The Challenges Facing Appraisers in 2015 – AAA AMC Interview Featured in CMBA ENews
I was honored when California MBA requested an interview with me about the challenges facing appraisers in 2015 for their upcoming newsletter and happy to comply. Below is a repost of what they published this week. Thank you to the California MBA for including my thoughts and for featuring AAA AMC on their website.
About AAA-AMC: AAA AMC performs high quality valuations on residential and commercial appraisal
With all the uncertainty in the market, we asked AAA-AMC’s President, Marlene Minite about where the industry is headed this year and beyond.
Q: What are the main challenges facing appraisers in 2015?
A: An important challenge facing appraisers in our industry in 2015 is the implementation of Fannie Mae’s Collateral Underwriter. It is a change to which practices are still adjusting. It is driven by the advancement of the latest technological capabilities. Businesses associated with the industry will need to be flexible. It creates additional work by requiring extensive explanations from appraisers as to why they chose certain comparables, and why they excluded others. Also, with supply constrained in some markets, it might be difficult to obtain accurate valuations as compared to price effected by temporary market factors. Also, turning points in valuations are really difficult to anticipate.
Q: What is the state of the residential industry?
A: Things are definitely better than they were three or four years ago but the residential real estate business is still not back to “normal”, whatever that is, after the crisis. I interpret it to mean activity levels are below what is expected given our population. Sales should rise this year since the economy added over 3 million jobs last year. California added many of those but since peoples’ incomes haven’t increased much, if at all, it may not be as strong as some are expecting.
There are some markets here in California where sales are low because there simply aren’t houses available to purchase. Regulations on development here are tough and it takes quite a while to get to market. Often when those homes do get to market the price point is not affordable for a typical first-time buyer. Prices have rebounded fairly strongly, which is a problem in some areas due to affordability concerns. Interest rates have remained very low, which helps affordability.
Delinquencies and foreclosures are way down across the country although those states which run foreclosures through their courts still have significant backlogs. The tightening of underwriting standards (some say too tight) has shown up in the very low numbers of new delinquencies. There are still a lot of homeowners who owe more on their home than they could sell it for. The number of underwater owners is down significantly from the peak though, due to the broadband price increases in the market.
The rental market has done very well and likely will continue to do so. The millennials are being very cautious about buying and any stigma associated with renting is long gone. Surveys of consumers by Fannie Mae and others show a continued desire to own a home by all age groups. Of course desiring it and being able to make it happen are two different things and, as I mentioned earlier, real income needs to grow in order for more renters to take on mortgages.
So it looks like 2015 should be up from 2014 barring some sudden interest rate spike or downturn in the economy.
Q: What is the one thing mortgage bankers don’t know that they should know?
A: For some reason some mortgage bankers, like many in our industry, are still not accustomed to or fond of the idea of having to deal with an AMC. Often times they hire an individual who has no insight about our industry and have them place and follow up on appraisal orders. Unfortunately, they don’t take this action seriously and fail to take the time to properly train and inform these individuals about the proper guidelines, what they can place in orders, and the mandated communication protocol. Mortgage bankers who make this mistake have a misguided notion that this tactic will help them save money by hiring a non-professional and paying them minimum wage to handle the complex role of an AMC. In hindsight, they fail to see that taking this approach will only delay the process of a revision or a re-inspection because the report will now be bounced back and forth between the UW and the AMC because the unsuspecting individual they hired is not educated on how to properly handle an order. However, mortgage bankers that do hire individuals who are knowledgeable about our industry and its regulations, find that the process of placing and completing an order is much smoother, less complex, faster and that they face much fewer complications.
Another matter I find that few mortgage bankers realize is that when dealing with a smaller AMC, they are fortunate enough to receive boutique service that they miss out on when dealing with a much larger AMC company. When you hire a smaller AMC company, you get the advantage of having someone who will always personally answer your call and update you on the current status of the appraisal report. Bigger doesn’t always mean better! Also, how can a small firm get the opportunity to expand when not given the chance? Finally, I believe that mortgage bankers should know AAA-AMC doesn’t only provide its clients with real estate appraisals, it provides them with quality service that is second to none and with peace of mind.