Could Mandatory Background Checks Cause a Shortage of Real Estate Appraisers in Pennsylvania?

By Michael Klazema on 10/15/2015
As of January 2015, real estate appraisers around the nation have been required by federal law to complete criminal background checks "from state and federal agencies." The new rules come from the Appraiser Qualifications Board of the Appraisal Foundation and were adopted all the way back in 2011. In other words, states had a long time to comply with the laws and set up new licensing policies and procedures for residential appraisers. The transition was made even easier by the fact that the Appraiser Qualifications Board decided not to require background checks for existing appraisers.

However, according to a report from Lehigh Valley Business, Pennsylvania's real estate industry is struggling with an appraiser shortage, with the mandatory background check law a potential contributing factor. In an article titled "Real estate appraisers may be endangered," the Eastern Pennsylvania publication looked at how various changes have made the appraiser job much less attractive for career seekers.

Background checks are just a part of the decline. National law requires new appraisers to undergo both state police and FBI database criminal history screenings, a factor that could potentially be scaring some applicants away from available jobs. The checks, while necessary to protect sellers, buyers, and properties from damage or theft may be sending the message that those with even minor crimes need not apply to appraiser jobs. Add hefty education and apprenticeship requirements, new appraisers must spend 2,500 hundred hours shadowing experienced appraisers before being allowed to assess the value of a home on their own, and it's no surprise that young professionals are steering clear of the field.

Arguably the bigger problem, though, Lehigh Valley Business also tackled a range of other issues in the appraiser job market, from unethical dealings to greedy middlemen. If residential appraisals come in low and threaten real estate deals, the Lehigh Valley Business notes that some banks will pressure appraisers to adjust their estimates. Higher estimates, in turn, can convince buyers that they are getting their money's worth and reduce the likelihood of someone backing out of a deal. Appraisers who won't tweak their estimates can be blacklisted by different banks and denied work in the future. Those who do tweak their estimates risk being sued, fined, and stripped of their licenses. Appraisal Management Companies, the middlemen who hire appraisers and deal with banks, complicate matters further—all while taking a substantial cut of an appraiser's fee.

The picture here is one of an industry that is probably over-regulated in some areas and under-regulated in others. Cursory background checks and educational requirements are good to keep appraisers honest and accountable, but are 2,500 apprenticeship hours really necessary? And while the state is watching the appraisers, who is watching the banks and the management companies for wrongdoing? Mandatory background checks might not be helping the residential appraisal job market, but they are just one factor in a heavily flawed system. Without some overhaul to state and national policies, Pennsylvania and other parts of the country could see a growing appraiser shortage in the next five years.

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