Since the housing crash, many appraisers have been accused of working too closely with lenders and real estate agents
MINNEAPOLIS — Al Kline, president of The Appraisal Group in Maple Grove, Minn., has seen a lot of changes in his business in the past 20 years.
Since the housing crash, many appraisers have been accused of working too closely with lenders and real estate agents, leading to inflated prices and new federal rules aimed at curbing such problems. Technology has transformed the industry, which has made the job both easier and more challenging, especially with the advent of appraisal management companies.
Finally, the industry doesn't have enough work to support all of the people who got into the industry when times were better. Kline recently discussed the changes with the Star Tribune.
QUESTION: How have appraisers changed over the past two decades?
ANSWER: Today it's almost like being a technician or a form filler. There are so many guidelines that it makes it very, very challenging.
Not that there aren't good appraisers in today's market, but the perspective has changed. "… Then, you wore a suit and a tie. Today, they'll casually (dress) in jeans and shorts.
Q: Why is it changing?
A: When I became an appraiser back in the 1980s, you were trained and mentored to a high degree by people who took appraising as a profession. It was a vocation, and they took it seriously. People aspired to be an appraiser, and it took years to get the (professional) designation.
Q: You're not a fan of appraisal management companies, or the third-party entities that broker the services of independent or freelance appraisers, because you think they are asking too much of appraisers. With new regulations, what's the problem?
A: AMCs are not training the individuals; they're hiring the individuals. Quality and competency has been so compromised, we're just reproducing the conditions that created this financial crisis.
Q: Have the new regulations have helped?
A: The regulations have a really positive intent. One positive of more government regulation dealt with less interaction between appraisers and the production department. There was often a lot of pressure to make a number, and that is not the case as much today. It's a huge plus.
Q: Have there been any other positive changes?
A: The data today is unbelievable. I tell people at my company that I could easily work from a timeshare in Cancun because everything is online.
Q: Does that means you don't even have to visit the property?
A: No, that's after you've done the inspection. You do have to do your due diligence.
Q: You said that the average residential appraisal today costs about $350. How much did they cost in the 1980s?
A: It's the same fee, but the work requirement has quadrupled. There are a lot of new things that make it more challenging for an appraiser. It's like being an architect, accountant and a financial analyst, but not having the skill levels to do any of them.
Q: Why haven't fees changed?
A: There's been an influx of appraisers who said, "We'll do it." They're willing to work for half the fee and are willing to kill themselves and work 24/7. Appraisers need to say, "We're not going to do it." Until you don't have this influx of appraisers who are willing to work for $10 to $15 an hour, it's not going to happen.
Q: If you were president, what would you do to lift the housing market?
A: We have to clean up the economic mess first. Housing market plays a fundamental role in how the economy does. Right now, it's very difficult to get a loan. If you're going to do any stimulus, I would stimulate the housing market and make it easier for people to get a residential or commercial loan.
Q: So that must mean that you were you a fan of the tax credit?
A: That was like a Band-Aid. Instead of throwing money at Wall Street, give it to people to get loans. With more oversight, of course.
Q: Should that support go to consumers or lenders?
A: Don't have the answer to that, but I think we need easier access to credit. People are hunkering down, and they're not looking to buy, they're looking to not get hurt.
Q: You're as close to house values as anyone, when do you see values improving?
A: About three years ago, David Michaels, a top mortgage producer in Minnesota, sat down in my office and said, "This is going to be a tough period." I asked how long, and he said, "It's going to take 4 to 5 years." I'd say that in 2013 things are going to turn around.