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Appraisal Business Fears Modernizing And Newcomers

Appraisers also need to mitigate appraisal bias

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Insider
Steve Goode
Appraisal Fears

The appraisal business is modernizing while still working on things related to well-publicized accusations of bias in the profession.

That’s the belief of those who work in the industry in different capacities.

Several of them spoke about current and future trends as part of the Mortgage Industry Standards Maintenance Organization (MISMO) fall conference held recently in Washington D.C.

A panel that included Julie Giesbrecht, senior policy analyst with FHFA, Elizabeth Green, chief strategy officer with Appraisal Logistics, and Jillian White, head of growth with Aloft Appraisal, discussed those topics and more.

What You Need To Know

Appraisers with an average age of 59 number about 38,000 active ones (not evenly spread across the country), had to adjust during the pandemic, when they were allowed to only do appraisals of residential exteriors. In recent years appraisers, not known for embracing change, have also been asked to accept modernization, but that doesn’t change their role in the mortgage process.

Jillian White
Jillian White

“The appraiser’s role doesn’t change. He’s still there,” said White. “The skills and responsibility might change, but he still needs to ensure that the data is accurate.”

Green added that modernization will actually help because it allows them to spend more time analyzing data. “With desktops and hybrids they could be on vacation and do an appraisal as long as they are comfortable with the data,” she said.

 

– Elizabeth Green, Appraisal Logistics

Appraisal Bias

The panelists discussed ways to mitigate the hot topic of appraisal bias from consistently using all three approaches to value — income; cost to replace; and sales comparison — instead of just sales comparison, to having the appraiser do the physical inspection and another person collecting the data. Both would mitigate bias and protect minorities, they said.

“It’s not that one approach is better than the other, but how the appraiser is supporting their opinion,” Giesbrecht said. “Appraisers have an obligation to support the value and adjustments.”

Facts vs. Beliefs

As for the culprits, the panelists pointed to a lack of standardized training and actual bias.

“A lot of bias is baked in,” said Green. “Bias is ingrained. We need to recognize that.”

White added that, “not only is it baked in, it refeeds the same process.”

The panelists said that going forward, increases in technology and the fact that homeowners now get copies of appraisal reports should result in a decrease in bias, but lenders should also consider solutions from their side of the equation, such as closing loans with borrowers who claim bias and tracking complaints against appraisers to see if there are trends that warrant cutting ties.

Elizabeth Green
Elizabeth Green

Still, Green believes that it’s wrong to assume that a value gap is automatically a case of bias.

“Measuring bias right now is very difficult,” she said. “We need to be fair to the appraiser.”

The Workforce

Asked why the workforce, which has an average age of 59 and is predominately made up of men, doesn’t more accurately reflect the communities it works in, the panelists shared some thoughts and experiences.

Green believes that there is a reluctance in the business to train people who will then go out and be their competition. Therefore they train people they know, family or friends. Often the job is passed on generation to generation, sealing in homogeneousness.

Green added that she couldn’t make a living as a trainee and relied on family to help her out while she worked the hours she needed to become an appraiser.

Giesbrecht agreed.“You can’t make a living as a trainee. I tried and I couldn’t,” she said, adding that she made about $15,000 her first year.

Giesbrecht also pointed to the issue of training hours. “If you’re an appraiser, you have to work 2,000 hours as an indentured servant,” she said. “Not a good model.”

Julie Giesbrecht
Julie Giesbrecht

But there’s good news too, including educational opportunities in colleges and universities, property data collectors that can realize additional pay beyond appraisals and add to the apprentice hours needed and help trainees learn about their communities, and older appraisers saying that they are learning from their trainees.

There also appears to be a return to staff appraisers who are W-2 employees, as opposed to independent contractors.

“It’s interesting to see it come full circle,” White said.

An urban recruitment program to build diversity begun by the GSEs in 2018 is also starting to bear fruit. The program, supported by the National Urban League and the Appraisal Institute, offers scholarships — more than 400 last year — sponsorships and mentorship programs.

Giesbrecht said that 34 have completed their training and 31 are working in the industry.

“I think that’s incredibly encouraging,” she said.

Giesbrecht also had praise for the old-timers, including the small percentage who continue to resist change. “I still believe in their adaptability,” she said. “They are a dedicated bunch.”

This article was originally published in the NMP Magazine October 2022 issue.
Steve Goode headshot
Steve Goode
Published on
Oct 03, 2022
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