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A Look into PAREA

by Kendra Budd, Editor

We’ve heard it time and time again—new would-be appraiser trainees have too many roadblocks keeping them from becoming independent appraisers. One of the primary roadblocks is that many folks interested in the profession experience incredible difficulties finding an appraiser supervisor willing to take them on as a trainee.

There are a variety of reasons why a practicing appraiser may not want to bring on a trainee: the time investment required in training, fear of training the competition, low appraisal fees paid by appraisal management companies (AMCs), lender requirements excluding trainees, and more lately, a slowdown in mortgage work unlike anything appraisers have seen in the last 20 years. The result is that it has been difficult for trainees to get their required training hours from the traditional supervisor-trainee model.

The difficulties of the supervisor-trainee model, combined with the fact that appraisers as a whole are an older demographic, has fanned the flames of fear that aren’t enough new appraisers ready to replace retiring ones. Thus, the Practical Applications of Real Estate Appraisals (PAREA) was born, a new appraiser training program designed to help prospective real estate appraisers obtain their needed requirements without a traditional supervisor.

For those brave souls who are passionate about becoming a real estate appraiser and have struggled with finding a mentor or a supervisor, the introduction of PAREA is a godsend. However, many practicing appraisers feel that there is no shortage of appraisers (especially now—during today’s slowdown) and that PAREA is designed to lower the standards of the appraiser profession and drive down appraisal fees further.

So, what is PAREA and how does it work exactly?

Here’s what you need to know.

What is PAREA?
PAREA was adopted by the Appraisal Qualifications Board (AQB) on October 16th, 2020 and became effective in 2021. The Appraisal Institute (AI) is the first organization to offer a PAREA training program to the public, receiving AQB approval in May 2023. AI reported spending over $2,000,000 on its program development and it describes its current program as “an alternative pathway for aspiring appraisers to gain their required experience hours to become a licensed or certified appraiser.”

How Does PAREA Work?
All participants in PAREA must complete all of their hours of Qualifying Education (QE) before starting the program—just like any other trainee situation (150 hours of QE for licensed, and 200 hours of QE for certified). Prospective students must then apply for AI’s program.

Once accepted, PAREA will automatically assign trainees a mentor who will share their real-world experience, insights, and tips to help them navigate the program and have a successful career. These mentors will appraise properties virtually with their trainees, walking them through the process and letting them ask questions and share insights as they go along.

Along with training on all topics, PAREA provides participants access to data, research, MLS, environmental information, and much more. This will allow trainees to get actual hands-on experience. Instead of watching their mentor work by peering over their shoulder. This will enable students to absorb information more quickly and efficiently. In fact, PAREA students will be quizzed often with something called “Milestones,” once they complete one section of PAREA, they will be asked to do a quiz review to ensure that the lessons are sticking and students aren’t just rushing through their training.

Additionally, PAREA students will complete ten practice assignments and immersive skill activities. This allows trainees to use the skills they’ve learned during mentorship and apply them to real-life examples, including USPAP-compliant appraisals.

Once participants successfully complete PAREA, they must also pass the national licensing and certification exam for the appropriate credential level.

The PAREA program allows students to become familiar with appraisals and be work-ready upon gaining licensure. It is not a simple program to throw out new appraisers into the world, but rather one that trains the next generation of competent appraisers with resources they can always look back on.

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The Digital Age
There are many appraisers who are skeptical that digital training of any kind will work. One appraiser commented on a Reddit thread about PAREA, stating that digital appraisals don’t work and further insinuated that it would only create lazy appraisers. “We don’t want every [average Joe] with a high school degree who did PAREA trying to bid on our work. PAREA needs to be shut down,” wrote the commenter.

However, Dave Bunton, President of The Appraisal Foundation (TAF), said in an interview with Hal Humphreys on Appraisal Buzz, that digital training is the way of the future. “If you look at the world today, surgeons don’t operate on cadavers—they do digital operations. Pilots do flight simulations. This is kind of what this is, a flight simulator for real estate appraisers,” Bunton enlightened.

In fact, Bunton continued by saying that PAREA was actually born from banks when they stopped outsourcing their valuation work. “That was the incubator for a lot of appraisers. Suddenly, we lost that and that hole could not be filled by the number of people who wanted to be supervisors. So that is why we came up with this simulated training,” Bunton explains. It’s increasingly harder for prospective students to find local appraisers to take them on as trainees—PAREA attempts to bridge that gap by making supervisors available virtually.

Not only that but the simulations are designed to help trainees think of every single possible situation when doing these virtual appraisals. For example, they’ll have students take a house and appraise it. Then, appraisers will be asked to appraise the same house again as if it’s near railroad tracks, a lake, has a garage, etc. Bunton says this is all simulated to teach students how this can all affect value—something you may not get in the traditional trainee-appraiser situation. “You have a limitless set of valuations. People that go through this may be better prepared than some people who use supervising appraisers, because their appraisals can be very narrowly defined,” Bunton says.

PAREA’s Goal
A hot button issue in the appraiser space right now is that of diversity—more so a lack thereof. Claims of appraisal bias have skyrocketed over the past couple of years, and many experts believe that a part of the problem is the lack of diversity within the workforce itself. This includes, race, age, and gender.

In fact, the U.S. Bureau of Labor Statistics (BLS) concluded that the appraisal industry was the least diverse industry in 2021, with it being dominated by 96.5% of white individuals. However, this is not to say that this is any appraiser’s fault but instead goes back to the lack of opportunities presented to prospective minority appraisers. PAREA wants to address that problem and make it easier for BIPOC, women, and younger appraisers to obtain training.

By allowing training to be readily available virtually, such as PAREA, trainees living in areas where there aren’t many supervisors or appraisal businesses in general will be able to finally obtain the mentorship and training they need.

At the Appraisal Institute’s 17th Annual Fall Real Estate Conference for the Seattle Chapter in November 2023, Craig Stanley discussed the benefits of PAREA. “We want the appraisal profession to reflect the population of the United States. We need a diverse new generation of appraisers, and that’s our hope,” Stanley summarized.

The goal is to make the appraisal industry more diverse so that appraisers will have fewer claims of bias against them and that this seemingly continued problem will eventually taper off.

Shortage of Appraisers?
Another worry that the Appraisal Qualification Board (AQB) has is that the turnover rate of appraisers is leading to a shortage of appraisers. Many appraisers don’t believe that there is no shortage happening and that appraisers entering the business are on the rise.

Bunton agrees that more appraisers are joining the profession, but that isn’t going to necessarily stop a shortage.

“Over the past five years, the number of first-time test takers from the national exam has gone from 1,500 to 2,500. That’s a 1,000 person increase! Moreover, they’re on average 26 to 34 years old. Ten years ago, they were in their 40s and onto their second career. Now, we’re getting younger people and more people. The question though becomes, is that the replacement rate? How many people are retiring? If it’s 2,000 we’re fine, but if it’s 5,000, then it’s not so good,” Bunton argues. PAREA would allow that number to only increase, he reiterates.

Even Humphreys joined in saying, “I was shocked by how many young people are joining this business. PAREA is giving them the sense of ‘I can actually do this.'” Especially with the rise of corporations now wanting to provide scholarships for PAREA students, Bunton believes this will increase the number of appraisers in the industry and cultivate more diversity.

Final Thoughts
Whether you have positive or negative thoughts surrounding PAREA, it is clear that it is here to stay. Currently 48 states have adopted PAREA either fully, partially, or by reference. “I believe that all states will have adopted PAREA fully by September 2024,” Bunton surmises. PAREA is still fairly new, so only time will tell if it has positive or negative effects on the appraisal industry. Perhaps we’ll see fewer bias claims against appraisers, or maybe they’ll continue to rise anyway. Either way, it will definitely make training more accessible to these prospective appraisers. We’ll just have to wait and see how they utilize it. Stay safe out there!

About the Author
Kendra Budd is the Editor of Working RE magazine and the Marketing and Education Coordinator for OREP, a leading provider of appraiser E&O insurance—trusted by over 10,000 appraisers. She graduated with a BA in Theatre and English from Western Washington University, and with an MFA in Creative Writing from Full Sail University. She is currently based in Seattle, WA.

OREP Insurance Services, LLC. Calif. License #0K99465