My New Blog

This is how I see things shaking out. In the near future there will be two categories of residential real estate appraisers. The first category I will call the "Professional Appraisers". These men and women will have local market expertise, years of experience, and a reputation for developing well-researched, reliable, and defensible reports. Their clients will be mostly lawyers, accountants, realtors, builders, and private individuals who need a no-nonsense estimation of value that will withstand scrutiny. They will also be articulate and comfortable explaining and defending their analysis and conclusions in a courtroom. They will get requests now and then from small local banks and credit unions when that particular lender cannot afford to risk making a loan based on an unreliable evaluation. They will not be working for the too-big-to-fail lenders.

While the "professionals" will never get rich in this business, they will be able to command a fair fee for their services. Over time, they will be able to increase their fees as there will be fewer "professionals" in the business.

The second category I will call the "Staff Appraisers." These men and women will work large, lender-owned AMCs. They will be expected to complete 2 - 4 reports per day and will be paid on a per-report basis. They will not be considered employees but independent contractors. They will be responsible for their own Federal Income Tax, Unemployment, and Social Security. They will also be responsible for most, if not all of their operating expenses, and they will be required to maintain Errors and Omissions Insurance. This will be especially important because their reports will be expected to meet all of the AMCs requirements regardless of USPAP or actual market conditions.  It is also important because, as a condition of their employment, they will be required to sign a document that they will hold harmless the AMC and accept legal liability on behalf of the AMC regardless of who was actually at fault or guilty of wrongdoing.

As time goes on, there will be fewer registered appraisers to fill these positions.

The AMC will cite the "appraiser shortage" as a reason to increase the appraisal fee paid by the borrower, but this will not translate into higher fees paid to their appraisers. They will expect their appraisers to complete more reports per day.

It is possible that Fannie and Freddie will become completely privatized, in which case they will no longer require an actual appraisal. FHA will probably follow suit because they usually go along with Fannie and Freddie. But, even if Fannie and Freddie remain government sponsored, the number of appraisers will continue to decline. As the number of appraisers declines, Congress will see the need to allow AVMs instead of appraisals for federally related loans. Lenders will then have their AMCs transition from producing appraisals to AVMs. Depending on the income and credit score of the borrower, the AMC may send a non-appraiser, independent contractor to the property to verify information by taking photographs, maybe some measurements, and probably complete a brief check list.