Real estate sales can be made or broken by an appraisal, making those who do the appraising critical economic gears. By and large, most of those attending the mid-Hudson”™s chapter of the Appraisal Institute at the Overlook Lodge in Bear Mountain Park on Sept. 10 said they were taking stock of an industry that is aging and in need of new blood, but that also has a higher bar to enter.
Dozens of appraisers from Westchester, Dutchess, Orange, Ulster and Rockland counties came to the dinner to hear comments from Appraisal Institute Chairman/President Jim Amorin, who encouraged members to keep up with the changes in their industry: “Even though we are experiencing tough times, we need to be on the learning curve when it comes to new technology that is increasingly being incorporated into the residential marketplace.”
Holger Sternberg, vice president of the Appraisal Institute”™s Mid-Hudson chapter, said the average age of designated members is over 50. “We”™re doing a lot of education programs and working with colleges, encouraging them to include our programs so the education piece is taken care of for our future appraisers and those who are constantly brushing up their skill sets.”
Prior to the financial fallout on Wall Street, a college degree was not required. Today, to become an MAI (a member of Appraisal Institute), a four-year degree from an accredited college or university for commercial appraisers ”“ two year degrees for residential appraisers ”“ is required.
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“The Appraisal Institute does not specify what kind of degree it must be, just that a completing a two- or four-year program is a requirement,” said Sternberg. “In addition to the degree, the potential appraiser needs 3,000 hours of work experience, 2,000 working with an experienced certified appraiser and the remainder on his or her own.”
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Appraisers are now mandated to follow the Homeowners Valuation Code of Conduct, put into place, says Sternberg, by Attorney General Andrew Cuomo shortly after his election in 2008.
“Because brokers and appraisers once worked together, banks felt there was too much pressure on the appraiser to come in with a higher appraisal than would be appropriate,” Sternberg, a 20-year appraisal veteran, said. “Now, many banks go through appraisal management companies to find appraisers. Essentially, that works like an HMO. The appraisal management program takes its fee off the top and gives the remainder to the appraiser, but the consumer is paying the same price ”“ or more ”“ for the appraisal, and appraisers are getting between 30-40 percent less than we did in the past.”
“That”™s pretty accurate,” said Dave Cocks, president of Walden Savings Bank headquartered in Orange County. “You can use two different appraisers and they may come with two different appraisals. An automated appraisal will give you a high-, mid- and low-range number. An automated valuation is $25, so it is cost effective. What it rally depends on is how close you are cutting the numbers. If you need a close, accurate look, you will use an appraiser. If there”™s any question about the accuracy, you will use an appraiser. We do use both. And if we get an (automated valuation) we don”™t think is accurate, again, we”™ll use an appraiser.
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“It”™s tough for both the appraiser and the trainee,” Cocks said. “The potential appraiser must work 2,000 hours with a certified appraiser. Usually, the certified member will split the fee he receives with the trainee. Between what is taken by the management company and sharing the remains of the proceeds with your partner, there isn”™t much left.”
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The new change in the way appraisals are done came as a result of an agreement the Attorney General”™s office made with Freddie Mac and Fannie Mae, with an eye toward putting together a home valuation code of conduct. Sternberg said both Fannie”™s and Freddie”™s appraisals were “skewed toward the higher end, and it was felt that it contributed to the number of foreclosures we”™re contending with. Appraisers do feel the bell curve has swung more to the middle as a result of the code being introduced, but it certainly hasn”™t added to the allure of joining the industry as a career path.”
Additionally, said Sternberg, banks are increasingly using automated valuation models and base decisions on those numbers. “It saves them time and money, which is perfectly understandable,” said Sternberg. “It works when you are using AVM for a new development built by the same company that has four or five models, but it doesn”™t work nearly as well in older homes where there has been a lot of remodeling ”“ or the home could be in poor condition. AVM”™s are based on the assumption that everything is in average condition.”
Today, a certified residential appraiser can expect to earn between $35,000 and $45,000 a year. Commercial appraisers”™ earnings are higher, between $65,000 to $85,000. “With four years of college, however, these potential appraisers have the opportunity to make much more, especially if they are in the residential end of the marketplace, where it is stagnant,” said Sternberg.
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To help offset the loss of income, said Sternberg, many appraisers are also real estate brokers. Most appraisers are strictly appraisers, with 60 percent of those in the industry working on the commercial side of the fence.
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“For people working on the residential end of appraising, you are under pressure all the time to get the job done and must contend with low fees. That”™s not the same case on the commercial side. To help those who want to work in the residential appraisal industry, learning about the new green technology on the market and learning to evaluate PDR (property development rights) and conservation easements, it gives them a boost up and opens up the market for them.”
Today, said Sternberg, many homeowners are paying for private appraisals, not because they are selling their homes, but because they want to know “what”™s true and what isn”™t.”
Although the market has seen an increase in activity over the last month, “the general consensus is the $8,000 tax credit being offered is the carrot. When it ends in November, we may see a different market.”
Congress is already being lobbied to extend the first-time home-buyer”™s credit to keep the real estate market percolating.
