Nick Talbot speaks with Dan Brewer, President of the Appraisal Institute of Canada, about trends in valuation and current challenges for the valuation profession.
Nick Talbot: Dan, thanks for taking the time to speak. Tell us a little bit about yourself and your Valuation Professional Organisation.
Dan Brewer: I started my career in real estate in 1978 as a salesperson. The broker who mentored me also carried out appraisal work. He encouraged me to become involved in property valuation and to work towards my Canadian Residential Appraiser designation, which I achieved in 1987. For the next 20 years, I remained a CRA and went about establishing my career. I then worked to earn my Accredited Appraiser Canadian Institute designation in 2006. Earning that designation gave me the opportunity to expand my expertise and continue to be a leader in this great industry.
In addition to my Appraisal Institute of Canada designations, I am also a licensed real estate and mortgage broker, and hold the designations of a CRP (Certified Reserve Fund Planner) with the Real Estate Institute of Canada, a CPPA (Canadian Personal Property Appraiser) and a PLE (Professional Land Economist). I believe that the additional knowledge and expertise from these other facets of the real estate business makes me a more well-rounded professional.
NT: What organisation do you work for?
DB: I am a senior appraiser and consultant for Appraisers Canada Inc., with offices in Richmond Hill and Barrie, Ontario. We are a multi-discipline organisation providing real estate valuation and consulting services to our clients.
I am also the President of the Appraisal Institute of Canada, a post that I am most proud and privileged to hold to help advance the interests of our profession.
NT: How many valuation professionals work at Appraisers Canada?
DB: Appraisers Canada is a family operation with three AACIs, one CRA and three support staff. I am involved in all aspects of the business which gives me a unique perspective on many aspects of this profession.
NT: What areas of valuation is the company involved in?
DB: Our service offering includes machinery and equipment, reserve fund studies, replacement costing, forensic investigation, litigation support, expropriation, stigma and contamination.
NT: What are the main markets that you work in?
DB: Our main market is the Greater Toronto area. This includes York Region, Newmarket, Richmond Hill, Simcoe County, Toronto, Durham, Kawartha Lakes, Northumberland, Peterborough, Muskoka, Dufferin, Parry Sound, Aurora, Vaughan, Peel, Barrie, Orillia and Gravenhurst.
NT: How are you and the Appraisal Institute of Canada involved with IVSC and International Valuation Standards?
DB: The Appraisal Institute of Canada (AIC) is actually one of the founding organisations of IVSC, which we are very proud of. With the advent of International Financial Reporting Standards, the global financial crisis, and the transition within Canada to International Accounting Standards, AIC recognised and fully supported the need for valuation standards that addressed emerging global valuation requirements.
In 2015, we signed a Memorandum of Understanding with IVSC to demonstrate AIC’s support of the adoption of International Valuation Standards to ensure consistency in the valuation process across global markets.
AIC members are also actively involved as advisors to IVSC on issues of governance, membership, standards, tangible assets, and other matters.
NT: What trends in valuation are you seeing at the moment?
DB: There are several trends affecting the valuation profession. The first and most obvious is the rising demand for appraisal services at a lower cost and quicker turn-around time. This is affecting residential appraisals and this trend is seeping into commercial appraisals as well.
There is also the rise of automated valuation models, especially within the residential sector, which is threatening the need for residential appraisals.
On the positive side, the use of technology within the profession is providing new and innovative ways to be more efficient (e.g. Google Earth, drone technology). The rise of big data can bring huge advantages to firms if they have the capacity to privatise this data as a revenue stream.
On a macro scale, globalisation of real estate investors and portfolios is continuing. We're also seeing increasing regulations within the mortgage-lending and mortgage insurance sector. Another big change is the emergence of alternative sources of funding, such as mortgage-backed securities, “B” lenders and crowdfunding, which are not regulated with the same rigor within the marketplace, increasing risk to consumers and investors.
NT: What are the key challenges you face relating to valuation?
DB: There are several challenges related to the trends within the industry, such as:
- The challenge of delivering quality appraisals that must meet our professional standards when our clients are demanding lower fees and shorter turn-around
- The accessibility to quality, reliable data at a reasonable cost
- Over-reliance on automated valuation models
- Lack of awareness of what appraisers do within the real estate sector
- Attracting the best and brightest to our profession
- The increasing tendency for frivolous professional practice claims to be filed especially during hard economic times
- Acquiring mentors and co-signers for our new Candidate Members to become designated
- Increasing operating costs and lower appraisal fees is making it more difficult for AIC members working within the residential market to make a good profit. This is causing some members to make the difficult choice to leave the industry
NT: What opportunities do you think the valuation profession has over the next few years?
DB: The increasing scrutiny of regulators to mitigate lending risk is providing an opportunity for our members to deliver more appraisal services to help their clients verify the value of collateral used in the mortgage application.
There is also increasing demand for machinery and equipment valuation, and now that AIC has a partnership with the American Society of Appraisers to deliver training to AIC members at a reduced rate, this will help our members to diversify their valuation practice.
NT: How would you like to see the valuation profession evolve over the next few years?
DB: I would like to see our appraisers constantly striving to provide exceptional, value-added real estate consulting services to their clients. I would also like to see the valuation profession be trusted advisors in key government policy decisions within municipal, provincial and federal levels.
NT: What are your interests outside of valuation?
DB: I love the outdoors, whether it is to snowmobile, ATV, fish, hunt, hike or bike. Unfortunately, these activities are all on hold at the moment… but not forever.