Many commercial fee appraisers are currently turning down jobs. They’re reducing their coverage areas. Cherry picking the easier jobs. Increasing fees. That’s the case in July 2021. Many chief appraisers and appraisal managers have said they have never seen turn times this long from their vendors.
We’re talking 4-6 weeks for commercial and 3-4 weeks for residential. Is there a capacity issue or a productivity issue? The cost of appraisals is also like lumber, up, up, up. Is it temporary or the start of a trend?
It took a long time, but the appraiser shortage has started. It’s no surprise.
Currently the appraisal threshold is $500,000 for CRE transactions. Can I get $1.0 million? Going once, going twice. Might this result in a more liberal use of evals? Will lending put up with 42 days to process a straightforward appraisal? I doubt it.
Appraisers are a discerning bunch. They want to see the numbers. Since the cost of this blog is zero, I will tell you the basis of my research is antidotal. I’m sure I’ll never be published in The Appraisal Journal (I asked, they said “no”). But I do talk to a lot of chief appraisers and appraisal managers, so take it for what it’s worth.
Appraisers hardly ever turn down work. Will it change? Sure. Best practice is for appraisal departments to seek out appraisal firms that invest in processes and productivity software to significantly shorten the turnaround times for a “typical” firm.
Revisit your fee panel list
It’s probably been a long time since you’ve taken an honest reassessment of your fee panel. I know personally I was taken off an approved appraiser list because my PDF report file size was too large for the reviewer (I’m not making this up). Seriously? Reviewer disagreements on value can also lead to being vetoed off the island. Often times, a reviewer is gone from the bank (or no longer outsourced), but the appraiser’s status is still “no bueno.”
Channel your inner Oprah
Having honest discussions with your fee panel is a start to reevaluate your working relationships. Occasionally, good appraiser will have a “bad” report or a reviewer disagreement on a value. Consider an appraiser “mulligan.” Otherwise, your pool of appraisers gets smaller and smaller. Those appraisers with a client-focused attitude can greatly close the gap of turnaround times. Give them a mulligan and put them back on the list, but talk to them to clear up past issues. Tell them exactly where they need to beef up their reports.
Ouija board reviewers
Train your reviewers not to expect their fee panel to be clairvoyant, having to read their mind. As a reviewer, telling the appraiser they should “reconsider their cap rate” is vague. Be real. Be transparent. Be communicative. Tell the appraiser why you think the cap rate is way too low or way too high.
Mount Sinai fee appraisers
You’re not appraising the property, but if you have good reason to ask for revisions, then a conversation needs to take place. That said, the appraiser needs to be real with you and not defiantly cross their arms and act like the purveyor of all truth. Somehow endowed with God-like abilities coming down the valuation mountain like Moses with market value conclusion tablets.
Avoid these types of appraisers, as the attitude often leads to unproductive business outcomes. These types of appraisers don’t understand the business side of appraising. Not negotiations or “caving” but rather using EQ to settle valuation issues cogently. My advice to give your fee panel.
“Have conversations to elevate your fee appraisers’ understanding of your bank’s risk appetite, bank policy and more depth to understand the transaction.”
As a fee appraiser, you don’t know everything. Nor does your client. Talk. Don’t send the report and hope no one calls. Chief appraisers and appraisal managers consider revisiting your fee panel. Talk to your peers about (organic) vendor grading. Have a platform like YouConnect that tracks it.
It’s okay to give an appraiser a mulligan for “B” work, but communicate clear expectations. The alternative for slow turnaround times is worsened if we don’t kibitz. And that would be a risk management shame. Appraiser shortage, do you feel it?