Property appraiser shortage a problem in rural Arkansas

When banks make loans for property typically an appraisal is needed. If the transaction is $500,000 or less, the loaning institution can do it in-house. For transactions that exceed that amount, an independent appraiser has to be hired.

In urban areas it’s not a significant issue, Arkansas Bankers Association Chairman Randy Scott, president and CEO of Farmers Bank & Trust in Blytheville, told Talk Business & Politics. But in rural areas there are fewer licensed appraisers and it is leading to serious problems, he said.

“Cities like Little Rock and Fayetteville have plenty of appraisers,” he said. “There’s no shortage of them in Northwest Arkansas. Where we are seeing a major problem is in rural areas.”

A home or other property appraisal is a licensed or certified appraiser’s opinion of a home’s value, according to Nerdwallet. The appraisal is based on research of recent sales of comparable homes in the area, an analysis of the property and the appraiser’s judgment. The mortgage lender requires an appraisal to help gauge risk of making a loan. The property serves as collateral in case the borrower defaults, so the lender wants to make sure the loan isn’t too big compared with the property’s value, Nerdwallet reported.

Appraisal fees can vary from state to state based on several factors, including what type of loan is being sought. Most residential appraisals in Arkansas fall in the $300-$700 range, while commercial appraisals can be higher.

Mississippi County, where Scott lives, has one appraiser, he said. There are several appraisers in Jonesboro, but they have so much work there that they don’t want to drive an hour away to do an appraisal in Blytheville, he said. Banks have to bring in appraisers from larger cities such as Atlanta and Detroit. This drives up costs, but more importantly it takes a lot of time.

“It can take months to get one done. When it takes months, deals can fall through,” he said.

Arkansas has various classifications for different appraisers, according to the Arkansas Appraiser Licensing and Certification Board (AALCB). To become certified, one must have a college degree and complete a specific number of hours in core training classes. The classes include basic appraisal practices and procedures, market analysis, residential sales, statistics, finance, and others. To become a certified residential appraiser, or CRA, many hours of apprenticeship are required.

“One thousand five hundred (1,500) hours of experience obtained during no fewer than twelve (12) months is required. While the hours may be cumulative, the required number of months must accrue before an individual can be certified,” the AALCB reported.

The qualifications to become a certified general appraiser require a 3,000-hour apprenticeship during at least 18 months. More core training classes are required, too.

The apprenticeship requirement is the problem, Scott said. For many years certified appraisers didn’t want to take on apprentices. The reasoning was simple, Scott said.

“Well, they didn’t want to train their competition,” he said.

The Baby Boomer generation retirement has had a significant impact on the appraiser industry in rural Arkansas, Scott said. One way to combat the problem would be to eliminate the apprenticeship requirement, he said. But, it’s a federal regulation, meaning it will be difficult to change.

“There are a lot of occupations that only require you to get the education and take an exam to become certified. I don’t see why this should be any different,” he said.

The appraiser shortage extends far beyond the Natural State. Fannie Mae reported that in 2013 there were 44,000 certified appraisers nationwide. By 2021, the number had dropped to 40,000.

One way large lenders such as Fannie Mae and Freddie Mac are combating the problem is to allow for more “desktop appraisals,” according to Bankrate. Instead of physically touring properties for sale, appraisers will inspect listing information and other data from their work stations, said Sandra Thompson, acting director of the Federal Housing Finance Agency.

“This can help each appraiser complete more loans in a day, and it can also help rural communities more readily obtain a necessary appraisal when the borrower is purchasing a property,” Thompson told mortgage bankers at a conference last week.

A desktop appraisal is an assessment of a property’s value by a professionally trained and licensed or certified appraiser that takes place remotely, according to Orchard, a service company that helps clients sell and buy homes. Instead of conducting an in-person inspection of the property, appraisers use a variety of digital data sources to complete their valuation, such as photos, floor plans, tax records, and information obtained through the Multiple Listing Service (MLS).

Desktop appraisals cost less and can remove some bias from the process, Orchard reported.

“There is growing evidence that desktop appraisals are just as accurate, or even more accurate, than the traditional version,” according to Orchard. “The real estate industry has begun to contend with its long history of discrimination in recent years. Appraisal bias – or the undervaluation of homes of people of color due to ethnic or racial bias – is one example of the many obstacles homeowners of color can face when buying or selling their homes.”