Monday, 15 August 2022 | The Latest Buzz for the Appraisal Industry

How Tech is Working on the Solution to the Appraiser Shortage 

The shortage of appraisers within the industry has been well publicized recently and no doubt plenty of you reading this article have experienced the impact of this shortage first hand. However, placing the appraiser shortage into a broader context helps us to better understand the causes, as well as the solutions that are already underway to remedy the problem.  
According to the Appraiser Institute, more than 10,000 appraisers have left the industry since 2013. This represents a decrease of 13% of the working population of appraisers across the country over that time period. This talent drain is further compounded by the fact that of the appraisers that remain in the industry, more than half are approaching retirement age, while 20% are aged over 66.
With the current red hot housing market, demand for appraisers is outstripping the reduced supply, which is pushing up fees and pushing out appraisal completion times. Some brokers are stating fees for residential properties have increased from an average of $750 up to $2,000. Meanwhile, appraisal completion times are taking up to 2 months in certain cases.
A natural reaction to this situation, especially when faced with these statistics, is to try and get more appraisers to enter the industry. But this alone cannot solve the underlying issues with the current appraisal process, such as inefficient workflows and analogue data collection.
Instead, tech innovations have started to enter the market with the goal of optimizing the appraisal process by automating key portions of a property’s valuation. Whether through machine learning tools that create quick and accurate measurements, or digital platforms that allow lenders and appraisers to interact directly, technology is helping modernize previously inefficient workflows, which enable appraisers to add efficiencies to the appraisal process. 

AMCs Driving Tech Innovation 

A number of appraisal management companies (AMCs) are at the forefront of this new tech wave. A number of them have made strategic acquisitions of related technology platforms over the last few years. In addition, AMCs have been investing heavily in R&D. 
 
One of the AMCs who has been most active in the space has been Class Valuation who recently acquired the proptech company DataMaster, which built one of the nation’s most comprehensive multiple-listing service integration networks. With the acquisition, Class Valuation is looking to deliver a completely digitized appraisal process. The company’s CIO Scot Rose said that the end goal is not to replace appraisers, but instead to help them by giving them more useful tools that can drive efficiencies across the appraisal market.
  
Class Valuation has been leading the way in this department, as it launched a tool in 2019 called Property Fingerprint, which leverages machine learning to improve the way appraisers capture property data. More specifically, the platform’s automated formula uses photos of a property to provide accurate measurements through 3D scans and detailed floor plan models. Appraisers can then store and access all that data through the software, dramatically speeding up the process.
 
In September, another AMC called Clear Capital acquired Finnish proptech startup CubiCasa. Clear Capital can now integrate CubiCasa’s automated floor plan sketching technology to provide more accurate results when measuring a home. With square footage being the second most indicator of a home’s value (after location), CubiCasa automates one of the most crucial parts of the appraisal process.    

Cutting Out the Middleman: Alternative Tech Solutions

Appraisal innovation isn’t just being driven by AMCs. In fact, other actors within the property buying process, such as lenders, are making their own play into the appraisal market and bypassing AMCs altogether. They’re doing so by providing brokers with tech applications that can connect them directly to appraisers, removing the need for AMCs.  
 
For example, wholesale mortgage lender United Wholesale Mortgage (UWM) announced it is launching its own in-house appraisal service in October of this year. Called UWM Appraisal Direct, the new service leverages technology and in-house administrators, to pass jobs directly to appraisers to execute. 
In order to support the roll out of this new service, UWM has dropped it’s requirement that brokers have to use AMCs to complete appraisals (although they are still free to do so if they wish). The service is targeting a 5 to 7 day turnaround for all appraisals, and will pass on 100% of the fee to the appraiser.  
 
Another interesting development comes in the form of back-end platforms and marketplaces that automate communication between lenders and appraisers. Cleveland-based AppraisalWorks, for example, provides a cloud-based appraisal management technology platform that acts as a marketplace and automations platform for lenders to manage and assign valuation orders. They have the choice to go through AMCs, or to communicate directly with appraisers.
 
As with other tech platforms, the ultimate appeal comes from faster processing times by setting up shortcuts like electronic payments and portals to upload documents. This allows for appraisers to reduce their heavy workload and automate a number of steps that used to add days to valuations.  

Closing Thoughts

Up until recently, the appraisal process has seen relatively little tech innovation compared to other parts of the real estate process. But the current high fee landscape has provided a huge opportunity to groups that leverage technology to undercut the market by offering lower fees and quicker turnaround times.
What’s more, with solutions coming onto the market that replace or remove the traditional role of AMCs, expect even more competition and innovation among AMCs as they battle to cut costs and retain market share. 
While only time will tell if and when appraisal fees will start to normalize, one thing is certain: increased competition and new entrants into the marketplace will drive innovation, which will help alleviate the appraiser shortage in the long term. 

Responses

  1. I do not think there is a shortage of appraisers. Only a shortage of appraisers willing to work for AMC’s whose business model is a race to the bottom of the fee barrel with the bid-to-work system. AMC fees are too low for an appraiser who has a mortgage to pay, a family to raise and a car payment. A seasoned appraiser cannot compete on fee with a new appraiser who lives at home with their parents with no bills to pay. I can tell you I am inundated with “bid” requests from AMC’s all day long. Even when I do have the capacity to take on more work and get it done within a week I ignore these requests. Because I know that I will take time out of my day to formulate a reasonable fee and explain why. Sometimes it can take me 5-10 minutes of research to derive what I think is a good fee. Then what. I get nothing. Multiply that by 20 a day and that is time wasted. The Class Appraisals, Clear Capitals. Solidifies, etc.. all want the lowest price no matter what. Quoting orders is a waste of time. Make no mistake, there are appraisers all over that can take on the work, but simply choose not to work with AMC’s. The liability is too great and in general the work to challenging to accept low-fee AMC work. These companies brought this on themselves after years of alienating good appraisers. Who in their right mind wants to work for so little. These AMCs seem to forget the fee is pre-tax, we have no health insurance, no benefits, and hold all the liability. Its funny how the players dance around the simple fix to all this. Stop the low fee bid system and pay more. Done. The VA has a great fee schedule for reference to make it even simpler.

    1. Andre, you hit it right on. The current system is not based on quality but low fees. The inexperience with little to lose will be the lowest bidder and gets all the jobs, so the good appraisers are pushed out.

    2. Well right about not a shortage of appraisers but the comment about Clear Capital and Solidi being low I don’t quite agree as they will send me a high offer to accept or decline between $750 to $1400 for a report. The appraiser has to ask for a higher fee to get it! Don’t take the “sucker fee”. For properties with an ADU I request double the fee and get it! I turn in reports same day as inspection also and they know this and probably has something to do with them offering me higher fees.

  2. There is no appraiser shortage. The AMC model has driven tons of appraisers out of the mortgage lending side of things. I have been a residential appraiser for 19 years and only work with decent AMC’s (there are some). If the AMC wont pay fair C&R fees, I pass and I am sure a good portion of the 80k appraisers do the same. Get rid of the AMC model of trying to find the cheapest appraiser possible even if he/she lives 50 miles away. I know of many of my peers who simply due direct lender or private work only to skip the AMC BS. Once again, there is no shortage, just a shortage of appraisers who want to work for peanuts and a 48 hour turn time.

  3. Sorry, but more tech won’t solve this problem…if anything it will make it worse. This is not a tech problem – this is a problem of a profession where many people have left but where demand has spiked quickly due to the sharp drop in interest rates and the economic stimulus done by the government in response to COVID. There are fewer appraisers in CA now than there were in 1992 when I first got licensed, but the State has about 30% more people. The whole problem of technology is that you have a lot of people with no or limited understanding of appraisal pushing buttons and thinking that this is how the problem will be fixed.

  4. I do not need a new sketch solution of any kind; especially one that requires me to hand off one of the most important functions of an appraisal to someone that I talk to over the phone. Sketches are the easy part with reasonable experience. I complete my sketches on site and I gather first hand info on the subject.

    The sketch solutions are aimed at sending a non appraiser to gather this data so a remote or very remote appraiser can do the valuation analysis. This is done purely as a way to push the fee structure back to the ” good ole days” of the AMC retaining more than 50% of the fee. This a Hail Mary attempt. However, there are some good AMCs. None of which were mentioned in the article.

    Most of the appraisers left because you could not make a living with the low fees. This is a problem the AMCs have made themselves. The market is teaching a painful lesson. Of course, the layers of regulation may step in to save their AMC buddies. If they do, I will not participate, I’ll retire.

    It’s really suspicious, I never hear of a designated appraiser ever doing appraisals. They just want tell us sheeple how to do appraising and shut the blank up and accept our measly portion with gratitude; and get ready at a moments notice to go out to next assignment 100 miles away from our market area.

  5. There is no shortage of appraisers. It may seem that way because many appraisers are either not accepting or even responding to appraisal requests from AMCs for various reasons but namely the low fees and higher risk assignments. With appraisal waivers available to many borrowers as well as other appraisal exemptions, many of the potential assignments from AMCs fall in the complex, unusual, atypical, rural or just plain “I don’t want to fool with it” category with the expectation that the appraiser will complete it for a fee that equates to about $15/hr. That is just a bit higher than the minimum wage at a fast-food restaurant in my neck of the woods. The old “one fee fits all” mentality that once existed in the residential appraisal world does not work anymore because the low risk, easy peasy lemon squeezy appraisal assignments are completed by AVM’s and other desktop products that use real estate agents or other “inspectors” to collect the “relevant property characteristics” for fees as low $75. Many appraisers are spending about 30 minutes at the end of each day going through their email and hitting the “delete” key on appraisal requests from AMC’s because the assignments are not worth the trouble for the ridiculous fee being offered. I am deleting about 8 to 10 a day. I believe that many appraisers that are accepting these assignments are failing to see that the assignments being offered are those that have been deemed as having a higher risk of default. This means the lender/AMC is getting the appraisal to have someone with insurance to “throw under the bus” should that loan go into default and that someone is the appraiser. My two cents.

    1. Agree with all of the above. No need to expound upon the truth. May be less Appraisers but only ones getting the work from many (most) amc’s are those that will prostitute themselves. I started in 1988 in San Diego, still have my original pay sheets and the average fee for an appraisal was $350; that was when $350 could buy something. andrew cuomo started this whole mess. Just like he was responsible for thousands of deaths putting older Americans in Rest Homes, he is also responsible for the demise of thousands of Appraisers by the development of another level of bureaucracy.

  6. I agree with the previous responses to this article. No need to rehash. However, I have been a Certified Residential Appraiser in San Diego since 1988. I still have my logs since that time. In 1988 we as Appraisers, were paid $350. on average, per appraisal. That was when $350 could purchase a lot more than $350 can today. amc’s are expecting to pay the same for an appraisal in today’s market. Fees have not increased because amc’s need to get their “cut”. We can lay this problem right at the feet of Andrew Cuomo who was responsible for the creation of the amc model. An additional level of bureaucracy which keeps Appraiser’s fees from increasing because of the reasons listed in previous responses. Cuomo’s executive order caused the deaths of thousands of Senior citizens by inserting Covid virus positive patients into senior care centers. The case he brought against Washington Mutual also caused the demise of thousands of Real Estate Appraisers by creating the amc model.

  7. In 1997 when I started in the appraisal business (Dallas, TX) the fees ranged from $350 (1004)-$425 (1004-FHA). If you calculate utilizing a CPI Inflation Calculator, $425 in 1997 is now $732.40 in 2021.

    So to call this a “current high fee landscape” is ludicrous. My question to the author would be, would you be willing to work for the same money you were making in 1997 ? or were you even old enough to work in 1997.

    A local lender ask me to do a final inspection on a new build. The order came over for $100., which I replied, no. This “VP” (in the mortgage industry everybody is a “VP”) then sent a scathing email about “we’ve always paid $100 for a final inspection, why are you asking for $200. My response was “Yes, in 2000 the fee was $100. My question to her was “would you be willing to work for the same fees today as you were getting 20 years ago? I signed it “President”.

    It seems, like the author, that everybody that is not an appraiser is completely out of touch with the cost of living realities. It feels like an insult when these people think they have a good bead on what is going on with appraisers, when it could be no further from the truth.

  8. Andre, Your response is absolutely perfect! So instead of reading Appraisal Buzz article headlines from the appraisers and their experience with what works and what doesn’t. Lets just continue inviting more people into this industry that have no clue or that are simply making modifications to their bottom feeding strategies. More time trying to explain to someone overseas that in some markets, regardless of what automation they have come up with, sitting behind a desk somewhere in their apartment building, is impossible to automate. Why should appraisers be forced to live out the definition of insanity? The only “shortage” is the shortage of appraisers “willing to work with AMC’s.”

  9. So one quick follow-up as an example. I just now received over 20 solicitations for 1004 orders from Pro Teck. I can certainly take some, but I am deleting them all. Why?? Because their fee offered is insultingly low – not in the ballpark of what I thing is reasonable. I mean what else should I do? Spend 5-10 minutes per potential order and provide my reasonable fee when I know I will get nothing? Who has time for that? Experience tells me that would be a waste of time because Pro Teck just wants the cheapest. At a minimum, that is 100 minutes spent quoting orders with the likelihood that I get even one slim to none. So, in our office, we just ignore and delete.

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