Valuation of real property
It’s been forty years for me. I came on board in 1979 as a trainee. Those my age have seen appraisals originally, not even typed. We have used unverified comps found in agent sales books and personal comps from individual offices kept on a small file card in a shoe box. We had no way to verify information other than looking up every sale at the county courthouse.
There was always a problem. It is the same problem that exists today. Industry leaders, regulators and congressional hearings have all missed the same point for the four decades I’ve been a real property appraiser.
Every problem has a root. If you don’t address the root you can’t solve the problem.
The root is NOT: a plethora of dishonest appraisers, (there are some, to be sure) a lack of education, a lack of the proper tools for use in solving the equation, a lack of regulator or state scrutiny, a lack of understanding the rigors of the job, a lack of rules and regulations intended to solve or reduce the problems. There are many other things that the root is not.
The problem is the players who apparently have no idea as to how the game should be played. Appraisers have been given FIREEA. We have been burdened with USPAP, which is supposed to be the appraisers bible, one who’s contents, always supposedly close to perfection, are changed every two years. We have been hampered by UAD whose theory is that big data will make appraisal problems go away. That hasn’t happened. And the appraiser’s favorite, the MC addendum. The GSEs no longer require it because of poor design and the restrictive data allowed to be used to assess the market conditions. Lenders still require it. Why?
Now bifurcated appraisals are being shoved down appraiser throats. These are short and cheap valuation products aimed at the appraisal profession as a way of reducing its significance. Do they attack the real problem? Of course not. Do they conform to USPAP? Most appraisers say no. They play directly into the hands of those who would decimate the appraisal profession in favor of greater lender profit with faster turn times.
The lending industry views the appraisal industry as standing in the way of profit. Extreme profit is its main and final goal. It is the reason for this current (and past) attack on the appraisal industry. As long as these wolves in sheep’s clothing are allowed to advocate short cuts in finding value, the problem will never be solved. In that case profit will remain king with only lip service paid to public financial safety and consumer protection.
How do we move toward solving the problem? 1. Remove lender profit as the motivating factor in appraisal regulation, 2. Provide one regulating body to address the issues. That body should be made up primarily of veteran and currently working appraisers with current field experience along with representatives of the lending industry and the GSEs to provide input to the appraisers. 3. Approach the issue with consumer safety and honest appraisals as the only issues of importance. 4. Provide regulations with teeth that will prosecute appraisers, lenders, AMCs who violate the public trust regarding property valuation. The prosecution must include incarceration, not just money as a goal of the prosecution.
As a veteran working appraiser I have seen these discussions untold numbers of times, all with the same result; none. Shame on those who stand in the way of progress concerning these issues. The country has spent untold hundreds of millions of dollars over many decades in an attempt to improve real property appraisals. We are not much further along than when I became an appraiser in 1979. The system of addressing these issues falsely over all this time has a name. Nothing has changes. That name is corporate greed.
Roy K. Brown, Puget Basin Appraisers