January 2016 - Out of the Woods

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24 | TH E M R EP O RT FEATURE This essentially makes the ap- praiser a de facto home inspec- tor. HUD Handbook 4150.2 has a checklist of health and safety issues that the appraiser must check, but these are often open to interpretation, leading to un- certainty among appraisers. Are they supposed to run the dish- washer? How long should they leave the oven on? All of this adds time as well as ambiguity to the appraisal process. Turn-Time Pressure L enders want the safest loan they can obtain to mitigate buyback risk and reduce the potential for noncompliance. Today's appraiser is expected to do more than ever. As a result, many appraisers try to default to a "safest route possible" when it comes to complicated apprais - als. Appraisers invest more time upfront to avoid possible correc- tion requests or re-inspections of the subject property. While accuracy is essential, appraisers are also pressured to work quickly. It is extremely common for lenders to use the promise of fast closings as a competitive differentiator, especially in a surging purchase market like we have today. However, the appraisal is often the factor can make or break a lender's claims. This creates a double-edged sword for apprais - ers. On the one hand, the scope of the appraiser's work is increas- ing. On the other hand, there is pressure to close quickly. This double-edge sword is sharpest when issues surface during the appraisal process. For example, an appraiser may find several health and safety items in need of repair, per HUD's guidelines, or concessions may become an influence to the final value estimate. Such issues become even more complicated if there are additional costs to the buyer. All the while, there is a lot of pressure on appraisers to get the work done quickly, and obviously to get it done right, even though "getting it right" in such circumstances is sometimes in the eye of the beholder. Who Will Carry the Torch? I n recent years, there has been a great deal of discus- sion about whether the housing industry is facing an appraiser shortage. I don't think there is much of a debate. In fact, the loss of appraisers through attrition is already exceed - ing the number of incoming candidates. While it's true that many markets seem to have an adequate number of appraisers to meet current demand, some markets are clearly stressed. Colorado, for instance, has seen little change in the number of appraiser licenses, and lenders in this state are frequently expe - riencing four-week delays in appraisal report deliveries. There are a number of reasons we have an appraiser shortage. Certainly the previous two is - sues I've discussed play a role. But perhaps the biggest culprit is the oppressive barriers to an appraisal career. The current sys- tem is no longer generating the quantity and quality of apprais- ers that the housing industry needs. Currently, licensed appraisers need to complete a certain number of hours of coursework and on-the-job work experience with a certified ap- praiser. However, as mentioned earlier, many appraisers work independently. Why take on a trainee today who may likely become a competitor tomorrow? The solution is not to lower training standards, which would only make matters worse and erode confidence in the profes- sion. But there should be more than one way to become an appraiser. There should also be licensing standards that are based not just on the number of class- room hours, but on actual com- petency. Attorneys, for example, must demonstrate competency before practicing in certain courts of law. It makes sense for apprais- ers to meet similar standards. For example, an alternative path to becoming a licensed appraiser could include a smaller set of coursework than is currently re- quired, but require the completion of at least 25 property inspections within a 60-day period under the oversight of a certified appraiser. Under such a system, a candidate could become a licensed appraiser within a six- to nine-month period. To advance to the level of certified appraiser, the requirements could remain similar to what currently exists but should also follow a competency-based system demon - strated by work samples. An appraiser shortage will only exacerbate the issues appraisers currently face. If our industry cannot find a way to recruit, train, and develop the next gen - eration of appraisers, we may all find ourselves overly dependent on non-appraiser models, which could have far-reaching impacts and damage consumer trust. Again, these are big chal - lenges for appraisers, but within every challenge lies opportunity. Many appraisers, for example, are taking a much closer look at their business practices and the companies they choose to partner with. By choosing to work more frequently with appraisal manage - ment providers that clearly outline client expectations and are more realistic on turn time demands, appraisers are able to work more productively and efficiently. A capable appraisal manage - ment provider can also help appraisers enhance and ensure the quality of reports. Quality is always the key ingredient in providing an accurate report, and clients are demanding it in order to avoid re-purchase demands and other post-closing issues. There is also a growing number of technology solutions that can help appraisers man - age appraisal orders and report deliveries while checking for quality and compliance. The bottom line is that lenders want a smooth origination process, so when appraisers need help with their issues, a quality ap - praisal management provider can remove friction from the process for both parties. As we consider the issues affecting today's appraisers, we should remember that poorly valued real estate decisions were a major factor behind the failures of hundreds of banks between the years 2008 and 2014. Our industry will remain suscep - tible to future disasters unless 3MReport.indd The current system is no longer generating the quantity and quality of appraisers that the housing industry needs.

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