Slow appraisal system advantageous to cash buyers – Urban Institute

Executive calls for reform and adoption of cost-effective technology to speed up

Slow appraisal system advantageous to cash buyers – Urban Institute
Obtaining a real estate appraisal has become a longer process in recent years but the sluggishness is a big plus for cash buyers, according to the Urban Institute.

Sheryl Pardo, UI associate director of communications, said the slow pace can “kill deals and give a big advantage to cash buyers over borrowers.”

Citing Zach Dawson from Fannie Mae, Pardo pointed pout a disparity between highly variable mortgage origination volume, and relatively fixed appraisers’ capacity. This causes uncertain earnings for appraisers and unpredictable costs and turn times for lenders and borrowers.

“This disparity became a significant problem in 2016, as the government-sponsored enterprises saw unprecedented levels of appraisals performed by a static number of appraisers,” said Pardo. “The unpredictable earning potential for appraisers is a deterrent to new people joining the profession, and increasing education and experience requirements make it hard to become an appraiser.”

The number of licensed appraisers has also dwindled in the past 10 years, especially in the state level, according to figures from The Appraisal Foundation. Certified licensed appraisers declined from 54,177 in 2007 to 49,187 in 2017; state licensed appraisers were 30,286 10 years ago, but just 7,854 this year.

The Urban Institute, along with industry experts, suggested several ways to solve the appraisal issue, such as simplifying the qualifications for appraisers by eliminating the college education prerequisite and shortening the experience requirement.

Another solution to speed up the appraisal process is to simplify it. “Creating a centralized database with market- and property-level data would become the centerpiece of a future process, though determining who owns and maintains the database poses some challenges,” said Pardo.

She also called for the adoption of cost-effective technology. For example, while drones can capture many images for a property, it’s more expensive to send one than an appraiser.

“Leaders in the appraisal industry can help by exploring options for entering the profession, simplifying the process, and adopting new technology, said Pardo. “These efforts can improve the real estate appraisal process for everyone, putting mortgage borrowers and cash buyers on more equal footing.”


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