If you have seen LinkedIn or read appraisal-related blogs lately, you know the appraisal workforce is experiencing a wave of layoffs as mortgage lending activity continues to be anemic. While unsurprising, every downturn in housing finance and its related loss of jobs should be a stark reminder of how quickly business can pivot from a deluge to a trickle. The conditions this time, however, are such that we may also see the beginnings of drastic change to how collateral is valued in connection with mortgage loans.
By way of analogy, I was among the many law school graduates who, upon completion of my degree and the bar exam in 2008, entered a legal profession facing upheaval. As the broader economy cratered, law firms were confronted with clients who refused to pay for junior attorney hours, seeing little value on the work being done by entry level staff. In some ways, this was compounded by the expansion of electronic legal research – a process that was often time consuming in paper form had been reduced to a few Boolean searches and the ability to quickly navigate among numerous decisions to find relevant case law.
What happened? The bottom fell out on junior hiring, and many of my peers struggled to find employment in this new environment where efficiency and client demands reduced the need for as many attorneys.
I see parallels today in the appraisal profession. Technology has made the collection of subject and comparable property data immeasurably faster and easier, to the point that large industry players are comfortable with non-appraiser third parties following guided prompts to conduct inspections. (This says nothing about the propriety of unknown third parties, lacking background checks or meaningful guidelines, entering individuals’ homes – a conversation for another day.)
The GSEs have embraced a spectrum of solutions around collateral valuation, regardless of whether they provide safeguards comparable to traditional appraisals. And the overlay of bias and discrimination provides support for the idea that, perhaps, entrusting one individual with an entire process so crucial to homeownership can lead to negative unintended consequences no matter how professional or well-intentioned the appraiser.
In short, there simply isn’t the same demand for appraisers in connection with mortgage lending transactions.
A corollary topic in this area relates to the recruitment and hiring of a diverse next generation of appraisers. While there is recognition that attracting young talent with a range of backgrounds and experiences is vital to the future of appraising, you cannot ignore the backdrop that demand for their services (at least, in a purely mortgage lending appraisal context) is dropping and unlikely to return to its once lofty peaks. So how do we ensure the well-being of the appraisal profession today and tomorrow, so that young professionals who choose to enter can have a long, successful career?
One way is to start by recognizing that while mortgage lending work consumes much of the conversation, it is only one way to craft a career as a professional appraiser. Opportunities abound in other areas, such as litigation support for estates and divorces, or for tax appeal work in a period where taxpayers are more likely to contest rising assessments. Relocation appraisal work provides its own unique challenges, as does eminent domain appraising and going concern valuation work.
Finding these opportunities takes additional effort but can be aided by joining with a professional appraisal organization. Not only do these organizations provide ongoing educational opportunities for growth, but they provide a peer group whose support and referrals can help a business grow into new areas. By tying in with other appraisers, the pathways for opportunity multiply.
Months ago, I wrote here that we had entered a new era for how risk is defined in connection with mortgage lending appraisals. Read it here:All Risk, No Reward? For Appraisers, a Question Worth Asking. Just as critically, it is time to recognize that – no matter our feelings about the changes that have happened – that they are here, they are real, and they will affect the need for appraisers going forward.
Waiting and hoping for a return to the “good old days” is folly, but taking a proactive approach to finding new ways to apply your professional skills and abilities will be the differentiator between those who thrive in this new environment, and those who struggle.