Demand for residential property appraisers has swelled since January 1 because lenders are sensitive to B-20, however, it’s revealed a glaring shortage of people willing to do a job that remunerates poorly.
A confluence of factors have conspired to make earning a living as a residential appraiser difficult. Chris Bisson, the founder of Value Connect, a property appraisals company, says educational requirements to achieve certain designations have turned appraising into a greater time investment than most people can afford, but large appraisal companies, who receive the bulk of the work from lenders, have also put downward pressure on fees.
“It’s essentially an oligopsony, so that means there are few buyers vis-à-vis the amount of suppliers, and the buying power is really condensed into a few bodies,” said Bisson. “Many banks have gone the route of the appraisal management companies. You’ve effectively got 70% of all mortgage transactions done through banks, and as a result the bulk of appraisal work done is channelled through appraisal management companies, and there’s only a few of them, so they dictate what the pay down to the appraiser is.”
Appraisers earn small fees per report, and in order to make a living, they have to take on greater volume.
“So many people opt for a different career,” said Bisson. “If you’re making $50 on a report as a candidate, you have to do a lot of reports to make a decent income. Appraisers tell me that they constantly see pressure to reduce their fees. A small percentage of people will make that money compared to the average, and it’s gross, not net. These appraisers have to pay all their costs out of that, like gas. Insurance and membership costs are significant. Out of the gate, you have to do 100 reports to break even.”
Juxtaposing appraiser remuneration with realtor commissions, Bisson says it’s no wonder residential property appraisers are in high demand and short supply. He also says lenders are notoriously difficult to deal with, and getting onto their approved list is a tall order.
So where do appraisers go?
“A staff appraiser might work for the City of Waterloo, and their job is to appraise real estate for the city,” said Bisson. “The CRA [Canada Revenue Agency] has appraisers on staff. Large companies like McDonald’s have appraisers on staff. Do I want to make $200 per report or do I want to get a job making $40,000 guaranteed with no cost, no travel or gas expenses? A lot of people do that. That’s another reason there’s a shortage of residential appraisers.”
The owner of a prominent Winnipeg-based appraisal company, who asked not to have his name printed for fear of “being blackballed,” says having an intermediary involved complicates fair remuneration.
“From a personal aspect, I find that with having a middle man in there, they’re more concerned with their bottom line than our bottom line. Most are larger corporations that have their bottom line to meet. A lot of appraisers are their own worst enemies, and to get more business they’ll cut their price.
“We try to quote it based on the amount of work that’s done. Certain jobs require more due diligence, so if I get a house within city limits on five acres of land with a well instead of municipal water, that’s different than a cookie cutter house in a standard neighbourhood, so we try to quote what the job entails. How much more time will it take?”