The Innovation Game

If there exists a special four-letter word in AppraiserLand, it is “modernization”. The oft-maligned efforts of the GSEs to “modernize” appraisals took the form, to many, of trying to find ways to get anything other than an appraisal to fulfill their understanding of collateral risk. From bifurcated appraisals to outright appraisal waivers, the push at the time was to overcome the friction of the appraisal process with faster alternatives.

Despite all these efforts, the appraisal persists as the most common collateral risk tool today – surprising when you consider the time and treasure invested in alternatives. We see a landscape today where the goal is not to end run the appraisal, but to find ways to make appraisals faster and more efficient for borrowers, lenders, and appraisers alike.

There are detractors of the current direction of travel towards non-appraiser property data collection (PDC) and further codifying the hybrid appraisal model. Yes, there is value in the same person conducting the inspection and performing the analysis that becomes an opinion of value. Sights, sounds, and smells don’t always translate into property data reports. As a friend once opined, you simply cannot understand the scale of noxious odor from cat pee until you’re in a home littered with it.

But for every exception where a traditional approach may be beneficial, there exists as many (If not more) use cases where handing off the data collection to an alternative workforce makes sense, especially considering what many, me included, think is about to happen to the population of mortgage lending appraisers.

The soft introduction of the Uniform Appraisal Dataset 3.6 (UAD 3.6) and its updated format started a clock towards full adoption (and, inversely, abandonment of the old appraisal forms designed originally for typewriter usage) in November of 2026. Estimates vary, but between 15-20 percent of the current appraiser workforce that performs mortgage lending appraisals may elect to stop doing lending work, if not leave the appraisal business altogether.

I heard of one state sharing anecdotally they are losing 60 appraisers a month from their license rolls, and they’re not alone in seeing a downturn in license renewals. While existing mortgage rates and economic conditions are suppressing demand for mortgages, a significant shift on either front will bring a wave of demand – be it purchase or refinance.

GSE data on the topic suggests we have enough appraisers to support the current level of activity, but any sudden spike in mortgage demand will flood the system, just like was experienced in the pandemic years. Even those maligned alternatives only work on a certain percentage of transactions, meaning the potential exists for real delays in the lending process.

It’s worth noting here that for all the intermittent acrimony, lenders, appraisal management companies (AMCs), and appraisers have a degree of a symbiotic relationship that must exist for all parties to flourish. Federal law, GSEs, and MBS raters and purchasers all have standards regarding how collateral risk should be addressed as part of the mortgage lending process. Lenders predominantly rely on AMCs to fulfill these obligations on their behalf, contracting with an appraiser who is duly licensed and competent to accept the work.

Put differently, there’s little to be done to bend the demand curve for appraisals related to mortgage lending; we either have a growing or slowing market for mortgages, and appraisers meet whatever need exist in the market for their services.

This is where the modern turn toward emphasizing appraiser efficiency is noteworthy. Far from battling over the necessity of appraisals, the housing finance system has instead realized the layers of inefficiency that have not been addressed sufficiently. One speaker at a meeting pointed it out this way: The most inefficient tool in the toolbox is the truck keys. Windshield time is lost time in the appraisal process and prevents appraisers from being more readily available to conduct the analytical work where their value (pun intended) truly shines.

Not every possible solution toward appraisal efficiency will be a winner, but there is a level of investment today in the question that makes me believe the total time for order completion is on the cusp of significantly shrinking.

For those of you who’ve read this far and are scoffing about how “that’s not the way I do it”, I get it. I’m not here to proselytize that a full pivot to PDC-backed hybrids is a panacea. But unless and until we see a meaningful increase in the available appraiser workforce, would you rather have approaches that maintain the role of the appraiser, or ones that eliminate the need for appraisers entirely?

Inclusion of the appraiser, however it remains, is vital not only for the survival of the profession writ large, but also in ensuring collateral risk is properly adjudged.

A last thought, for those same folks a moment ago grousing over change and its necessity: We know there’s a crying need for new appraisers, yet I still hear stories of trainees who simply cannot find supervisors to take them on. Programs like PAREA and Practicum are good alternative solutions, but struggle with limited throughput capacity.

I’d suggest that unwillingness or inability to train new appraisers exacerbates this looming deficit. If you’re not already, consider taking on trainees and sharing the deep well of knowledge you’ve developed over the years – if not for your bottom line, then to better the profession and ensure its viability for years to come.