Three Ways to Reverse the Mass Exodus of Appraisers

I was recently in Texas at yet another appraisal conference. The man who was speaking asked everyone to stand up. There were approximately 140 appraisers in the room. He then asked for those under 30 years of age to sit down. About five people did. He asked those under 40 to sit down. About 10 more did. Under 50. About 25% of the room was now sitting. Finally, he asked for those under 60 to sit down. I am not kidding when I tell you that about 60 appraisers (of the original 140) were still standing!!! In other words, 75% of the appraisers at that conference were over 50, and 60% were over 60!!!!

Now, that may not be a scientific look at the industry as a whole. I would dare say that older appraisers are more likely, in general, to attend such conferences, but it is not that far from reality. Now for the kicker; he then asked for hands to go up of those who were currently training new appraisers. Including myself, 5 hands were raised. Out of a room full of 140 active real estate appraisers, only 3% were training new blood to replace those balding heads and crow-feet eyes leaving the industry in mass quantity. See the problem? I have heard that we have lost as much as 30% of our population in the past 3.5 years!

For some, this may not seem like a problem at all. Simple Econ 101 teaches a little something called ‘supply and demand.’ If there are less appraisers, our fees go up, right? Well, maybe, but there are more issues at play here than just appraisal fees. Needless to say, it is not a good thing for our industry (or our clients) to see the number of qualified expert appraisers heading for the hills (or the golf course as the case may be).

So, what can we do to reverse this ominous trend? I will suggest three ways.

1. Reconsider Retirement

Sounds simple, but there are reasons to look at sticking around. As I travel the country and meet with appraisers, there is a common theme among the ‘more seasoned’ professionals. “I used to be able to make a pretty good living as an appraiser,” they will opine. “Not anymore. All this crap they are asking for is just ridiculous. I am not getting paid anywhere near what I am worth. I am done with this and am throwing in the towel!” I understand the frustration, but maybe there are other considerations to look at.

You are well aware that things are not what they used to be. The cheese has moved. Many of us ‘rats’ are in the pantry running around in circles wondering where it went and praying it will soon be returned. A few of us, however, have left the building and found the rich formaggio Italiano somewhere else.

I have seen a handful of disgruntled appraisers lately make this shift. Those who were once determined to find another job are realizing that, with a little creative thinking, there is a better way to make a living. Yes… even as an appraiser.

2. Hire a Trainee this Month

Okay, that is admittedly a bit naive. I am not saying you should go out and hire a trainee for purely altruistic reasons. I believe in charity, but an appraisal business is not a charitable organization. There must be an economic benefit to hire an employee, so let me go a little deeper.

What I AM saying is that there are very viable (profitable) reasons to still hire trainees. Begin by asking yourself a few questions. Are you currently turning down appraisal requests? Are there areas that you are geographically competent in that you are not currently covering but would like to? Are you putting out an inferior product because you do not have enough (or any) extra sets of eyes checking over your work? If you answered “yes” to any of these questions, you may be a candidate for….. (okay, now I am sounding like a sleazy lawyer commercial). But, you may want to consider utilizing a trainee.

I know. I know. “Why would I want to train my competition.” I hear it all the time, and my answer is always the same. “Don’t! Do not train your competition. Make their package to stay with you so sweet that they will have no reason to hang out their own shingle.” Open up your books, and show them how much you really net (most employees do not understand the difference between gross and net fees). Offer to pay them a percentage that is higher, but remind them that they will not have to run the business. How can you pay them a percentage that is higher than your net? Easy. Overhead consolidation and volume pricing.

3. Clients/Lenders/Regulators Need to Stop Disqualifying Trainee Use

This one is obviously not on the backs of the the appraiser, but maybe this article will get into the hands of those who can make a difference. Also, I am not going to spend a huge amount of time on this one because I have already written an entire article on this very topic. Needless to say, our clients (AMCs or Lenders) are shooting themselves in the foot by making it nearly impossible for appraisers to use a trainee for INSPECTIONS and/or other significant parts of the appraisal process. I stress inspections because most new appraisers can be trained in a fairly short period of time to do very competent inspections which becomes a huge financial incentive to the business owner to hire. Remember, hiring new appraisers is the goal here. Now, there are still ways to use trainees and comply with most client’s requirements, but that is also another article for another day.

Conclusion

Now, there are other ways to look at this issue, but hopefully you have been given enough to warrant a consideration of this important topic again. There are many cynical appraisers out there who see no reason to even broach the topic of trainees. “I’m not paid enough to do my own work,” they cry. “Why would I want to hire someone else and pay them some of my already meager fee?” I get it, but with all due respect to your point of view, you are looking at this through the wrong paradigm. If you are doing too much and not being paid enough, you are a PERFECT candidate to hire and train a new appraiser.

Now, go create some value!

 

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Dustin Harris is a multi-business owner, but he has found most of his success as a self-employed, residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc., and is a popular author, speaker and consultant. He owns and operates The Appraiser Coach (www.theappraisercoach.com) where he personally advises and mentors other appraisers helping them to also run successful appraisal companies and increase their net worth.  He is also the Founder and President of Your Appraisal Office (www.yourappraisaloffice.com) which implements some of the systems he has developed to help lower costs and free up time for real estate business owners.   He and his wife reside in Idaho with their four children.

11 thoughts on “Three Ways to Reverse the Mass Exodus of Appraisers”

  1. Dear Dustin,
    As a trainee about to test for my certification license, I applaud what you are saying here.
    It has been my strategy since getting into this business not long after Dodd-Frank was implemented, that soon the dearth of appraisers in the dwindling pool will make it possible for the rest of us to escalate rates and take back some of what we lost with the advent of AMCs.
    But, you planted a seed for me. If there is a serious shortfall of appraisers, maybe someone (the government??) will come up with a plan B that is not as good for us.
    Keep up the good work and great insight.
    -Vito Mandato
    Los Angeles, Ca.

    1. Set a timeline. Don’t wait 10 or 20 or 30 years for plan B. I don’t think appraisers are in anyone’s plans. College graduates surely cannot be enticed into this profession with the meager earnings of a trainee. After 42 years and over 20 trainees I have seen it all and this ain’t pretty.

    2. Retired Appraiser

      I fear that you placed your bet on a 2 legged horse Vito. The smart thing to do would be to run like L while you still have a little change left in your pocket. The smart money (and appraisers) left this business for greener pastures long long ago.

  2. As AVMs becomes more refined and accurate thanks to all the data appraisers have gathered to build the databases over the years, low risk loans will simply use these requiring fewer appraisers.

  3. I have 2 trainees on my staff, and I have had 2 others that went on to get licensed and certified………and became my competition [regardless of the package I offered, they wanted to be the boss!]. The problem for me is liability. The state appraisal boards need to relook at the punitive nature of the supervisor/trainee relationship. Most of my peers, WILL not bring on board a trainee. The risk/reward is not there, primarily due to the liability.

    Dave

  4. Justin,
    What you are trying to convey is correct, there are too few new appraisers coming on line & eventually there will be a shortage of appraisers. There will always be a need for hands on/feet on the ground/eyes on the site, i.e. appraisers to (hopefully) deliver credible/defensable/accuate appraisal reports. Forget about AVMs/BPOs/Etc. I heard about how they are going to replace the appraiser for the last 20 years. So far that has not happened & I do not think that the Lending Industry will ever be able to completely replace the field appraiser. Does anyone on this forum old enough to remember R41 (a)(b)(c)? The RE crash in the mid 70′, late 80s or the mid 2000s? The greed of the Lending Industry caused all these crashes & the only persons that got blamed were the appraisers. The Lenders got baled out by FDIC/the Government & have now been combined/ con-solidated into super banks that a “too big to fail”. After all, they never said that the properties that they package & sold as securitys were worth that, the appraiser is the only one who place a value on these propertys, which is true, so why would they want to do away with the appraisers role in their pursuit of profits (they might have to take the blame themselves & this is not going to happen).
    All of these past crashes have lead to the implementation of HVCC, Dodd-Frank & the advent of AMCs (most owned or controled by the to big to fail banks)virtual control of the residential appraisal business, with their take or leave fee structure. Unfortunaly there are too many appraisers that are willing to work for these reduce/unreasonable fees, additional requirements & turn/deliver requirements. Being an Appraiser is a Profession, not an Industry. Doctors/Lawyers/CPAs/Plumbers/Electricians, Etc, all know the value of their services & the cost of their overhead & charge accordingly. So when the AMC is offering $185 & your professional time, expertise, overhead & resulting liability equals a $375 fee, “why?” should a Professional Appraiser accept less? Until this is realized, bringing on new/trainee appraisers is not a financially feasable proposition for the trainee or their sponser/supervisor. Over the prior 40 years of my career as an Appraiser, I have been directly or secondary in the training of +/-100 trainee appraisers (compensating them @ 35% to 45% of fee charged) & properly training an appentice is a full time job. Current requirement in Texas only requires 2 years experience to obtain a full license & this is not adequate (in most cases) to be an fully functioning/competent independent appraiser, let alone being able to “train” a would be appraiser, but this is what has happened in the past 10-15 years. Requirements for being able to accept & train a new/would be appraiser are/have now been raised, along with the qualifications & education requirements for the entry level appraiser, which will further reduce the number of current appraisers that will take on a trainee. Sorry for this long winded rant, but I do believe that there is a real future for the Appraisal Profession, IF, the current license/certified Appraisers will stop accepting the AMCs low fees (without us they are out of business), so that new personel will see the potential for making a living in this Profession.

  5. It appears to me that the appraisal field is a dying industry. If changes are made to force acceptance of trainees on lender transactions, it will go to avm’s. what other option will be out there? Bpo’s? Haha

    At this point I would only train relatives, but only after weighing the pros and cons.

    Bryan

  6. Nobody in their right mind would enter the residential appraisal profession today. You may however be able to convince a few patients in a mental wards or state prisons to give it a whirl (assuming they have college degrees).

    Best of luck with it guys. I wrote this pseudo profession off four years ago. It will only get worse as AVMs use your new regulations (college requirements) against you to obtain more orders.

  7. I know look after my investments,retirement funds where on some single days i can do better than a year of appraisal revenue. I make time for that; and did not fare well when i delegated it to Merrill Lynch. But I still appraise for select assignments existing client base and litigation cases. I use my own contract forms which limits my liability to the fee, don’t work for banks with their low fee, 40% of my 1986 fee.I also don’t like that the seek insurance values, I work on usually fairly complex assignments where valuation is only one piece of the service. I have kept multiple licenses and designations but the CE has become just a lot of nonsense with a herd mentality from regulators who think four different courses on ethics makes an appraiser honest. How important is it to know the fine account or the number of egos sitting on a committee when you are 100% honest . How about regulators blocking the bad buys rather than penalizing honest appraisers. I do have faith in the profession and in particularly in the many fine honest appraisers who have served the profession well.I know the profession has not served them well and i have great sympathy for these colleagues . we never had the clout, to defend ourselves, no effective lobby and therefore were doomed in a world where one needs to have value other than being very honest and professional. The broker profession in contrast has a strong lobby and as a member can see the difference , even their CE is enjoyable, interesting while the appraisal CE especially at state level is very childish.

  8. I used attend 10 conferences a year, mostly investment .It was important for my brokerage business. The cost of attendance often exceeded $2,000. Usually the lunch speaker was a political star. They like cost a fair share of the $2,000 head cost; usually the conference organizer was also (later) bestowed with some honor, award, commission , panel . I guess a quid pro quo. No such going ons in the appraisal profession which really does pride itself on its ethics. Maybe i am naive but that is what i think with most of the professionals i encountered. But the profession is also a victim of its integrity. We can all least go down with our heads held high. Not that anyone cares or would notice.

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