The number of real estate appraisers will significantly decrease over the next five years, which could mean longer waits, higher fees, and lower-quality property appraisals. There were 78,500 real estate appraisers working in the U.S. in 2015, which is down 20% from 2007. This could fall another 3% each year for the next decade. Much of the drop has been among residential, rather than commercial, appraisers.
Currently, appraisers are required for mortgages backed by the Federal Housing Administration, Fannie Mae and Freddie Mac. Those mortgages make up about 70% of the market by loan volume and 90% of the market by loan count. Computer-generated appraisals can’t match the precision of one conducted by someone who has seen the property, and knows the area.
Since most residential mortgages require an appraiser to value a property before a sale closes, a shortage of appraisers is potentially problematic — and expensive — for both home buyers and sellers, who rely on accurate and prompt property valuations. As appraiser numbers are falling, the pool is aging: 62% of appraisers are 51 and older, according to the Appraisal Institute, while 24% are between 36 and 50. Only 13% are 35 or younger.
Industry experts blame an increasingly inhospitable career outlook. Financial institutions used to hire and train entry-level appraisers, but few do anymore. The requirements to become a certified residential appraiser have also increased over the past couple of decades. Before the early 1990s, a real estate license was often all that was needed. Today, classes and years of apprenticeship are required for certification. Also, government regulations have placed a heavy burden on the industry. Federal regulations in 2009 led to the rise of appraisal management companies, which act as a firewall between appraisers and lenders so appraisers can give an unbiased opinion of a home’s value. But those companies take a chunk of the fee, cutting appraiser compensation.
The effects of an appraiser shortage could be substantial for individuals on both sides of a real estate transaction, experts say. Fewer property appraisers means longer waits, which could hold up a closing. That delay means that borrowers might have to pay for longer mortgage rate locks. Longer waits also affect sellers who need the equity from one sale to purchase their next home. When they can’t close on the home they’re selling, they can’t close on the one they’re buying. A shortage also means appraisals will likely cost more, which some say is already happening in rural areas. Appraisal fees are generally paid by borrowers. There is a quality issue, too: In some areas, appraisers come in from other states to value homes. While there are guidelines for these appraisers to become geographically competent, they could miss subtleties in the market.