We are fairly near the end of the continuing education cycle for appraisers in my home state of Pennsylvania. Among other topics, I’ve been presenting changes to laws and regulations, which include the new Appraisal Qualifications Board (AQB) standards that go into effect in January 2015. You can find the regulations here: http://www.appraisalfoundation.org/
The overwhelming response from existing appraisers is: “Do they just want to make us go away?”
The new requirements will include a bachelor’s degree, as well as — in most states — 2,000 hours of experience under a state-certified appraiser (the number of hours varies, but the requirement to gain experience under a state-certified appraiser is found in all states), plus another 75 hours of specific appraisal classes, including the 15-hour basic Uniform Standards of Professional Appraisal Practice (USPAP) course.
Most state laws require the supervisory appraiser to be present at the inspections, supervise the trainee, and basically do the appraisal. Pennsylvania regulations can appear somewhat contradictory: You can find this language: “Accompany the assistant during the physical inspection of the property until the assistant has logged 300 hours of appraisal experience or until the supervising appraiser determines the assistant is competent under USPAP to perform the physical inspection unaccompanied, whichever is the longer period,” as well a statement that the assistant “may not arrive at an independent determination of value.” Source: http://www.pacode.com/secure/data/049/chapter36/chap36toc.html#36.13.
Couple this with the reluctance of some lenders to allow trainees to work at all on appraisals, and you can see how difficult it will be to become a state-certified appraiser.
Now let’s talk about the inspiration for this blog: the money side of things.
I’ve had trainees in the past. I could not afford to pay them much because when you’re doing something you know how to do inside out but taking time to explain to another person what you are doing, why you are doing it, and how it fits into the big picture, well, it takes at least twice as long. If you have children, think about training them to tie the laces on shoes. It’s the same idea. You can do it much more quickly by just doing it yourself. You take the time to show your kids how to do it because (1) it’s a skill they need and (2) you love them. On the other side of the appraisal equation, appraisal management companies (AMCs) want appraisals faster and cheaper than ever before. Working appraisers who have already had to cut their fees have little, if any, money left to pay an assistant. Under the new standards, assistants will be college graduates. Can we agree college graduates expect more than minimum wage? After all, they spent four (maybe more) years in school and probably have the student loans to prove it!
Now, assuming a good-hearted certified appraiser takes in a trainee and scrapes together some funds to pay the person. (Some trainees are coming from the brokerage side of the business, and continue to list and sell. That complicates the appraiser’s schedule, but that’s a whole other headache.) At the end of the time period, that trainee takes (and hopefully passes) the state exam. The appraiser has just created a new competitor. Some appraisers work from offices, but many of my students — if they do not have a brokerage or work in one — are working from a spare bedroom or den. They don’t need a place to meet with clients. They just need Internet, computers, printers (rarely), and fax machines. So, having completed the education, they don’t have a significant outlay for an office and equipment; in fact, many people already have all those things in a home office. It’s easy to set up your own business and simply say bye-bye to that appraiser who trained you.
With one exception, the only appraisers I’ve encountered who train others are training family members. It’s part of a succession plan. And typically, it is not just exclusively appraisal — because the money isn’t as good as it used to be. I’ve said this in class, and I’ll say it here: “I have two kids, both of whom have college degrees. If either one of them expressed a desire to get into appraising, I’d suggest brokerage instead because I see more stability of income there in the future.”
My kids might think about real estate appraisal as a career because I’m second generation in real estate. How many other kids will they look at a job that requires a two-year apprenticeship — at next to no pay and, typically, with no benefits — and decide that this is a viable career path for them?