Appraisal Issues are Causing Major Delays!
We will be the first to say that appraisers have a tough job. Appraisers are questioned constantly. When values come in low, it is the appraiser’s fault. Plus their job continues to grow tougher. But, no one can dispute that the real estate industry has a real problem. That problem is the bottleneck of the appraisal process. So let’s discuss the reasons for appraisal issues lately. Additionally, we provide ways to avoid many of the problems.
There’s Not Enough Appraisers!
Research by the Appraisal Institute finds the number of appraisers has declined 22% since 2007. Additionally, 60% are over 50 years old. So obviously, the number of appraisers is dwindling and there are several factors. First of all, anyone that wants to enter the appraisal field has huge barriers to overcome. In NC, a certified residential appraiser needs a bachelor’s degree, 200 hours of appraisal education, 2500 hours of appraisal work, and at least 2 years of experience. Sound like masters or doctorate degree? Sure does to me! Just think, a general contractor that actually builds a house doesn’t need anything near this. So to become an appraiser, a trainee needs a supervisory appraiser to hire him/her. Therefore an appraiser hires a trainee that will often be the competition in 2 – 3 years. Because of these barriers of entry, the appraiser demographic is getting older. So these appraisers will eventually retire or at least want to lessen their load. More problems for real estate market!
Appraisal Management Companies Control the Market
Mortgage companies hire Appraisal Management Companies (AMC) and they are the middle man in the appraisal process. The AMC will shop the order to appraisers until one accepts the order. There are good and bad things with AMC’s. Foremost, they usually cover the entire US, follow a compliant process, and often the fee is uniform. But the actual appraiser is paid a lower than market fee. So for appraisers to make a living, they need to crank out a lot of low paying appraisals to these companies. Hence, there is at least the perception that these appraisers would grab the first 3 comps and get out of dodge. Again, we really think the world of appraisers and don’t mean to state an appraiser would do such. But there is at least the perception to many. Our company prefers to set up approved appraisers in each county though. We order appraisals in a compliant rotation system with local appraisers. Orders only go to the AMC if all approved appraisers reject the order.
Regulations and Investor Requirements Increase Appraiser Work
The real estate market and more importantly homeowners, have experienced the financial meltdown, mass foreclosures, and depreciation. Well, appraisers really took it on the chin too. As lenders, PMI companies, and agencies took losses, they ratcheted up the appraiser requirements. Were some things done wrong on appraisals or done in a lax manner? Yes. But the amount of work going into appraisals has increased dramatically. Of course HVCC came into effect. This regulation created rules for the appraisal process. Additionally, extra forms and processes were added onto the appraiser’s workload. Basically some appraisers have said the changes have added hours to each appraisal. The $100,000 question is “are appraisals any better today than before the meltdown?”.
VA Appraisal Issues
The Department of Veteran Affairs is currently overwhelmed with the sheer volume of VA loans. This is in addition to the other reasons mentioned in this article. Recently we learned that VA is only assigning appraisal orders on Mondays. Therefore just the assignment to the appraisers is taking 1 – 2 weeks! Then you have to add the appraiser’s turnaround time to it! It is not hard to do the math here! 30 day VA appraisals have become the norm in many VA concentrated areas such as Fort Bragg and Camp Lejeune. Solution: Use a longer closing date such as 45 days to account for the delayed appraisals.
VA Appraisal Problems & Solutions:
- Appraiser requires missing contract pages or addenda. Realtors can help by providing all documentation up-front. This includes fully executed contracts complete with all addenda, signatures, and other applicable items.
- Assigning orders only on Mondays. For this reason, we do our best to submit all appraisal orders possible prior to Mondays. This is at least until we hear VA changes their schedule. Otherwise, we order the appraisal through VA’s system as quickly as possible. So at least we are not the hold up.
Busy Real Estate Market Means Slow Turn Around
So there’s not enough appraisers because they are old and every entry level person may as well be an attorney. Then AMC’s don’t pay appraisers enough so appraisers won’t accept the low ball pay orders. In some markets, appraisers are charging “rush fees” over and above the normal appraisal fee. Additionally, regulation increases the appraisal report length. We have even heard of fees as high as $2600! Not very buyer friendly and especially first time buyers. Finally VA and the small segment of VA approved appraisers can’t keep up with the VA lending environment. This is a perfect storm! It is no wonder that we see appraisers rejecting orders and charging more money.
In conclusion, we do love our professional appraisers in our local markets. But if the market entry restrictions for appraisers doesn’t change, the current appraisers will either burn out or soon retire.
So What Can I do to Protect My Purchase From Appraisal Issues?
Foremost, remember that lenders cannot pick the appraiser. But there are several things a Realtor, Buyer, or Seller may do to avoid appraisal issues. It all starts with the offer to purchase. Allow sufficient time to close. If VA appraisals are taking 30 days alone, make the closing date for 45 days. Also, check out our article “Appraisal requirements to prevent closing delays and extra costs“. It includes easy to follow tips you can implement before the appraiser comes.
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- Pest Inspections – Don’t let your dream home become a nightmare because of unwanted guests
- Understanding why & when flood insurance is required
- Public Water Connection little known rule that could kill a closing
Author: Russell Smith
Team Move OVM Financial loan officer success is Russell’s primary focus. He provides the tools and techniques he used as a top producing loan officer. Additionally he offers the Team Move OVM Financial Agent Training Program. Sharing is so important to Russell so he works diligently to be a resource to loan originators and Realtors.