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MReport September 2015 - Cool Under Pressure

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Th e M Rep o RT | 23 feature A n economic tragedy is unfolding silently across American neighborhoods. With fewer young careerists joining the residential valuations industry, real estate appraisers foresee a future where lenders and consumers alike face added costs and lengthened real estate delivery timelines due to a shortage of trained appraisers in the residen- tial valuations space. Statistics pointing to an appar- ent drop-off in young profes- sional appraisers continue to alarm real estate experts across the country, with the number of appraisers falling approximately 3 percent per year, according to data from The Appraisal Institute, a professional group for the valuations industry. Statistics from the same orga- nization show a long-term trend, in which more than half of the country's appraisers are between the ages of 51 to 65—not exactly a promising statistic if the U.S. real estate market hopes to have a supply of well-trained appraisers in the decades to come. "The rate of decline in the appraiser population within the U.S. has been averaging between 4 percent and 5 percent," explained Greg Stephens, Chief Appraiser and SVP of Compliance for Metro- West Appraisal Co. "That number is expected to increase due to the high percentage of practicing ap- praisers who are in their 60s and 70s and who will either be retiring, dying, or leaving the industry within the next decade." On the surface, the decline of rookie appraisers in America appears insignificant. After all, how much is there to lose when the parties responsible for valuing everything from a home's roof to its green features and custom cabinets are no longer a stone's throw away? But the stark reality is every person and business tangentially tied to real estate stands to lose if this new paradigm survives in the residential valuations space, espe- cially consumers and lenders who rely on the independent analysis of appraisers. "Today we have fewer apprais- ers, increasing average age and a decrease of people coming into the profession—not a model that can sustain without change," said Jeff Dickstein, Chief Compliance Officer for Pro Teck Valuation Services, and a member of the Five Star National Appraisal Congress. "If this trend continues I believe we will see dramatic increases in the cost and time needed for field appraisals. At the same time, I believe we will see increased adoption of other valu- ation products, including desktop appraisals and other non-appraiser valuation alternatives." Dickstein's assessment mirrors analysis from sources that have been following this issue since the dawn of the housing crisis in 2007, when many experienced appraisers ran to the exit gates as soon as business activity plum- meted. The shift caused negative reverberations still felt throughout the industry today. The Federal Reserve Bank of Minneapolis sounded the alarm two years ago, noting that bank- ers in the Fed's Ninth District "expressed frustration" over their inability to find qualified appraisers. At the time, data from the Federal Financial Institutions Examination Council Appraisal Subcommittee showed a dramatic sea change, with the number of U.S. appraisers falling by 15 per- cent between 2007 and 2012. But repairing the ranks is no easy task. Valuation professionals in training remain systemically dependent on licensing institu- tions, regulations, and mentors to ensure they have the chops to enter the profession. The lifestyle, which comes with the potential to earn six figures, begins with a level of uncertainty that appraisal trainers and their pupils increasingly view as not worth the time or expense. New job candidates often find them- selves turned off by certification requirements alone. "We have a difficult time recruiting residential trainers for the apprentices wanting to enter the business," noted William Fall, CEO of The William Fall Group, a real estate valuations firm. "The two-plus year obligation of joint field inspections is felt to be a real burden by most people. There is just not enough positives to offset the time." Michael Floyd, Chief Appraiser and SVP of Compliance for Streetlinks Lender Solutions, blames a complete "lack of incentive" for the dwin- dling ranks of new appraisers. "With the amount of additional required oversight involved with accompanying an appraiser trainee to every inspection and the liability of being completely On the Path to Extinction? ...Not So Fast Residential Appraisers Defy the Naysayers, Fight for their Profession. By Kerri Panchuk

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