Appraisal delays are stalling real estate market activity nationwide, but slow turn times in some states are dragging out the loan origination process for reverse mortgage lenders by an extra month at the very least.
Turn times for appraisals vary across the country. But depending on the state and the market, getting an appraisal could take as long as 4-8 weeks, according to some reverse mortgage industry members.
“As busy as the market is today, it is very busy in most parts of the country—appraisers are inundated with offers,” said John Dingeman, chief appraiser at Calif.-based Landmark Network and president of the National Association of Appraisers.
Dingeman, who also serves as the president of the National Association of Appraisers, notes that some appraisers in Colorado—a particularly painful state for appraisal delays—are receiving anywhere from 15-25 orders per day. But those figures are not exactly what appraisers are accepting.
“At that point, they are going to look at things like proximity to their home or work—why drive 20 miles, when I can drive five?” Dingeman said.
Appraisers are also going to take into account their past experiences working with particular lenders when considering which orders to take. Doing so gives them an idea of what will be expected of them in terms of documentation such as photo taking on the premises, and other expectations the lender might have.
“That is significant when dealing with appraisers and trying to see who can assist you and work with you,” Dingeman said.
‘Pain point’ states
Granted that demand for appraisals differs nationwide, and that states do not have equal numbers of appraisers, it is only natural that some states stand apart from others as having longer turn times.
Places like Colorado and Washington are often the two biggest “pain point” states marked by significantly longer appraisal delays compared to the rest of the United States, said Wynetta Byers, chief appraiser at LRES.
“In Washington, there is a lot of area to cover and much of it isn’t metro area,” Byers said. “The state also has a lot of intricacies because of all the waterfront and island properties, and rural areas further away from metro areas that everyone struggles with.”
Along with Colorado and Washington, Byers also points to Oregon as being a state with traditionally longer appraisal turn times ranging anywhere from 4-6 weeks.
“We’ve informed clients that if you have new loan origination in one of those three states, let your borrowers know they won’t be able to get an appraisal done in 1-2 weeks like the old days,” she said.
In states like Colorado and Washington, appraisers are tasked with covering broad swaths of rural terrain. That could be a lot to handle in Colorado, for example, which has roughly 2,300 appraisers certified to do Federal Housing Administration work, according to data reported earlier this year by the Colorado Association of Real Estate Appraisers.
Some reverse mortgage loan originators in these areas, such as American Liberty Mortgage in Denver, are waiting an average of 4-8 weeks for appraisals. About one-third of the company’s ordered appraisals are not delivered by their expected due date, estimates Bruce Simmons, reverse mortgage manager at American Liberty Mortgage.
“The thing is that these are homes in the Denver area,” Simmons said. “If I need an appraisal in a rural or mountain area, I can probably add another month or more.”
Reverse mortgage volume in Colorado is trending higher this year compared to 2015. Through August 2016, the state’s volume of 1,259 Home Equity Conversion Mortgages is 32.9% higher than its year-ago period, according to recent industry data tracked by Reverse Market Insight.
Denver alone accounted for 285 of those total units, representing a growth of 55.7% from its year-ago period.
Meanwhile, Washington state is also seeing notable growth this year. Through August, volume is up 2% from last year with 925 units through the first eight months of 2016. Though the increase was modest, Washington was the only other state, aside from Colorado, that reported volume growth through August.
Simmons, who has tried using four different appraisal management companies to no avail of seeing shorter turn times, credits the delays to a “severe” shortage of appraisers in the area exacerbated by lofty certification requirements.
Active appraisers shrinking
The number of active real estate appraisers in the U.S. totaled 76,800 as of December 31, 2015, according to data from the national registry of the Appraisal Subcommittee (ASC), the governing body of appraisers.
This population has been declining over the years, falling by an average annual rate of 3%—contributing to a cumulative 22% decrease since 2007, as indicated by the Appraisal Institute, a trade association.
As the number of active appraisers has declined each year, the percentage has grown for U.S. real estate appraisers who hold a license or certification in one or more states outside of their home state.
In 2015, appraisers with a license/certification in at least one or more states beyond their home accounted for 19.6% of the total appraiser population, compared to 18.6% in 2014 and 17% in 2011.
Broader analysis suggests the number of active appraisers will continue to decline over the next 5-10 years due to a variety of factors, including retirements of current appraisers, government regulation and greater use of new technologies.
Perhaps none of these factors will contribute more to the shrinking pool of active appraisers than fewer new entrants coming to the profession.
Lowering the barriers to entry
The licensing process for appraisers has been a topic of contention among industry members, some of whom are calling for changes to the onerous and exclusionary certification requirements, particularly as they apply to earning certification for Federal Housing Administration (FHA) projects.
Appraisers who wish to become eligible to perform appraisals on properties that will be secured by FHA loans—such as Home Equity Conversion Mortgages—must obtain Certified Residential or Certified General licensure in order to gain a spot on FHA’s appraiser roster, as opposed to Licensed level appraisers.
Earning such certification requires prospective appraisers to carry a four-year college degree and, on top of that, 2,500 supervision hours spent as a trainee.
“That is a long time to be working for somebody where you are not making much at all,” Dingeman said.
More than half (62%) of active appraisers are over age 50, according to demographic data compiled by the Appraisal Institute—the majority of which, 51%, fall between the ages of 51-65.
Lowering the degree requirement from a four-year degree to a two-year Associate’s Degree not only would help attract more people back into the appraiser profession, Byers said, but could also attract current License level appraisers to put in the extra effort to gain Certified licensing.
“They could take that step and not feel like they have to go back to school to acquire a degree,” she said.
Another alternative to alleviating the stresses of the appraisal shortage could include the opportunity for appraisal management companies (AMCs) to bring trainees on staff.
“One of the biggest resistances for independent appraisers is to take on trainees,” she said. “Apart from fear of personal liability, they would be taking work out of their own mouths to train their competition. That’s a real fear in the back of some people’s minds.”
Unlike a one-man-shop appraiser, who might just specialize in refinances or purchases and never see servicing, REO or default foreclosure type of work, AMCs could provide a wide range of opportunities for training, Byers said.
While appraisal industry experts agree that lowering the barriers to entry would invite more skilled professionals into—or back into—the profession, they also agree that current regulations make it difficult to effect immediate change any time soon.
“We’re a minimum of 18-24 months from fixing a problem in any one geographical area,” Dingeman says. “That presents a real challenge.”
Written by Jason Oliva