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Virginia Regulatory Town Hall
Department of Professional and Occupational Regulation
Real Estate Appraiser Board
Guidance Document Change: Providing guidance to real estate appraisers and AMCs on the use of hybrid appraisals
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6/24/19  1:35 am

Penny wise, and pound foolish

Just 11 years ago, our US Treasury bailed out banks, PMI companies, and we saw numerous bank failures, foreclosures and lived through the 'worst financial downturn since the Great Depression.'  Total losses in GDP, loss of productivity and wealth were estimated to be 19 Trillion dollars.  Those figures are difficult, and somewhat intangible to truly calculate, however we do know the actual figures for the the two largest bail outs - Fannie Mae and Freddie Mac at $317 Billion.

These two GSEs remain in government ownership to this day.  For the last 11 years, Congress has enjoyed the profits from these two entities and it doesn't look like they will be spun back to the private sector any time soon.  What used to be an implied guarantee from the Treasury is now full responsibility.  The US Taxpayer carries the risk of these portfolios, and the very same legislative body that is reaping the profits, is also charged with creating policy and funding the oversight agencies that would keep them operating on sound principles.  Who really is monitoring their risk?  Does this conflict of interest not concern the powers that be?  It most certainly should and the lack of discussion of this topic is fairly alarming.  

As an appraiser, each year, I have seen the increased pressure for faster turn times, yet at the same time, the need for greater documentation, research, verification of market trends, among many other details becoming more onerous.  Our society seems to demand instantaneous gratification, even when it comes to making the largest long term household investment.  The GSEs wish to follow suit, demanding the valuations 'fast and cheap', yet who is left holding the bag when 'fast and cheap' are revealed to be sadly inaccurate?  Apparently no one driving these trends, but once again, the US Taxpayer. 

We would not expect any licensed plumber, electrician, building contractor, doctor, lawyer or dentist to render opinions and advice in a situation and accept the liability based solely on the observations of another unlicensed, untrained, unknown party.  And most certainly not at a fraction of their normal fee.  The appraiser's fee is a paltry sum in comparison to the dollars spent closing most real estate transactions.  The appraiser's job is to inform the party holding the mortgage note that the collateral is both sound and sufficiently valued for the amount of the loan proposed.  When hundreds of thousands of dollars are at risk in each transaction, consider the $400-500 cost of a quality valuation report and recognize that this is money well spent.  

CommentID: 72653