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Appraiser shortage needs big-picture solution


Much has been written about the growing shortage of residential appraisers, the stepped-up requirements on the appraisal industry and the challenges involved in getting properties valued in a timely manner, particularly in rural areas. Meanwhile, computer programs using market data, known as automated-valuation models, are able to assign a value to properties instantaneously, putting the future of the traditional appraisal in some doubt. Susan Allen, senior vice president in CoreLogic’s Valuation Solutions Group, spoke with Scotsman Guide News about the future of the appraisal industry and why she believes it will take more than simply increasing the number of qualified appraisers to speed up the process and efficiently serve lenders and borrowers. 

What is perceived as the problem with appraisals?

AllenYou will find consensus among most industry stakeholders, including appraisers, that completing a residential appraisal takes too long. It takes too long within the current process but, more importantly, the mortgage industry is driving toward shorter appraisal and funding times. So, we need to perpetually strive to produce quality appraisals in a shorter amount of time.

Do you get any sense of how long is too long?

How long is too long is going to be very dependent on the situation. In a refinance transaction, for example, you have a different window of opportunity than you have in a purchase transaction, where there is an established close date. An appraisal takes too long if it doesn’t meet the lender’s expectations and it doesn’t allow for the mortgage transaction to close in a reasonable time. I know that is a bit of a soft answer, but it drives to the point that I made earlier, which is that it is a moving target.

What are the stumbling blocks? Is it the lack of appraisers, or is it what is required of them?

I suspect there are three main areas of focus for us. The first is the appraiser population itself. The second is technology, and the third is what we can do with alternatives to traditionally produced appraisals. When we think about what are the problems and what needs to happen, we tend to segment them into those three buckets as we look for solutions.

How can we overcome some of those problems?

Well, let’s start with the appraiser population. There is a lot of focus on aging and retiring appraisers, and the stringent requirements for becoming an appraiser. CoreLogic is participating in the industry’s efforts to encourage new appraisers to enter the field. Even if we do that, there is still a fundamental disconnect between supply and demand that I think will always be present in residential appraising. The demand for appraisals in the short run will be highly dynamic and local.

Mortgage applications are highly sensitive to interest rate movements and local market activity. But, the supply of appraisers in the short run is static and immobile. Let’s say mortgage applications rise 25 percent in a specific market in a short period of time. No matter how we adjust appraiser certifications, training requirements, or education requirements, we are not going to instantaneously see 25 percent more appraisers available in that market to fill the void. So, it is not practical that we are going to address the industry’s desire to compress turn times solely by increasing the number of appraisers to the point where we can handle peak mortgage application volume in every part of the country. It is not going to happen.

It is a challenge that we have an aging and retiring population. We need to find a way to encourage new people to come in, but that alone isn’t going to get the industry where it needs to be. That’s why the second area of focus is on technology. How do we leverage technology and process improvements to make the process of completing a residential appraisal less time consuming? As an industry, we actually have a lot of runway here. There are a lot of mobile and software solutions on the market today for appraisers that are gaining momentum. As an industry, we must continue to invest in solutions that help appraisers do their work more efficiently.

Given that computer programs can now establish a property’s value and looking ahead potentially to a time when buyers may demand rapid sales online, do you think there will still be a need for live appraisers?

I think there will always be a role for appraisers in the mortgage process. I suspect that that role will change over time, but I absolutely think there is a need in the market for appraisers.

Sometimes, the discussion of alternative valuations veers into one of just cost reduction. Can’t just technology do this, and we don’t need people? I think that is a mistake. Borrowers are typically making the biggest investment of their lives, and we all saw what happened in 2008 when mortgage defaults exceeded expectations. We have to leverage appraisers for their unique skill sets, especially research and analysis. Those things are critical in our business for understanding value, but we have to fuel that appraiser with robust data, analytics and appropriate technology to allow them to proficiently do their job. 

So appraisers are not going to be replaced by robots and algorithms, then?

I don’t think anytime soon. Sometimes we think about technology’s ability to value a property. Most AVM [automated-valuation model] producers will tell you that AVM tends to work best in properties that are similar to their neighborhood and in neighborhoods that are fairly homogenous, and fairly close to the median value for that county. AVMs are not going to help you value a very unique property, or a single-family property in the midst of a bunch of duplexes. AVMs are not going to be very helpful if there are material differences in marketability and curb appeal, things like that, which they just can’t see. Although there are properties that are similar enough to neighboring properties and in a common price tier for their county such that an AVM could be pretty accurate, we need to be a mortgage industry that can loan money on any property.  


 

Questions? Contact at (425) 984-6017 or victorw@scotsmanguide.com.

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