Portland Area Real Estate Appraisal Discussion

The Underlying Problems Causing Appraiser Shortage in Oregon
August 18th, 2016 7:26 PM

Where are all the appraisers?
Recently, I was in the field for the entire day racing from house to house without my normal time between home viewings to respond to a voice mails (happening more often lately).  When the day was done I had about forty messages on my phone, which is normal these days.  About ten of those messages were home buyers or borrowers who had been told that their lender could not find an appraiser to get their deal done prior to the planned closing date, stating that appraisers were scheduled months, not weeks out.  These consumers are calling around trying to help their lender make their refinance or purchase transaction work.  The remaining thirty or so messages were our normal appraisal requests, but far more than our four appraisers could ever service daily, and this does not include the majority of appraisal requests that come in by email each day.

Appraisers around Portland, Oregon have been seeing a demand for appraisals that is beyond anything we have ever encountered, even during the run-up to the last real estate market collapse.  Our schedule is seven weeks out as I write this, but we are trying hard to bring that down to a more reasonable two to three weeks.  According to many people I’ve spoken to, it is more difficult to get an appraisal in Oregon than anywhere else in the country.  So what is going on?  Where are all the appraisers in Portland?

There are many factors that are causing long delays for appraisals, not just in Oregon, but across the country.  Here is a list of some factors that you might have heard:

  1. Portland’s real estate market is one of the most active in the country and the number of transactions is well above what it was at the peak in 2006.
  2. Prerequisites to become an appraiser have increased in recent years. A four-year college degree is now required for a State Certified Residential Appraiser, which is the level of licensure needed for most residential appraisal applications. This is in addition to the minimum two-year apprenticeship (also known as Appraiser Trainee or Appraiser’s Assistant) and appraisal-specific curriculum.
  3. Appraisal fees have not risen since the ‘80s or ‘90s until just recently (here in Portland), but the time needed to perform an appraisal has gone up for most appraisers, despite advances in technology. Fees have stayed down because many lenders see the appraisal as a commodity, only differentiated by its price and turn-time, rather than the credibility of the report or skills and qualifications of the appraiser. Also, appraisal management companies (AMCs) influence appraisers to keep fees low by sending out orders to many appraisers, and shopping for the lowest bidder. This control over price is more of a reality for appraisers who only work for one or two AMCs. Income stagnation or decline makes it more difficult to justify the high barrier of entry into the appraisal industry.
  4. Owners or buyers of unique or rural properties around Portland find it even more difficult to hire an appraiser. This is because when appraisers have the choice of many jobs, the tendency is for appraisers to select the jobs that pay the best dollar per hour, that have the lowest liability, and that will receive the least scrutiny through red flags or pushback from automated reviews or quality checkers.

However, I think there are two underlying causes for this problem that are not listed above.

  1. Many or most lenders are not allowing appraiser trainees to inspect subject properties and comparable sales without the signing appraiser present. The viewing of the subject and comparable properties, and reporting of condition and features back to the appraiser is probably the easiest part of the appraisal for an appraiser assistant to learn, but assistants are being forced to tag along with the appraiser. This is like saying to doctors that the nurse is not allowed to check the patient’s blood pressure without the doctor present. Such a rule would certainly make doctors less productive, make it harder for nurses to find work, and increase the cost of medical services. That is exactly what is happening in the appraisal market when the assistant cannot make a big enough impact on the appraiser’s efficiency to justify a reasonable starting pay.

     

  2. Training an appraiser is something that can most easily be done by appraisal companies that have multiple appraisers in the office. This is because they have the infrastructure in place to train and pay employees, and other appraisers are likely available to answer questions when the supervising appraiser might not be available. However, the small residential multiple appraiser office (like A Quality Appraisal) has almost disappeared as a result of financial reform legislation like the HVCC and subsequently Dodd-Frank that, in an effort to keep appraisers from being pressured to meet a value, produced a marketplace where most AMCs select the appraiser and assign appraisals directly to the individual appraiser and not to an appraisal company. The appraisal company no longer has the ability to trade an assignment for one appraiser with another appraiser who might be working in that area or who may be more able to handle the assignment without the permission of the lender/client. Also, the AMCs have taken over the quality control portion of the appraisal assignment. These factors have made it difficult for the appraisal companies to add value to the appraisal transaction. Consequently, an appraiser can decide to quit working for an appraisal company one day and continue working the same clients the next day. It is no wonder most appraisers work alone, most of the small multi-appraiser offices are gone, and so many residential appraisers will say, “I don’t want to hire an assistant and train my future competition.”

The solution to these problems are already starting to work themselves out with simple supply and demand.  Just today I got a call from an appraiser in Utah looking to move to Portland for the higher fees and I’ve had four appraiser trainees ask me for work in the past two weeks.  When there is money to be made, some appraisers who had previously left the industry will come back. 

In the past six months, appraisers have seen fees jump, especially around Portland, Oregon.  Some real estate agents near Portland were refusing to accept VA offers on sales because the appraisals were taking too long.  In response, the VA raised prices for appraisals in Clackamas County by over fifty percent if the appraiser completes within a reasonable time.  Also, some lenders are now following suit with VA-like appraisal price increases or bonuses for quick delivery.  These fee increases will also likely attract more appraiser trainees and make more appraisers feel like they can afford to train someone. 

Now, the lenders need to open up their internal policies and make it clear that appraiser assistants can and should take more of an active role in the appraisal process and inspect subject properties and comparable sales in states where it is legal to do so.  The health of the appraisal profession, the real estate market, and the lending industry all depend on having plenty of skilled appraisers.  More background is provided below regarding the laws in Oregon and using appraiser assistants on typical Fannie Mae appraisals for lenders.

Did I leave anything out or do you want to join in the conversation?  Let me know in the comments below.

If you find this information interesting or useful, please subscribe to this blog and like A Quality Appraisal, LLC on Facebook.  Also, please support us by making Portland real estate appraisal related comments on our blogs and YouTube videos.  If you need Portland, Oregon area residential real estate appraisal services for any reason, please request appraisal fee quote or book us to speak at your next event.  We will do everything possible to assist you.

Thanks for reading,

Gary F. Kristensen, SRA, IFA, AGA

Here is some additional information regarding if an appraiser assistant can inspect a property without the supervising appraiser present in Oregon:

Each state and lender can decide if appraiser assistants can inspect a property and report what they see back to the supervisor, but the rules are complicated and out of an abundance of caution or other bureaucratic reasons, many or most lenders and AMCs will not allow appraiser assistants to inspect the subject property and comparable sales without the supervising appraiser.

The Oregon Appraiser Certification and Licensure Administrative Rules 161-010-0010 states, “Unlicensed/Uncertified individuals may assist in the preparation of an appraisal, but are not allowed to sign the appraisal report.  However, Oregon rule 161-025-0030 states, “An appraiser assistant may sign an appraisal report, provided their supervising appraiser co-signs the appraisal report and accepts full responsibility for the contents of the appraisal report. 

Fannie Mae, Freddie Mac, FHA, VA, and USDA (GSEs) dictate on the Uniform Residential Appraisal Report (URAR) that the signing appraiser must personally view the subject property and comparable sales.  It says on page 4 of the URAR, under Scope of Work,

“The appraiser must, at minimum: (1) perform a complete visual inspection of the interior and exterior areas of the subject property, (2) inspect the neighborhood, (3) inspect each of the comparable sales from at least the street.” 

The Fannie Mae Selling Guide B4-1.1-03 states:

“As noted in the License and Certification section in this topic, Fannie Mae allows an unlicensed or uncertified appraiser, or trainee (or other similar classification) that works as an employee or subcontractor of a licensed or certified appraiser, to perform a significant amount of the appraisal (or the entire appraisal if he or she is qualified to do so), as long as the appraisal report is signed by a licensed or certified supervisory or review appraiser and is acceptable under state law.

If a supervisory appraiser is used, the supervisory appraiser must certify that he or she

  • directly supervised the appraiser that prepared the appraisal report,
  • has reviewed the appraisal report,
  • agrees with the statements and conclusions of the appraiser,
  • agrees to be bound by certifications as set forth in Fannie Mae’s appraisal report forms, and
  • takes full responsibility for the appraisal report.

A supervisory appraiser may not sign the left hand side of the appraisal report unless he or she has met the requirements of the appraiser as noted in the License and Certification section in this topic, including but not limited to, inspecting the property. “

All of this information suggests that the problem with appraiser assistants not being able to inspect properties is not in the Oregon laws or Fannie Mae rules.  James Baumberger, CEO of First Choice NW Appraisal Management Company says the caveat is that, “some individual institutions have policies prohibiting trainees from completing appraisals, as well as some investor overlays…”

Posted by Gary Kristensen on August 18th, 2016 7:26 PMPost a Comment

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Gary, Keep shinning that light of truth. Well done!

Posted by Casey Lyon on August 18th, 2016 11:08 PM
crossroadsappraisalgroup.com
Thank you Casey for following.

Posted by Gary Kristensen on August 19th, 2016 12:15 AM
Very timely topic. I'm getting similar calls, though I am not out 7 weeks in Sacramento. You hit the nail on the head with this one Gary. We really need to see lenders relax their standards on trainees. It's ironic to hear lenders complain about the problem, yet my sense is they hand a big hand in creating it. I really appreciate you clearly listing Fannie Mae's stance on trainees too. Solid stuff. Keep up the great work.

Posted by Ryan Lundquist on August 19th, 2016 7:06 AM
www.SacramentoAppraisalBlog.com
Great post Gary. I think you have painted a very good picture of the situation we appraisers face.

Posted by Tom Horn on August 19th, 2016 8:29 AM
www.BirminghamAppraisalBlog.com
Thank you Ryan and Tom for weighing in. It is an honor to have you following my blog.

Posted by Gary Kristensen on August 19th, 2016 11:45 AM
Nice job Gary. I am receiving 20 + orders or requests for fee and turn time daily. Never in all my years of appraising, have I seen this type of demand. In addition to your stated underlying problems is the fact that dealing with AMCs just takes more time. Before HVCC I received orders via fax or email with my fee and turn time. No more contact until I submitted the appraisal. Now AMC’s want their websites updated constantly, accept or decline, appointment times, inspection completion dates, status, status and more status. Sometimes two or more people call or email from the same company on the same order. The government has successfully created this problem with HVCC and Dodd- Frank. I realize the number of appraisers has declined but 1 or 2 years from now when this rush is over it will be interesting to see if people still think there is an appraiser shortage.

Posted by Greg Strength on August 19th, 2016 1:27 PM
Greg, it is nice to hear the prospective from another appraiser in Portland. I too think it will be interesting to see if there is a shortage in a year or two. I'm guessing there will not be.

Posted by Gary Kristensen on August 19th, 2016 1:33 PM
Great post Gary, I'm seeing all the same things in Chicago, I although Portland has us beat in turn time 7 weeks wow.

Posted by John Tsiaousis on August 21st, 2016 3:38 PM
www.chicagolandappraisals.com
John, it is interesting to hear the problems finding appraisers are also in Chicago right now. When you say, "has us beat in turn time", do you mean that your appraisal turn-time is longer?

Posted by Gary Kristensen on August 22nd, 2016 1:30 AM
Great piece Gary. I concur with your analysis. While we're not backed up as much as appraisers in Portland, we are extremely busy. It will be interesting to see what happens. The banking lobby has the power to get some of these problems resolved. I'm hoping the potential impact on their business might finally spur some action.

Posted by Frank John on August 22nd, 2016 12:40 PM
www.WashingtonAppraisal.com
Thank you for following Frank John. I think that the banking loby can do something about this problem, but I hope that what they do is help the appraisal profession grow rather than finding ways to circumvent appraisals, as I fear they will do if they have a chance.

Posted by Gary Kristensen on August 23rd, 2016 7:42 PM
Gary, thanks for taking the time to outline the current challenges in the appraisal environment. I am a residential home owner currently in the middle of a refi that was stopped cold by this shortage. My lender has told me to prepare to wait upwards of 3.5 MONTHS for an appraisal! They are holding my rate lock until they can secure an appraisal, but being in financial limbo for that long has me very uneasy. I, too, was preparing to call around locally and see if I could find a company to do my appraisal sooner (how I found your site and this page), but won't bother now. Been a home owner in Portland for 22+ years and have never seen this.

Posted by Al Hutchinson on September 6th, 2016 11:45 AM
Thank you so much for sharing your story Al. I'm sorry to hear about your situation, but it is important that your story is heard.

Posted by Gary Kristensen on September 6th, 2016 7:23 PM
Test Comment

Posted by Gary Kristensen on September 23rd, 2016 7:35 PM
Hi Gary... I just took the Supervisor/Trainee 4 hour course..(and 71 other hours of required courses for a trainee).. I had understood that a trainee may be allowed to conduct an inspection alone if, and only if, the supervising appraiser determines that he/she is at a point when they have become competent to do so. Your post says.."Many or most lenders are not allowing appraiser trainees to inspect subject properties and comparable sales without the signing appraiser present." Did I misunderstand the rule or are there particular lenders that are imposing this requirement despite the USPAP standard? Thanks for all the good info. I'm finding your Blog very helpful indeed.

Posted by Fred Jaeger on September 29th, 2016 2:18 PM
fred@fredjaeger.com
Fred, you're correct. It is the lenders and the appraisal management companies in most cases that will not allow the appraiser assistant to inspect a property without the appraiser being there. There is no USPAP rule, Oregon law, or Fannie Mae requirement barring assistants from inspecting alone.

Posted by Gary Kristensen on September 29th, 2016 2:27 PM
thank you so much for this insight. As a family trying to buy our home it is very frustrating not knowing why it is taking so long. We just keep hearing "no one wants to pick up your appraisal because it is in the country and it has a second non livable mobile home on it" So my question is "is there a chance no one will ever pick it up??" :(

Posted by Carmen Berkey on October 13th, 2016 3:11 PM
Thank you for sharing your story Carmen. If your lender keeps trying to find an appraiser and nobody is willing to pick it up, it sounds like the fee that is being offered is not sufficient to justify the time necessary to complete the assignment. Your property sounds like it could be a headache for the appraiser. I see many properties that are double the work for the appraiser, but the lender is only willing to increase the appraisal fee by 20% or so. If your lender is not willing to reasonably increase the appraisal fee paid to the appraiser, I'm afraid that it is possible no appraiser will take the assignment.

Posted by Gary Kristensen on October 14th, 2016 1:02 AM
I am currently finishing my four year degree to become an appraiser in Oregon. After reading this article, I worry how I'm going to find someone to work with for my two year apprenticeship. Any suggestions?

Posted by Tamara Jones on January 11th, 2018 9:55 PM
Tamara, thank you for following and glad to hear you want to become an appraiser. Although there is no longer a shortage of appraisers in Portland, here is an article I wrote that might answer your question http://www.aqualityappraisal.com/How+to+Find+an+Appraiser+to+Train+You

Posted by Gary Kristensen on January 12th, 2018 12:53 AM
www.AQualityMeasurement.com

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