The Real Estate Appraisal Industry: A Call For Reform And Modernization

The real estate appraisal industry serves as the backbone of the wider real estate market, providing the critical service of property valuation. This sector contributes significantly to the overall stability of the market by facilitating informed buying, selling, and lending decisions. As per a recent report by ResearchAndMarkets.com, the U.S real estate appraisal market, valued at $8.89 billion in 2022, is projected to reach $11.41 billion by 2028, mirroring the robust growth of the housing market.

Despite its size and impact, this vital industry is currently facing a series of challenges that underscore the urgent need for comprehensive reform. The primary issues plaguing the industry include an aging and homogenous workforce, regulatory stagnation, and technological inefficiency. The current state of affairs not only calls for immediate rectification but also offers an opportunity for an industry-wide evolution to meet the demands of a rapidly changing real estate landscape.

According to a 2019 report from the Appraisal Institute, the number of professional appraisers in the U.S. has been decreasing at an annual rate of 2.6% over the past five years. The workforce's demographic composition is worrisome; over 70% of appraisers are above the age of 50, with 20% older than 66. The acute shortage of new entrants into the field exacerbates this aging problem, leaving the industry with a looming replacement crisis.

“The average age of the person with my license is 65 years old, across the country,” says Adam Musiel. At 39 years old, and with 18 years of experience, he stands out as one of the younger and most active members in the field.

Operating mostly in the Houston-Dallas-Austin area, Musiel’s an example of how fresh blood can make significant changes just by doing things differently. “We’re all working overtime here, and the reason for it is because I know how to talk to people,” he says. “I’ve worked as an agent, I get hired to protest taxes, and I listen to the client.”  

Compounding this issue is the startling lack of diversity within the profession. The Bureau of Labor Statistics reports show that, even though the profession has become more open to women recently, 92.4% of people working as property appraisers are white. This lack of representation brings not only criticism but also affects the industry’s credibility. There is a clear need for a younger, more diverse workforce that reflects the varied demographics of those participating in the housing market.

The industry's regulatory framework has come under increasing scrutiny, with critics arguing that the primary regulatory body, the Appraisal Foundation, has been resistant to change, slow to modernize rules, and ineffective in addressing issues of bias and discrimination. There is a growing consensus that these regulatory bodies need to be more proactive, transparent, and dedicated to promoting fair practices. A modern, fair, and accountable regulatory environment is essential to ensure the appraisal industry remains a trusted and integral part of the real estate market.

With the housing market boom of 2020 and 2021, appraisal turnaround times have increased to their longest in a decade. To address this, the industry introduced hybrid models and PDR reports to traditional full appraisals. However, these necessary changes have brought complexity and confusion, highlighting the urgent need for improved technology. Many appraisal departments continue to rely on outdated technology that cannot meet the demands of a digital, fast-paced environment.

Adopting advanced order management software enriched by business and property intelligence is crucial for the industry. Likewise, the use of predictive analytics can streamline appraisal processes, improving efficiency, and turnaround times.

The real estate appraisal industry stands at a crossroads, facing the dual challenge of modernizing its workforce and operations while also advocating for necessary regulatory reforms. However, with pioneers like Adam Musiel leading the charge, there is reason to be optimistic about the industry's future. It is through embracing change and innovation that the real estate appraisal industry can continue to serve as the backbone of the broader real estate market, promoting stability and transparency.

This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice. Benzinga does not make any recommendation to buy or sell any security or any representation about the financial condition of any company.