To borrow a well-worn cliché, today’s residential real estate appraisal industry is not your father’s industry. It’s not even the one that existed 10 years ago. The collapse of the housing bubble in the previous decade and the recession that followed led to changes designed to strengthen the housing industry. Those reform efforts by Congress included appraisers in their sweep.
“In reacting to 2007 and 2008, Congress told the Federal Housing Administration that you cannot use licensed appraisers anymore, you can only use certified appraisers,” said John S. Brennan, director of appraisal issues at the Appraisal Foundation in Washington, D.C. “As a result, a very small population of licensed appraisers are left, doing niche work. Certified appraisers are doing the lion’s share of appraisal activity.”
Certified appraisers are qualified to appraise one-to-four residential units without regard to value or complexity. Licensed appraisers are limited to appraising only noncomplex one-to-four residential units with a transaction value less than $1 million and complex one-to-four residential units with a transaction value less than $250,000.
In late 2011, the Appraisal Foundation’s appraiser qualifications board opted to strengthen its educational and professional training criteria. Among the changes, certified-appraiser applicants since 2015 have been required to possess a bachelor’s degree, whereas previously only a two-year associate degree was required. Applicants for licensed appraiser must have either an associate degree or 30 semester hours of college-level education.
Prospective appraisers then must undergo lengthy apprenticeships. Licensed appraisers need to complete 2,000 hours of training over a minimum of 12 months before taking their appraiser exam, while certified appraisers must put in 2,500 hours of training in no fewer than 24 months.
“We joke that anyone graduating from college and learning appraisals will still live in mom’s basement,” said Linda Sepso, owner of LM Sepso Appraisal Associates in Stratford.
“A lot of lending clients don’t want inexperienced apprentices and will not accept an appraisal from trainees,” said Taylor Beerbower, owner of Mulberry Street Appraisals in Fairfield. “As for 2,500 hours out in the field, it is hard to get that level of work.”
Recent college graduates and young career-seekers apparently are not flocking to the appraisal field.
“I am over 65 years old and in very good shape, thankfully,” said Martin Iselin, owner of Fairfield Appraisals LLC in Fairfield. “When I go to the continuing education classes that we are required to take every two years, I’m one of the youngest people in the room.”
Iselin said that many mortgage lenders demand that appraisers work with appraisal management companies, which serve as a middleman in what used to be a direct process between lender and appraiser. The companies get a percentage of the transaction. “A lot of appraisers do not want that and they have either left the industry or elected to do nonlender work with lawyers, real estate agents or private individuals,” he said.
“Most of our work is with attorneys,” Sepso said. “We do very little lending work.”
Appraisers must also contend with the ongoing shift from traditional appraisal reports to automated findings.
Iselin said Fannie Mae has moved to a computer code for the appraisal reports it reviews. “Where we used to have ‘average condition’ or ‘good quality,’ we now have ‘Q2’ and ‘C3,’” he said. “For collateral underwriting, every appraisal which Fannie Mae gets is run against a computer program ranking from one to five.”
Sepso said appraisers have an automated competitor with the rise of Zillow’s Zestimates, an online service that offers opinions on residential property values.
“Zillow is very often not accurate,” she said. “They look at a house, not at a neighborhood area or to see if I-95 is in the backyard, which is what appraisers look to know how that impacts valuation…It is more of a guesstimate than anything else.”
Despite the obstacles, the distinctive housing market in Fairfield County ensures that traditional appraisals will not be going out of business anytime soon, according to Iselin.
“We deal a lot with higher-end and unique properties,” he said. “It is not as if you would go into a development in Colorado where 350 homes are built by a developer and pick seven or eight Ascot models and come up with ideas what it is worth. We don’t have a lot of that in Fairfield County.”