Real estate professionals in all corners of the industry have seen a thinning of their ranks in recent years. But Massachusetts real estate appraisers, in particular, are worried that low numbers of licensed appraisal professionals may cause permanent problems.
The number of licensed appraisal trainees in Massachusetts has declined more than 70 percent in recent years. Some appraisers are worried that the drop poses a long-term threat to a profession already struggling with changed regulations giving appraisal management companies (AMCs) a leg up and putting downward pressure on fees paid to appraisers.
Between February 2007 and February 2009, the number of licensed trainees in Massachusetts has fallen to 470 from 1,648, according to the Massachusetts Board of Real Estate Appraisers (MBREA), a drop of more than 70 percent. Overall numbers are down as well, with the total number of licensed appraisers declining almost 30 percent in the same period.
The severe drop in trainee licenses has driven the overall decline in licensed appraisal professionals. The number of certified general appraisers was down less than 1 percent between 2007 and 2009. The number of licensed residential appraisers was down about 20 percent, but the number of certified residential appraisers, a distinction a step above normal licensing, was up 11 percent. That shift could be accounted for by recent FHA guidelines requiring lenders to use certified residential appraisers for its loans, rather than simply licensed residential appraisers.
“It’s a concern to us because the appraiser profession as a whole is graying rapidly, and what we see is a lack of young people coming into the profession,” said Steve Sousa, executive vice president of the MBREA. In its most recent membership survey, the MBREA found more than 70 percent of its members were 50 years old or older, Sousa said. Nationally, the average appraiser is also over the age of 50.
At present, the low volume of appraisal work means there are enough already-certified appraisers to handle demand, Sousa said. He said he is more worried about the future.
“Our concern is looking forward five to 10 years,” Sousa said, when there could be a shortage of appraisers to meet increased demand.
‘I Can’t Use Trainees’
The real estate sector as a whole is frequently subject to fluctuations in professional employment, as people enter the sector when housing is strong and depart during lulls. But earning a full appraiser license requires approximately 2,000 hours of training, and often takes years to obtain. So, when a normal market does return, appraisers may not be able to adapt as quickly to increased demand given the lack of trainees currently in the pipeline.
Existing appraisers say they just can’t afford to take on new trainees right now. The Appraisers Group, of Belmont, maintains a staff of 20 appraisers, according to President Richard Goulet. Normally, several would be trainees, he said, but right now, he has none.
Goulet says that’s due, in part, to newly stringent requirements from lenders and government agencies. For the better part of the past year, Goulet said, lenders have been telling him appraisal trainees and licensed appraisers cannot sign appraisal reports. And if trainees do prepare a report, “a certified appraiser has to have seen the property inside and out.”
Since certified appraisers will have to essentially do appraisal work himself in order to intensively review a trainee’s work, and then split the resulting fee, adding a trainee becomes a money-losing proposition for already certified appraisers. Even when there is enough work to justify additional staff, Goulet said, “At that point you’re going, ‘I can’t use trainees, I’m going to go find a certified residential [appraiser].’”
In the short-term, a shortage of available appraisers may give those who remain a bit more leverage as they capitalize on a short supply of, and modest demand for, appraisal services.
But already, lenders are looking to appraisal management companies and automated valuation models to cut down on appraisal turn-around time and reduce fees. Many suggest that AMCs are sending appraisers to evaluate properties further afield from their core markets, meaning they are less familiar with the areas they are evaluating and more prone to submitting an inaccurate appraisal. Frugal lenders may be tempted to switch to cheaper automated valuation models, which rely on computers to estimate prices.
Gary Minnehan, president of the MBREA, said pressures like these on the appraisal industry cast doubt on whether a return to normal is possible under such conditions.
“It’s really hard to tell what’s going to happen out there. AMCs did get a bite out of what the other appraisers are doing – that did hurt, and a lot [of appraisers] have lost long-term relationships,” he said. “It’s hard to feed yourself, never mind trying to feed two mouths [with a trainee in tow].”
