Rapid growth in South Dakota requires elimination of appraiser certification bottleneck
Recently, South Dakota has been a national success story in attracting people and business from other states. The pandemic has accelerated the movement to remote jobs, and this trend is expected to enrich the state with people who are seeking the benefits of less crowded and affordable places to live. At the same time that South Dakota is experiencing rapid population growth, it has become more difficult to process real estate transactions because of the lack of qualified residential appraisers. Effective occupational licensing has been an ongoing issue, and government should be periodically encouraged to reexamine many of the requirements which currently define one’s ability to earn a living for about one out of every four Americans in the workforce.
Like many other professions, the qualifications for entry into a career of establishing or affirming the value of residential or commercial property are predominately set by a national association, and every level of certification requires increasing levels of experience. According to testimony on the failed House Bill 1061, which was to codify the 30-year-old appraiser advisory board, the single greatest bottleneck to accreditation in South Dakota is a deficit in the number of appraisers who are willing to provide the supervisory experience that is required by the feds. The state has no option but to follow the federal requirements set by the Appraiser Qualifications Board. This board has the unique power to decertify every single licensed property appraiser in the state for any loan that is federally guaranteed, by ruling state certifications out of compliance. This of course embraces not only Fannie Mae, Freddie Mac and Federal Home Loan Bank loans, but also Farm Credit rural lending, which are all ultimately federally guaranteed.
To avoid a backlog in the relocation process caused by a lack of qualified appraisers, it is worth a closer look at what can be done to facilitate real estate closings. The obvious answer is to open the door to allow more people to become qualified appraisers. During a time of record-setting refinancing and new loan transactions, the state has been making little progress on upgrading licenses or adding new appraisers.
However, South Dakota State University has begun a program to give virtual experience to satisfy the certification requirements to some of the 150 or so prospective students that have indicated an interest. Still facing a lack of experienced supervisory appraisers, the state has creatively moved to train them in much the same way as we train pilots in simulators.
With 442 active appraisers and 31,378 homes sold last year, South Dakota has about one appraiser for every 71 transactions. The Sioux City Argus Leader reports that a record number of residences sold for over a million dollars and that the average increase in price for houses sold last year in Rapid City was around $90,000. This alone would seem to require some serious interaction with lenders via qualified appraisers. Since in competitive states, nearly half of homes are selling for more than the listed price, and more than half, on average, are selling within two weeks of the listing date, the skills of a qualified appraiser are even more critical today than previously to avoid severe bottlenecks in the housing market.
This is but one example of the importance of getting occupational licensing right, and not letting people who are already licensed pull up the ladder behind them to make it more difficult for others to enter new professions. Unfortunately, this is the tendency in every profession and state governments concerned about creating jobs and focused on economic growth are starting to take notice. In the meantime, there is probably no greater imperative for state governments interested in attracting new residents than to make sure that it is not difficult to resettle in the state due to artificial barriers which can be largely eliminated.