Disturbing Trends in the Appraisal Industry

A colleague sent out a chart which shows the decline in appraisers in the state of Michigan from 6/15/2010 to 9/25/2011.  The trends are dubious for the future of the industry.  Even worse, are some of the interpretations of the data.  Excluding limited appraisers who are not permitted to do mortgage work, a summary is shown below:

 

                              6/15/2010                          9/25/2011           % change in 15 months

Licensed                       1,382                               861                          -37.7%

Certified Residential       1,036                            1,019                          - 1.6%

Certified General            1,059                               950                         -10.3%

 

Totals                            3,477                            2,830                         -18.6%

 

To understand the impact, one must first understand the licensing levels.  Licensed appraisers cannot do complex reports or properties exceeding $1 million.  Further, FHA, VA, and many lenders and AMCs will not accept work from licensed appraisers.  Certified Residential are allowed to do complex residential reports exceeding $1 million.  Certified General appraisers can complete all reports within their competency including commercial and industrial reports. 

Licensed Appraisers saw the greatest decrease which can be attributed to upgrading licenses to Certified Residential levels.  But much more likely is the probability that many have left the appraisal industry due to increased educational requirements since 2008 to upgrade as well as lack of work available to licensed appraisers.  With the lowest percentage decline, the Certified Residential appraisers maintained their numbers due primarily to Licensed Appraisers upgrading to replace those leaving the profession.  Most alarming is the decline in Certified General Appraisers.  The difficulty involved in upgrading to this level excludes many Certified Residential appraisers from doing so. 

The total decline of nearly 20% over 15 months should be a concern to all in the real estate industry.  Age demographics have shown that the majority of the Certified Residential and Certified General appraisers are over 50 years of age.  With the increasing requirements and liability placed on appraisers, it can be expected that many more will simply leave the profession over the next several years with no "feeder system" in place to refill the ranks.  It can also be reasonably predicted, that Certified General appraisers will refuse residential mortgage work in favor of the less regulated commercial work available.  Likewise, Certified Residential appraisers will favor non-lending work for the same reasons.  The result will be an extreme lack of qualified appraisers with no means of training new ones in the profession which is generally viewed negatively by those presently in it.  By that, I refer to numerous sources where appraisers who formerly would recommend the profession no longer do so.  Since entry into the appraisal profession requires working under a mentor, the pipeline for entry is effectively closed.