hundreds of banks between the years 2008 and 2014. Our economy will remain susceptible to future disasters unless we are able to sustain a well-trained, competent workforce of professional appraisers in the years ahead.
Currently, to become a licensed appraiser one must first complete a total of 150 hours of coursework and accumulate 2,000 hours of work experience with a certified appraiser. However, a vast majority of certified appraisers work independently, and are unmotivated to take on apprentices who may eventually become competitors and erode their business.
That’s the first problem. The second is that many credit and risk professionals today have interpreted recent regulations concerning appraisals very narrowly, and are requiring additional oversight of appraiser trainees. Credentialed appraisers are more frequently required to not only sign appraisal reports, but personally view the subject properties themselves. Again, most certified appraisers work independently or in small groups, and are ill-equipped to jointly view every property.
This situation can be corrected while reinforcing the public trust in appraisers through a two-fold solution. First, there ought to be more than one way to become a licensed appraiser. Second, licensing standards that are based on actual competency, not just on the number of hours of coursework one completes, should be adopted.
Other professions, for example, utilize a system of professional development that is more competency-based. For example, doctors receive academic training, then continue to develop their skills through internships, then receive a license, then begin a residency in their chosen area of practice. Similarly, attorneys are required to meet certain qualifications if they wish to practice law in different courts. In both examples, the focus is on competency, which engenders public trust in the profession.
The following two options are a sensible approach to replacing the current licensing requirements:
Option 1 — A license is received after the candidate successfully completes basic coursework. The courses should be mandated and not challenged, and should include simulated lessons, both online and in a physical classroom.
Option 2 — A license is received after the candidate completes a smaller set of mandated coursework in addition to completing a minimum of 25 property inspections, with oversight from a certified appraiser. The inspections should take place within a 60-day period and the candidate should be permitted to use technology tools to avoid duplicate trips to the property.
For both options, the candidate should be expected to complete the requirements within a six to nine-month period. After completing them, the candidate would be classified as a licensed residential appraiser, qualified to appraise non-complex properties less than $1 million.
To advance from a licensed appraiser to a certified appraiser, the requirements should remain similar to what currently exists. However, licensed appraisers should only advance to the certified level by demonstrating their competence based on work samples.
Undoubtedly, any proposals to change our current system of appraiser licensing and certification will be met with resistance. Something needs to be done, however, to anticipate future needs. If the current system is left to continue, it could lead to overdependence on non-appraiser models, which will in turn erode consumer confidence.
William Fall is the CEO of Ohio-based appraisal company, William Fall Group.