Appraiser shortage could mean trouble for housing market
With the sharp uptick in recent home sales, appraisers are in higher demand than ever, at least as far back as the last 10 years. According to the latest fact sheet on appraiser demographics from The Appraisal Institute, however, the ranks of valuation experts are thinning. If this trend continues unabated, it could spell delays for homebuyers, sellers and the real estate market as a whole.
"The number of active appraisers has fallen 20 percent since 2007."
Number of active appraisers dropping
As the Appraisal Institute's June 2015 demographic analysis showed, the current number of active real estate appraisers in the U.S. stands at 78,500. It's not a small number, but it is one that has shrunk significantly in the last eight years. There are now 20 percent fewer practicing appraisers around the nation than there were in 2007. The Appraisal Institute estimates this number will decrease even further in the future - potentially by as much as 3 percent per year for the next decade. Higher rates of retirement combined with relatively fewer replacement candidates are cited as the most probable reasons for the precipitous decline. In fact, 62 percent of active valuation experts are older than 50, while just 13 percent are under 35. Other contributing factors, according to the Institute's analysis, included economic factors and government regulation.
Appraisers are now required to undergo more training for certification than even a year ago. As of 2015, real estate appraisers are required to have a bachelor's degree, as well as undergo a training and apprenticeship for 1-2 years depending on state requirements.
Trends in the shortfall
According to Brennan, at present, appraisal shortages seem to be limited to rural areas, where less business means less incentive to make the trek. This could soon change, however, if the overall number of appraisers continues to shrink. Sandra O'Connor, regional vice president for the National Association of Realtors, speculates that a shortage of appraisers would mean longer wait times for borrowers, and thus sellers seeing more deals fall through.
"Longer waits also affect sellers who need the equity from one sale to purchase their next home," Amy Hoak noted at Realtor.com. "When they can't close on the home they're selling, they can't close on the one they're buying."
Fewer valuation experts available to perform appraisals also means an inevitable rise in cost. Again, this trend may already be visible in rural areas, where the supply of certified appraisers is thin and travel could further inflate costs.
Facing such dire circumstances, the appraisal industry is responding. After a meeting of industry stakeholders, the Appraisal Foundation has a plan in place to tackle the issue of declining numbers of appraisers operating in the United States. Some have discussed creating a set of "competency-based exams" designed to be less time-consuming than current requirements. This could help those without a background in real estate finance become an appraiser in a more timely fashion. Others have discussed pilot programs for colleges, which would allow current students access to a fast-track appraiser certification plan. In this strategy, college students pursuing a four-year degree could simultaneously gain practical experience in the appraisal profession and graduate fully certified.
There are appraisal firms committed to hiring and training the next generation of appraisers. The appraisal profession offers a very bright future for those who embrace education, technology and customer service. The appraisal world will continue to evolve, and for the next generation of appraisers it will be a one of great opportunity.
But it's not only appraisal firms and professionals who are champions of this cause. Several high-profile national lending leaders have recognized the need to support the next generation of appraisers. Many of them have created new policies or are in discussions to allow broader use of new appraisers during their apprenticeship period. All of this is a big step in the right direction for the profession.