Changes across the appraisal industry including a declining supply of appraisers in the market stand to put pressure on this segment of the mortgage process. Those in the industry say something has to give.
Barring change that could include an increase in fees paid to appraisers, turn times could rise substantially, making for an even longer process—application to closing, they say.
Both mortgage professionals as well as consumers need to prepare for these potential changes, says Erik Richard, CEO of reverse mortgage appraisal management company (AMC) Landmark Network.
“Supply of appraisers is low and demand is high and it will only get worse,” Richard says. “We already see a significant number of our orders get hit with fee increase requests from the field. Building this cost in upfront will speed up the appraisal process.”
The AMC fee has not increased of yet, Richard says, but others in the appraisal business agree that a rise in the cost to consumers is one very realistic outcome.
“Fees are going to go up, and we are actually switching to a flat fee model as there’s just too much going on for things to remain the same,” says Brian Coester, CEO of Coester VMS. “Appraisal fees are going up not just because of regulatory cost but the requirements that lenders have on appraisers.”
The pressure is twofold: There are not only fewer appraisers than there once were due to an aging work force, but heightened regulation is also putting some additional pressure on AMCs and individual appraisers.
Through Dodd-Frank’s implementation, states have new rules and regulations regarding appraisals, and no longer can trainees conduct appraiser work, and thus there are fewer trainees at the same time many longtime appraisers are retiring.
“If we can increase appraiser happiness with higher fees, we can start to change the narrative and squelch the appraiser complaints,” Richard says. “Higher fees also make it more likely appraisers will see [an upside] in the job and will allow current appraisers the margin to bring on trainees.”
The actual cost may remain in question, but the increase looks to be inevitable, says David Stroop, regional vice president for Mortgage Information Services.
“Prices will probably continue to rise,” he says. “There are a lot of factors for this, including new regulations and less appraisers, but there are others out there as well.”
The model is broken, Richard says, and needs a solution to prevent long-term effects.
“As an industry I think we should fix the pricing model,” he says. “It’s currently flawed and without a drastic fix we are certain to experience short term frustrations but the long view is far worse.”
Written by Elizabeth Ecker