There's a whole lot of bitchin' going on lately about appraisals. They're taking too long. Why are they taking so long. Well as the wife of an appraiser, I have sympathy for the appraiser. There's several things going on right now in the appraisal industry. There is a huge lack of appraisers due to the change in the requirements to become an appraiser
There seems to be a lot of bitching going on about appraisal as these days. I hear it from lots of different people: loan officers, the real-estate agents, the sellers, the buyers. Being the wife of an someone on the appraisal side, I have complete sympathy for all the appraisers out there right now. They are overworked and underpaid. Yes I said it. They are grossly underpaid for the time and effort that they spend doing an appraisal report the fee that they receive does not compensate. The requirements of an appraisal have become much more tedious over the last 10 yrs and yet their fee has only increased about $50 for the hours of extra time they spend on the reports.
Here some of the reasons that the appraisals are taking “so long”
#1: Lack of appraisers
In 2008, when the mortgage industry collapsed and the Congress decided to introduce what is now known as Appraiser Independence, a lot of it up a lot of appraisers lost all of their business. No kidding. A lot of appraisers had existing relationships with mortgage brokers and received all of their work directly from the brokers or the lenders. That disappeared. Lenders now have to blindly order their appraisals using some sort of appraisal management type system or an appraisal management company. Most lenders have an appraisal panel consisting of several local appraisers that they've probably done business with in the past or that they trust. They order the appraisals “blindly” and do not know who the appraiser is that is doing the assignment. There are few people that can access that information but it's rarely accessed because lenders are not to be in touch with the appraisers prior to the completion of the appraisal report. This new processes was brought to you by Appraisal Independence and it was designed to stop lender pressure on the appraisers to make value (good thing). In the past, lenders would call the appraisers and get "value checks." on properties before they would do the loan. “Can you get XX value?” “Can you get an extra $5000?” Any lender that says that they did not do that is probably full of shit. Everyone did it. It was pretty much industry standard. Why would you NOT have done it if you could get value without incurring a fee to make sure your deal worked? Appraisers no longer have to deal with constant phone calls from lenders asking into the determine values on a property and then never getting the order OR feeling pressured to make a certain value. Rant over and back to the lack of appraisers. In 2008 with Appraisal Independence many appraisers got out of the business. It just became too difficult to try to start over. Another result of Appraisal Independence came the creation of a bajillion Appraisal Management Companies (AMC’s). AMCs came about as a way for lenders to blindly order appraisals to meet the requirements of the Appraisal Independence The AMCs have their own large panel of appraisers in all different areas of the country. The lender orders the appraisal from the AMC who then assign it to a local appraiser who goes out does the inspection, writes the report, delivers it back to the AMC ( who then does a quality control check on the appraisal report) and then the AMC delivers they report to the lender directly. They are a middle man that created to satisfy the rules of the Regulation. Link to Fannie’s Appraiser Independence requirements: https://www.fanniemae.com/content/fact_sheet/appraiser-independence-requirements.pdf The appraisers might be doing the same volume of appraisals as in the past but their income is cut in half from these due to the AMCs getting a large portion of the fee (complete B.S. in my opinion). So that sucks; why would an appraiser wanna keep doing that?! They didn’t so that’s why many have left the industry.
#2- The how craziness of the underwriting process on appraisal reports
Everything is scrutinized. The lenders want the appraisers to comment about e-ver-ything. It’s common for lenders to have to run Automated Valuation Models (AVM) on all files. These AVMs review data that they have compiled and they determine if the appraised value seems in line with their value or if it seems inflated. This is a computer model and cannot take things into consideration such as location, outdated comps if in a rapidly appreciating market, quality of construction and property updates, etc. You need an actual warm body to go out to the property in order to make the decision of which comparable are ACTUALLY comparable. Just because another house on the same street sold DOES NOT mean it is comparable to the subject (another post for a later date). AVMs do pull random crap like if the property is located near a gas station. “Please have the appraiser comment as to the effect of marketability due to being near a gas station.” Seriously. Some of it I get. OK maybe people don't wanna live next to a cemetery. That may have an effect on marketability but the stuff that we've had to ask the appraisers to comment about over the years is just borderline ridiculous and they get tired of it. The lenders are so scared of their own shadows that it's nothing but C.Y.A. These requests take up the appraiser’s time and time is money people.
#3- The requirements to become an appraiser are strict and it takes YEARS to get your actual license
The agencies (Fannie and Freddie) have really come down on appraisers and wanna make sure that they are extremely well-qualified to be determining the value of their collateral. To become an appraiser, at least in Texas, you have to find an appraiser to sponsor you. You then have to have a Bachelor’s degree * higher from an accredited college/university, hundreds of hours of specific appraiser education, over 2000 hours of acceptable and verifiable appraisal experience acquired over a min of 1-2 yrs (depending on license type) and of course, pass the State Exam (which I hear is a BITCH) (https://www.talcb.texas.gov/potential-license-holder/appraiser-trainee) . A little side note is that while most are “training” with another appraiser for this 1-2 yr period they are paid minimum wage OR are commission only. If you come out of college with student loan debt or have other financial responsibilities this makes it difficult to be able to not make much money for a few years. There does not seem to be a lot of appraiser trainees coming into the industry right now that is a real concern for the years going forward. Information from a study by the Appraisal Institution June 2016 shows “As of June 30, 2016, the number of active real estate appraisers in the U.S. stood at 76,075. The average annual rate of decrease is just under 3 percent – a cumulative decline of 9% since 2012. Broader analysis suggests that a decline may continue for the next 5 to 10 years due to retirements, fewer new people entering the appraisal profession, economic factors, government regulation, and greater use of data analysis technologies.” Great link to check out: http://www.appraisalinstitute.org/assets/1/7/U.S._Appraiser_Demos_3_1_16.pdf
#4- Lest we forget about TRID
Something else a lot of people do not seem to be taking into consideration is the fact that the mortgage industry changed October 2,2015 with the implementation of TRID. TRID requires the lenders to disclose the Closing Disclosure 3 business days prior to the actual loan closing. In some circumstances (depending on what date the closing falls on during the week) can cut off almost a week's worth of processing time on a file. Prior to TRID a 30 day close was no big deal. When you take almost a week off of the processing time of a file a 30 day close is pretty difficult. A lot of loan officers & real estate agents do not want the appraisal ordered until the borrower is out of their option period. The option period tends to be 7-10 days. That leaves 20 days for the file to be fully processed. Despite losing these days of processing a file real estate agents still do not write contracts longer than 30 days. I guess they feel like it’s not their problem since they will not be one that looks like the bad guy. The proposed closing date on the initial offer has to do with getting the contract accepted. Sellers want to close as soon as possible and if you're putting in a contract for a 45 day close and going up against a 30 close, the sellers are more likely to accept the 30 day close over your 45 day.
When we are in an environment were interest rates are ridiculously low what does that mean? Lots of people taking advantage of the low rates. Lots of contracts. Lots of real estate being sold. Lots of appraisals that need to be performed. You have a lack of appraisers with an increased amount of business plus you have lenders repeatedly asking for revisions on the appraisal reports this equates to what we’re seeing in the markets which is extended turn time on appraisals. God forbid you need an appraisal in a rural or outlying area! In Texas we are definitely seeing 2 to 3 weeks turn times for these areas. That doesn’t really fly with a 30 day contract closing date.
I see first-hand my husband working into the night constantly. The appraisal fee has gone up a little bit in the past 10 years but in my opinion it has not gone up enough to cover the increase in the amount of work that they are doing right now. Obviously I have I'm biased.
It would really be nice to see all of the different parties of the transaction work together to streamline the process. Everyone should be striving to set realistic expectations. If you're not working with someone that knows the local market well enough they're not gonna know what's going on. No sales pitch in that statement; that's the truth. Everyone is working towards the same goal!
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