Last month the Virginia Center for Housing Research and the Virginia Tech Program in Real Estate released the Virginia Residential Real Estate Appraiser Remuneration Survey Results. We sat down with Drew Sanderford who was the primary investigator to discuss the survey itself, the results, and what it means to the appraisal industry.
Buzz: Thank you for joining us to discuss your recent findings. Can you tell our readers a little about your experience in the industry?
Drew: Jim, thanks for having me. It's great to have the chance to share a little bit about the project and its results. My professional background is in housing and commercial real estate analysis. My doctoral degree is in urban planning with an emphasis on housing and innovation. I am currently an Assistant Professor of Real Estate and Planning at the University of Arizona. During the project, I served as a post-doctoral research fellow at the Virginia Center for Housing Research.
Buzz: What were some of the reasons behind the survey in the first place?
Drew: The survey was motivated by the Wall Street Reform and Consumer Protection Act's (Dodd-Frank) requirement that lenders to pay appraisers a 'customary and reasonable' fee for their services. Prior to this survey, data describing appraisal fees did not exist in Virginia. The project was designed to provide data that regulators and other market actors could use to inform deliberations about appraiser remuneration in Virginia.
Buzz: Who were the partners that participated in the design of the survey and collecting of the results?
Drew: The project was a partnership between the Virginia Center for Housing Research (VCHR), the Virginia Tech Program in Real Estate (VTPRE), and the Virginia Coalition of Appraisal Professionals (VaCAP). VCHR is the state housing research agency and has a distinguished history in providing data driven guidance to Virginia housing policy makers and market participants. The VTPRE is a new major and is a collaboration between six colleges at Virginia Tech. VaCAP is an appraisal advocacy organization.
VaCAP provided funding for the project and created the email database to which the survey was distributed. VCHR and VTPRE carried out the survey and generated the report.
Buzz: Who were the people who completed this survey? How did they submit their answers?
Drew: The survey respondents were residential real estate appraisers licensed in Virginia. They completed the survey online. 11% of the survey respondents were Licensed Residential Appraisers;78% were Certified Residential Appraisers;10% were Certified General Appraisers; and 2% classified themselves as "Other" (e.g., In-House or Review Appraisers). The majority of the respondents were male, between 51 and 65 years old, had a bachelor's degree, and earned between $50,000 and $150,000 for appraisal work in 2013. Respondents conducted appraisals in all Virginia counties.
Buzz: What were some of the main things you hoped to find out from appraisers with this survey?
Drew: Because of the amendments to the Truth in Lending Act created by Dodd-Frank, we hoped to gain insight into whether or not appraisers earned different fees when working for Appraisal Management Companies (AMCs) than when working for non-AMCs. We also hoped to learn about the extent to which changes in the characteristics of the respondents played a role in the fees they earned in 2013.
Buzz: The thing that most appraisers want to know about is customary and reasonable fees. Do you feel this survey helped you establish these values for the state of Virginia?
Drew: Yes, we believe we've helped. We showed that in 2013, Virginia appraisers earned between $325 for a Review appraisal and $532 for a 1-4 Unit Residential Income Property appraisal. They earned an average of $401 for the standard 1004 appraisal.
Additionally, there are several clear patterns in the data. First, in Virginia, appraisers earn more for non-AMC appraisals than for AMC appraisals. Second, appraisers expected to earn higher fees across the board than they were paid for both non-AMC and AMC appraisals. Finally, while some attributes of the respondents were significant predictors of the variation in fees earned, there was no systematic influence from geography.
Buzz: Should appraisers and appraisal management companies in other states consider your findings when setting their fees?
Drew: The survey captured a snapshot of the market place for appraisal services in Virginia. Together with the reports from Utah, Texas, and Louisiana, regulators, appraisers, and AMCs can begin to fill in a picture of the market for appraisal services that is plagued by missing information. What constitutes a customary and reasonable fee in a particular market will be determined by the forces of that market place in conversation with regulators. Reports like ours provide data points for consideration and guidance on how other stakeholders might collect and use information about appraisal fees in their markets.
Buzz: What would you recommend to the industry and regulators moving forward?
Drew: In the report, we provided information on the range of fees earned as well as a comparison of the mean fees earned and the mean fees appraisers expected to earn. We also analyzed the how these fees varied and the factors associated with that variation. While quite useful and a potential guide for others, the report should be considered the start, not the end of the conversation about appraisal fees in Virginia and other states.
There is, perhaps, an example in medicine that may offer guidance to the appraisal industry to help drive that conversation. In medicine, data on all types of medical services are constantly collected into a centralized database. Medicare and third party insurers use the database to establish the 'usual, customary, and reasonable' cost of these services in each market. While the medical database isn't perfect, it shows that with more information, fees for various services are more transparent.
Buzz: There is some great data and information in this report. If our readers would like to see all the survey results where can they find them?
Buzz: Thank you for taking the time to discuss your findings with us. Hopefully more states will follow the example you have helped set and begin doing their own state appraisal fee surveys.
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