The real estate frenzy of the past year-plus has been well-documented in state, local and national data.
As buyers flood the market, a dwindling supply of available homes has caused a spike in home prices, yet done little to blunt that surge in demand. In South Carolina, home sales in 2020 and early 2021 increased by almost 15% over 2019.
This red-hot real estate market has put a strain on every industry involved in home buying and selling: homebuilders, real estate agents, mortgage lenders and, especially, appraisers. Nearly every home sold must go through an appraisal process, where a licensed or certified appraiser inspects the home for sale and researches nearby comparable properties recently sold to calculate a fair market value for the home.
No bank or mortgage lender will agree to a loan without an appraisal, and the process by its nature is detailed and painstaking. But as with many other industries during the coronavirus pandemic, those in the real estate appraisal business find themselves overwhelmed by a trend no one saw coming.
Paul Ryll is a real estate appraiser based in Greenville and owns several restaurants in the Upstate. When COVID-19 cases first started to surge in the U.S. and lockdowns forced business and school closures in spring 2020, he thought about how he’d survive financially with an expected sharp decline in revenue.
“I remember thinking at the start of the pandemic about what I would do when business slowed down, where I could save money, because I assumed a lot less money would be coming in,” Ryll said. “We had no idea we’d be going 100 miles an hour right now.”
Ryll said he and other appraisers in the Upstate have been overwhelmed with appraisal orders since at least May or June 2020, a few weeks after the first lockdowns were imposed. At first, it was home loan refinancing that created a surge in his business.
“People could basically sit at home and apply online, do most of the refinancing work at their computer,” he said. “With everyone being home so much more and interest rates being so low, we saw a big increase in refi appraisals at the beginning of the lockdowns.”
That unexpected spike in demand was compounded as people started looking to move out of larger cities where COVID-19 cases were at high levels or sought to move within their local area into a newer or larger space more suitable to spending substantially more time.
Appraisals have always been one of the limiting factors in the timeline of the home-buying. According to Ryll, a normal timeline for an appraisal to be completed is about 10 days. But now, with the backlog of orders from home sales and refinancing, 30 days is what his company quotes to complete an appraisal.
“We are absolutely slammed right now,” he said. “Before the pandemic, we would do about 80 appraisals a month. Now, we’re doing about 140. All appraisers in the Upstate are in the same situation.”
Ryll said the number of appraisal companies in the Upstate has remained fairly steady in the past decade or so, and the fact that the certification process takes up to 18 months or more means new appraisers can’t enter the market quickly.
“It’s difficult to add staff quickly in this business,” he said. “The training takes a long time, and licensed appraisers like myself simply don’t have the time to properly train people when we’re as busy as we are right now.”
According to information from the state Department of Labor, Licensing and Regulation, which oversees certification and licensing of real estate appraisers, the process for qualifying as an appraiser begins with three courses and completion of a supervisor/trainee course. Once that is completed, training continues under the supervision of a certified appraiser for six to 18 months, depending on the license being attained. During that time, trainees must take more appraiser courses and gain experience to upgrade to “licensed” or “certified.” The last step is the state exam.
Ryll has developed an online software platform that aims to streamline the appraisal process. During the pandemic, many lenders allowed more desktop appraisals, which means an appraiser is not required to do an on-site inspection, but can accept photos and data from a real estate agent or home inspector to begin the appraisal process.
He said appraisers were reluctant in the past to accept data from third parties not specifically trained to take those measurements because the appraiser was still liable for any mistakes made. But new language in federal lending guidelines has now passed that liability to the data collector, so certified appraisers have more protection in that regard.
Ryll’s platform, Oscar Mike Mobile Appraisals, helps data collectors upload information into a template that can easily be accessed and used for online appraisal submissions.
“It makes the process more streamlined, and saves a lot of time on data entry,” he said. “When you can save 20 minutes or so in one appraisal, that adds up over a month of doing so many appraisals.”
Ryll unveiled his platform at the recent Valuation Expo in Las Vegas, a national convention for appraisers and lenders. He said response was enthusiastic, especially about the fact that his software was developed by an appraiser, not from a typical source such as a fintech firm or lending company that might store data that can be used basically in perpetuity.
“Appraisers are reluctant to submit data on properties that can be stored indefinitely,” he said. “If enough of that data is kept, appraisers worry that it can reduce demand for their expertise and services. OMMA keeps data for just 30 days; then it’s erased. We aren’t interested in data storage; appraisers understand current data on a home or property is the only way to create an accurate market value.”