Impact of COVID-19 on the U.S. Real Estate Appraisers
A new RealEstateBees.com survey of over 2,000 active real estate appraisers found that despite the negative impact on their business caused by the COVID-19, more than 55% are seeing new opportunities opened by the pandemic.
The following segmented report provides results of a large scale survey—Impact of the Coronavirus on the U.S. Real Estate Businesses—conducted by the Real Estate Bees research team, leading real estate platform for real estate professionals.
The following statistics reflect the situation among the US property evaluators. We reached out to over 2,000 active real estate appraisers from all the 50 U.S. states and Washington D.C. to collect their insight on the impact of the COVID-19 pandemic on the industry in general and their businesses in particular.
The report is divided into the following two parts.
1. Multiple choice questions where the professionals had to choose one of the suggested answers to each question:
1.1 Is there a negative impact the pandemic is having on real estate appraisers?
1.2 Has the pandemic opened any unexpected opportunities for real estate appraisers?
1.3 How are you adjusting your marketing budget?
1.4 Are you transferring your business to a “work from home” basis?
1.5 Have you noticed any benefits of transferring your business processes to a “work from home” basis?
1.6 Have you noticed any drawbacks of transferring your business to a “work from home” basis?
1.7 Will you keep your business processes transferred to a “work from home” basis after the pandemic is over?
2. Open questions that allowed the experts to share their insights on various aspects of the impact of the coronavirus pandemic on the U.S. real estate appraisers:
2.1 What are the specific negative impacts the pandemic is having on real estate appraisers?
2.2 What unexpected opportunities have the pandemic opened for real estate appraisers?
2.3 If you knew the impact of this situation on your business in advance, how would you prepare your business to mitigate your losses or even profit from it?
2.4 What marketing channels do you prefer to use during the pandemic over the rest and why?
Is there a negative impact the pandemic is having on real estate appraisers?
Has the pandemic opened any unexpected opportunities for real estate appraisers?
How are you adjusting your marketing budget?
Are you transferring your business to a “work from home” basis?
Have you noticed any benefits of transferring your business processes to a “work from home” basis?
Have you noticed any drawbacks of transferring your business to a “work from home” basis?
Will you keep your business processes transferred to a “work from home” basis after the pandemic is over?
What are the specific negative impacts the pandemic is having on appraisers?
Key takeaways from the appraisers’ answers:
- The pandemic has affected the number of residential appraisals ordered by banks and credit unions: fewer homeowners apply for mortgages to purchase residential housing.
- However, residential appraisers are not expected to be affected heavily because of low interest rates that are favorable for new constructions, refinancing, and purchasing new property.
- Commercial appraisals are also impacted with fewer commercial properties being purchased. Some commercial appraisers may be fortunate enough to offset this lull, thanks to governmental clients and job opportunities related to estates and litigation.
- Commercial appraisers don’t expect to get a lot of work from traditional lender clients, as most banks these days are into processing SBA and PPP loan applications than traditional commercial real estate loans.
- The deployment of flexible reporting options, which allowed reports without an interior inspection, negatively affected how appraisers’ reports were accepted since lenders and even the GSEs themselves that allowed this option are hesitant to accept such reports.
- Safety is an obvious issue: since appraisers need to be physically present to inspect the interior and exterior of a subject property, this puts them and occupants at risk for virus exposure.
- In the absence of appraisers conducting an interior inspection, homeowners take it upon themselves to take a photo of the interior to fulfill appraisal requirements. Appraisers see a big problem in this new setup as many items can be missed or hidden from view.
- Appraisers are also experiencing difficulty in researching data with government offices being shut down. Meanwhile, the pandemic’s effect on market values remains to be seen.
- While appraisal reviews are expected to slow down, foreclosures due to the pandemic are seen to create job opportunities for appraisers with lenders requiring property evaluations for the assets they acquire.
- For appraisers with a more stable business, a job opportunity lost in one line of work isn’t seen as a problem as they can excel in another. For example, if there is reduced work from banks, they can find an opportunity from legal clients needing appraisal work.
- Overall, appraisers are confident that the pandemic’s effects are short term, as they believe the appraisal field is the most recession-resistant profession in the real estate business.
Lee Smalley, MAI, BBG, Inc.
The pandemic has impacted the entire real estate spectrum. We have been impacted due to the shift of lenders and market participants into a hold pattern for the interim. Also, the rise in unemployment, new regulations regarding occupancy and operations, and the rise of work-from-home arrangement will impact many real estate sectors for years to come.
This has resulted in less appraisal work coming into our pipeline for the time being. Appraisers generally are busy when the market has some movement; whether it is up or down. However, the freeze put in place by the government effectively placed most participants on hold.
Domenick Neglia, SRA, CSA-G, Neglia Appraisals, Inc.
Most residential appraisers rely on appraisals ordered from banks for a large part of their business. Because of the pandemic, fewer homeowners are applying for mortgages for refinance purposes, and there are also fewer people buying residential housing.
This results in a negative impact on the number of appraisals ordered by banks and credit unions. For commercial appraisers who rely on sales transactions of commercial property, the pandemic has also had a negative effect because fewer properties are being purchased.
Drew Watson, EVP
It has become apparent through the deployment of the flexible reporting options made available by the GSEs that the primary risk mitigation function addressed by the appraiser is property condition. I expect to see the bi-bifurcated appraisal model back in GSE policy soon after the pandemic stabilizes.
This shift in the appraisers value add was exposed when the GSEs allowed flexible reports (aka reports without an interior inspection) but neither the lender nor the GSE were willing to accept the report and warrant risk (i.e., financial downside) without an interior inspection.
Keith Bodungen, KTB Real Estate Services, LLC
Residential appraisers do not seem to be impacted due to low interest rates. Many people are refinancing, while there are still many buyers out there, along with new construction. Commercial transactions have slowed some, so if a commercial appraiser primarily provides appraisals for lenders, they may be slow.
However, many commercial appraisers are busy due to government clients and ongoing work related to estates, litigation, etc. Appraisal reviews have slowed, especially commercial ones, since not many transactions are taking place.
Dale Webster, Cornerstone Appraisal Group
It is difficult to inspect real estate interiors. The occupants may or may not allow us inside. If the occupants take pictures of the interior for us, many items can be missed or hidden from view. Researching data is more difficult with government offices closed. Lastly, the impact of the pandemic on market values is unknown at this time.
Michael Comstock, MAI, Cushman & Wakefield
Appraisers have always been flexible, so the work-from-home aspect was a very easy transition. The negative impacts are more related to the lenders and investors halting their loan activity until they get a better handle on the COVID-19 situation. This has translated into many appraisers having a significant cut to their workflow.
Gary DeClark, Valbridge Property Advisors – Chicago
I say the industry has been moderately affected because a well-positioned business may feel a reduction in one line of work (e.g., bank work) from the pandemic while, at the same time, a surge in another (e.g., legal work). The majority of appraisal operations are not well positioned or evenly balanced in their client bases.
Gordon Wicker, Quality Valuation
At the onset of the stay-at-home orders, I began to see a fairly substantial slowdown in work volume. We are a commercial appraisal firm, and the majority of our work comes from traditional lender clientele. When the banks had to process the enormous volume of SBA and PPP loan applications, the “all hands on deck” in that regard meant that none were processing traditional commercial real estate loans.
Mark Liley, AAA AMC
The COVID-19 pandemic has created a negative impact on appraisers. Since appraisers are commonly required to physically inspect the interior and exterior of the subject property, they come in close contact with the occupants and surfaces of the dwelling. This level of inspection places both the occupant and the appraiser at risk for exposure to COVID-19.
Richard L. Steeves, Southeast Commercial Appraisers & Consultants
I believe that in the short term, there will be lower activity in both residential and commercial transactions. Unfortunately for most, foreclosures (of both residential and commercial properties) will increase over time, which will create work for appraisers as lenders are forced to establish values for all of the assets that end up under their ownership.
Matt Speer, MAI, Keller Craig & Associates
There has been a slow down in new appraisal bidding opportunities. However, I expect this to be short term. The appraisal field is the most recession-resistant profession in real estate as appraisals are still required for estate purposes, divorces, foreclosures, and debt workouts.
Greg Hansen, MAI, Hansen Valuation Services, LLC
Deal volume is down to a degree, and the credit markets remain somewhat frozen. Banks have been hyper focused on PPP loans and are just now starting to get back to lending on traditional CMB loans.
What unexpected opportunities has the pandemic opened for appraisers?
Key takeaways from the appraisers’ answers:
- Appraisers are using desktop reports more than previously, which allows them to complete appraisals faster and eliminate secondary routine procedures that come with traditional appraisals. Utilizing new tools in desktop reporting also helps appraisers be more efficient when producing supplemental inspection information.
- Consultation work is on the upswing, with appraisal work being required for lease/buy decisions and loan portfolio review.
- As low interest rates continue to be provided for buyers and homeowners, appraisers see an opportunity for more property assessment work in residential properties to fulfill refinancing and new transaction requirements.
- With the pandemic forcing some homeowners to foreclose on their properties, appraisers expect a steady stream of work as lenders require to assess these assets.
- Appraisers are also seeing new opportunities in bankruptcies, which require appraisals to fulfill court requirements.
- The pandemic has also given appraisers an opportunity to strengthen their relationship with clients, allowing them to conduct fruitful discussions that bring forth a deeper understanding of customers’ needs and providing them add-on services that offer greater value to their business.
- With the lifting of shelter-in-place orders, appraisers will have an opportunity to see the extent of the pandemic’s impact and apply their skills in areas of the real estate business where these are useful. For example, they can be relied on to assess the value of commercial establishments post-pandemic. Their area of expertise will further assist clients who are looking to evaluate their real estate assets after the pandemic.
Lee Smalley, MAI, BBG, Inc.
With the shelter-in-place order being lifted, we can now begin to see the impacts from the COVID-19 regulatory implementations. Given this, appraisers will be able to apply their skills in determining what the impacts are to real estate from the new limitations placed on restaurants, hospitality, office, and multifamily.
As an example, we are able to analyze what happens when occupancy is reduced by government orders for a retail property or what the loss in value can be to a hotel that now has to ramp up operations for the next few years. There will be opportunities to assist our clients and quantify it as it pertains to the real estate asset.
Drew Watson, EVP
The promulgation of desktop-type reports, which match the risk to scope of work, is expected to continue. This is a bright spot for appraisers because desktops usually allow appraisers to spend more time at their true highest and best use, which is choosing comps, determining or approving adjustments, and reconciling values rather than typing detailed reports few people ever read.
The desktop medium allows appraisers to compete with automated models on speed and price and, hopefully, exceed AVMs on transparency and accuracy.
Matt Speer, Keller Craig & Associates
The pandemic has made our firm dig in and analyze the changes in market conditions. It has also led to more discussions with our clients about values and what drives value.
These discussions allowed us to better understand the needs of our clients and discover additional services that we can provide them, such as sensitivity analyses that let lenders know the potential range in value due to market conditions.
Gary DeClark, Valbridge Property Advisors – Chicago
Some examples of unexpected opportunities include:
- lease/buy decision consultation work
- loan portfolio review work to test values against loan balances
- estate planning work, among others.
Richard L. Steeves, Southeast Commercial Appraisers & Consultants
In the intermediate term, appraisers will see a reasonable amount of work as lenders are required to estimate asset values (foreclosed properties) on their books.
Brenda Dohring Hicks, RealWired
Financial institutions are looking to analyze their portfolios and may need consultative valuation services that appraisers are best suited to handle.
Christopher Bourland, JB Real Estate Valuation & Advisory, LLC
New tools were launched to assist appraisers in desktop reporting, which may be valuable going forward for supplemental inspection information.
Jumana Judeh, Judeh & Associates
Since commercial lenders are not lending, I switched to doing residential work which is booming due to the low interest rate.
Keith Bodungen, KTB Real Estate Services, LLC
I would say the low interest rates have opened opportunities for appraisers, given the demand for refinances and new transactions.
Domenick Neglia, SRA, CSA-G, Neglia Appraisals, Inc.
In the short term, there will likely be more bankruptcies, which will require appraisals for submission to the courts.
If you knew the impact of this situation on your business in advance, how would you prepare your business to mitigate your losses or even profit from it?
Key takeaways from the appraisers’ answers:
- Training the staff to handle new processes during the pandemic could give appraisal firms a headstart on how to better deal with inspections and occupants. Training them as well as to look for new customers in other sectors is a good way to keep the business relevant across all industries.
- Communication with clients is key to strengthening business operations, particularly to expound on changes in the way appraisals are handled in the time of COVID-19.
- Communication also opens doors for appraisers to educate clients on how to manage market condition expectations and potential impacts of the pandemic on the market.
- Getting as much new business as possible from repeat clients can help businesses stay afloat. Taking more appraisal jobs before the pandemic could have been done to ensure more work in the pipeline.
- Planning and marketing in advance is the best defense against unexpected events.
- Technology could have been leveraged to come up with tools that can provide profit during the pandemic. Some appraisers who have realized the value of technology in advance by developing a homeowner inspection app and valuation platform for desktop reports are now winning by leaps and bounds.
- Appraisers could have also used the time to improve their education to be more efficient and knowledgeable in the business.
Michael Comstock, MAI, Cushman & Wakefield
There are many reasons or situations that can hit any business at any moment. Mitigation is a defensive state and I try to focus on offense during all situations. Preparation could be having money in the bank so paying the bills is not the primary cloud hanging over during survival mode, but really it is more about being confident and scrappy to fight through.
Not many could have predicted that fitness centers would go bankrupt while in-home fitness equipment sales are off the charts. The fitness owners that switched their mindset to in-home related fitness are winning. Those that didn’t are not.
Evan Himel, Evan Himel, LLC – Real Estate Appraisal & Consulting
The only real change to our business is how we communicate with clients and property owners. There is a little more questioning and time spent on scheduling. We’re either taking precautions with PPE or doing exterior-only appraisals with property owner surveys.
So if I knew ahead of time how to prepare, I’d say I would have trained up our admin staff to deal with the new scripts and processes for dealing with inspections and occupants.
Jason L Ferris, MAI, SRA, Bell Ferris, Inc.
There was no way to really prepare for this. The government shut down the economy, so people weren’t buying and selling houses, starting commercial development projects, or looking for commercial properties for their businesses or investment portfolios.
Our internal company infrastructure cannot change and still effectively completes a single appraisal, so there was no way to prepare.
Greg Hansen, Hansen Valuation Services, LLC
I perhaps would have broadened my client base prior to the pandemic and strengthened relationships with attorneys whose appraisal needs are not materially impacted by the virus. However, I have a small operation (I employ one person), and we have enough work to keep both of us busy for the time being.
Matt Speer, Keller Craig & Associates
I think looking back, I would have spent more time educating our clients on the potential for changing market conditions by providing sensitivity analyses in the reports that help explain potential impacts due to market conditions.
Lee Smalley, MAI, BBG, Inc.
There is no preparation for a complete shutdown of business. Ultimately, had we known how this would have panned out, I would have started preparing our staff to start looking at other sectors who would need appraisal services.
Tim Allen, Seagle & Associates, LLC
Again, I’ve been through hard times. Seeing my customers face-to-face or at least getting on the phone with them to let them know that I will perform for them has been my best defense.
Domenick Neglia, Neglia Appraisals, Inc.
We have a deep pool of repeat clients, so we would try to accumulate as much new business as possible based on their short-term needs in order to maintain steady workflow.
Gary DeClark, Valbridge Property Advisors – Chicago
My budget is not being adjusted, but I am redirecting emphasis. The best hedge against a downturn is advance planning/marketing to spread the client base.
Drew Watson, EVP
We have the tools to profit from the expected changes: a proven homeowner inspection app and our valuation platform for desktop reports.
Shawn Wilson, MAI, Compass Real Estate Consulting, Inc.
I might have taken on an above-average workload in order to have more work in the pipeline.
Dale Webster, Cornerstone Appraisal Group
I would use the time to take classes/get more education.
What marketing channels do you prefer to use during the pandemic over the rest and why?
Key takeaways from the appraisers’ answers:
- Word of mouth remains an effective marketing tool to use for gaining clients in the time of pandemic.
- Social media channels like LinkedIn and Facebook are good platforms to widen client reach. For some appraisers, LinkedIn can be utilized to get updated information about the state of the economy or to get their information and messages across a wider audience.
- Blog articles and websites are being utilized during the pandemic to remain relevant and maintain a strong presence in the digital space. Most appraisers get their clients through web searches.
- Video conferencing tools like Zoom and GoToMeeting are also being used to communicate with clients.
- Despite the rampant use of technology as a means to advertise, conventional methods, such as getting in touch with one’s best customers through face-to-face interaction, phone calls, and emails, don’t take a back seat, especially when weathering a slowdown.
- Marketing efforts for some appraisers are mostly directed toward clients that handle loan workouts.
- Some appraisers don’t rely on marketing channels to gain new customers. They get most of their clientele from referrals and repeat clients. Appraisers that have banks as clients are provided with bidding opportunities, which enables them to limit all marketing efforts.
Tim Allen, Seagle & Associates, LLC
I am as busy as I have ever been. The last time real estate had a slowdown, I made it a point to go see my best customers. I don’t advertise or have a website. It’s facetime and word of mouth. It’s STP-seeing the people. It’s letting them know who I am as opposed to doing a Facebook entry or running a webpage.
Gary DeClark, Valbridge Property Advisors – Chicago
Word of mouth and previous experience have always been the best sales tools. These have been the best avenues of work generation for years. Articles, blogs, and conveyance of timely information through electronic means are also very good.
Michael Comstock, MAI, Cushman & Wakefield
I rely on LinkedIn for up-to-date, economic-related information. Many of the other marketing channels are too political. Frankly, I need to do a better job communicating my ideas on LinkedIn.
Evan Himel, Evan Himel, LLC – Real Estate Appraisal & Consulting
Social media and direct mail have been our only marketing channels since opening our business three years ago. That hasn’t changed much since the pandemic.
Lee Smalley, MAI, BBG, Inc.
I prefer to use conventional marketing channels: emails and phone calls. We have also been using Zoom and GoToMeeting for video conferencing.
Domenick Neglia, Neglia Appraisals, Inc.
We market mainly to attorneys, so that mainstay will be unchanged. Our website is critical to maintain a strong presence on the internet.
Matt Speer, MAI, Keller Craig & Associates
We have been focusing on our existing clients and referrals via word of mouth. We have not spent any money on marketing during the pandemic.
Dale Webster, Cornerstone Appraisal Group
I generally don’t market my services due to the specialty nature of my business. The closest I can claim to marketing channels is word of mouth.
Richard L. Steeves, MAI, Southeast Commercial Appraisers & Consultants
I use word of mouth and the internet. In commercial real estate, the quality of your work is what typically drives more/new business.
Keith Bodungen, KTB Real Estate Services, LLC
None. I’ve been too busy to market, which I really don’t do anyway. My work is from referrals, repeat clients, and web searches.
Christopher Bourland, JB Real Estate Valuation & Advisory, LLC
My positive relationship with banks has provided me with bidding opportunities. My marketing is very limited.
Jeff Harris, Harris Property Advisors
Mostly the same. I would envision marketing heavier toward clients that handle loan workouts.
___
If you too want to contribute your expert advice on a topic of your expertise, feel free to apply to our Expert Contributor Program.