AQB's latest dumbing down by 'Stakeholders' Dropping the College Degree Requirement

[Terrel L. Shields]

So what happens when they get it wrong and there is another housing crash due to these inept valuations?

To go back to some pages I skipped... good question, but again. The appraiser is never going to be liable for a housing crash due to "inept" valuation. The housing crash will result from prices getting too high and people not being able to pay for them. When it fails their credit score won't matter. Their past loan history won't matter. The appraisal won't matter.

The issue is that banks are allowed to hold precious little in reserve for any glitch in the market; they are likewise allowed to lend 90%, 96%, even 104% of the value of the property (and that is our sole job - value the property) so the borrower has no skin in the game and the lender is gambling against 'the house' so to speak. If all property were limited to 70% LTV, fewer people would qualify for a house, but fewer defaults would result. And prices would be cheaper. Fewer qualified buyers. Fewer sales and, of course, the 'downside' is fewer real estate agents, less sales and servicing of new home related businesses.

We saw this when interest rates rose dramatically (or actually they only returned to typical rates of past decades) and sales came to a screeching halt. Suddenly nothing was on the market, but prices didn't fall because nothing was on the market. Supply and demand had checkmated the normal expectation that higher rates and higher mortgage payments would not translate into lower prices. And that is a question of how long can consumers of homes afford to pay those high mortgage rates and what happens if more and more of them throw in the towel and foreclosures start to rocket upwards?

 

[DWiley]

You make a good case for strengthening the education requirements and more hands-on real world work with a qualified supervisor.

How has that been working for the past 30 years? I think the reality is that many who have been supervisory appraisers are so focused on generating income (not a bad thing in an of itself) that they cut corners in training. How many supervisors really grill the trainee to make sure they know how to support adjustments? Or, rather than doing that, do they just give them an adjustment list to use so they can crank out reports? I get that business is about making money - but being a SA is also about properly training someone.

I think the testing structure is part of the problem. When I took my 102 class, for the final exam we started with 50 multiple choice questions, but then we were given a data pack with information on a fake property in a fake location. We had to take all that information and, in six hours, we had to essentially write a mini-demo report, showing support for all adjustments, extracting effective age and depreciation from the market, etc.

It is hard to test to that depth using only multiple choice type testing.

 

[ucbruin]

"I have no doubt that you can pull someone with only a HS diploma off the street and they will become a highly competent appraiser in no time at all. The question is should we be making standards and procedures based on the small % of that happening?"

I'm betting the generation or two before appraisal licensing had minimal college grads among them....

In my opinion, residential appraising hasn't become more complex than in the past....
If high school grads can't become competent appraisers with some training....
Our country has bigger problems than property valuations....

 

[J Grant]

As for the money that's obviously a huge factor to all concerned. Nobody is saying otherwise. Full stop.

But the money - and competition control - is not one of the roles of the licensing programs or the qualifications criteria. That's why , as Terrel notes "The regulators avoid the issue of compensation and fairness ..." They avoid it because it's literally none of their business. That's not one of their roles, it's not part of their job description. The only reason AIR exists is because of the requirements for objectivity due to the demonstrated effects of client advocacy on the value conclusions.

It's a function of the market for services which speaks to the money, even if that market demand is affected on the user side by the laws/regs they operate under.

If Covid blew through the appraisal profession and took 50% of us out the fee situation would change drastically, and everyone here knows it. You can't acknowledge that while believing that the main reason for the current fees is unrelated to the current supply/demand dynamic

Yes, we can deny it because the reality is fees on the eAMC side were significantly lower than direct lenders and private order work PRIOR to COVID-19.

During COVID-19, when volume was high due to low rates, we saw a temporary rise in appraisal fees on the AMC side, which went back down as soon as the volume slowed. Appraisal fees are not supposed to be S/D based for mortgage lending due to the imbalance of concentration of demand into few channels due to regulations about who can order. That is why the C and R were specified in the HVCC regs, but it got neutered when the change was approved in the regs that AMC's own surveys of their own fees could form C and R for their sector.

 

[George Hatch]

The problem with the argument that education is not necessary to become a competent appraiser is that then by the same logic, supervised experience is also not necessary to become a competent appraiser. Neither is appraisal education.

None of this is bare minimum necessary to become a competent appraiser.

All you need bare minimum is ability to read and comprehend USPAP standards, research, critical thinking, problem solving, reporting skills.

In counterpoint

"education is not necessary" basically conflates college with QE, the former not being occupationally related whereas the latter is directly and solely related to the occupational skills. "Supervised" experience goes beyond merely supervising. And the experience requirement itself includes exposure to other elements of appraisal practice besides just completing made-for-training problems in the QE.

If the lenders and other users weren't regulated then there wouldn't be much reason to regulate appraisers. If any. But they are regulated and the govt's interest in lenders using competent and unbiased appraisals is, by definition, in addition to what the lender's usage would be if they weren't regulated.

 

[J Grant]

"I have no doubt that you can pull someone with only a HS diploma off the street and they will become a highly competent appraiser in no time at all. The question is should we be making standards and procedures based on the small % of that happening?"

I'm betting the generation or two before appraisal licensing had minimal college grads among them....

In my opinion, residential appraising hasn't become more complex than in the past....
If high school grads can't become competent appraisers with some training....
Our country has bigger problems than property valuations....

and that did them no favors either, since licensing was made mandatory to address some of their deficiencies. Though the AI education and SRA was more prevalent then which was a good thing, wrt getting certain work or to be on lender lists

Idk what your point is, sure the country has bigger rprolvems, but valuioms and mortgage regs affect the housing market where many Americans have their life savings /equity at stake.

 

[Terrel L. Shields]

College degrees are not the piffle you suggest

They have been dumbed down incredibly. My nephew's step-son, high grades in HS, chose philosophy, of all things, for a degree. It was easy and he didn't have to do jack to get a degree. Then he got out and went "now what?" He had no foresight of what that degree meant apparently, although his teacher-parents warned him. So now he is working on a second degree...something that might actually result in a job.

Even "good" degrees change with demand. Geologists were once key to finding oil and minerals. Today, unconventional drilling demands engineers, not geologists. The geological basins are known. So the engineers are now dominating the exploration field not just the production side of the business. Most geologists are in demand for environmental work now. Most archaeologists are employed by that same oil and construction business to do surveys of construction sites to avoid damaging artifacts. A huge team of them are working near me in the path of the expansion of a new 4 lane road near Fayetteville - they've uncovered an antebellum farm with many artifacts. In Missouri a few years ago they uncovered a cave with skeletons of natives from thousands of years earlier. Research archaeologists are few and jobs for them scarce.

Many of us hated math. Even though I had a calculus requirement, it does not mean I liked it. But today that same degree in that same college I attended does not require calculus, nor does it require invertebrate zoology. It does require certain computer classes we didn't even have available.

I think the reality is that many who have been supervisory appraisers are so focused on generating income (not a bad thing in an of itself) that they cut corners in training.

If compensation had kept pace with housing prices, do you think appraisers would be more likely to not only train folks better but to seek the kind of education for themselves that would 'up their game'? Why do I want to invest is Bert's 'MARS' and the learning curve it takes to earn the sort of disgusting $295 fees of an appraiser who knows the AMC will make $400-800 on top of that for doing basically nothing beyond assigning the job and having Punjab in Kolkata 'review' it for $12 to collect their cash. Maybe I should become an AMC instead.

 

[J Grant]

In counterpoint

"education is not necessary" basically conflates college with QE, the former not being occupationally related whereas the latter is directly and solely related to the occupational skills. "Supervised" experience goes beyond merely supervising. And the experience requirement itself includes exposure to other elements of appraisal practice besides just completing made-for-training problems in the QE.

If the lenders and other users weren't regulated then there wouldn't be much reason to regulate appraisers. If any. But they are regulated and the govt's interest in lenders using competent and unbiased appraisals is, by definition, in addition to what the lender's usage would be if they weren't regulated.

Piling on more occupational course work does not create to college, where the nonoccupational course work is what teaches teh reasoning and thinking skills often honed in debate, mandatory reading and study of other points of view, exposure to history and philosophy- the reasoning and openness to other ideas then is baked into applying it to a specific occupation

This is why the military, a hierarchal and skill-oriented organization, requires a college education to be a commissioned officer, and why so many professions require it as an entry-level, even before additional occupational coursework is studied and, in some cases, required. Pre med is college, then they go on to study the medical subjects only, though their college includes biology and other related courses, it also included non occupational related courses.

 

[J Grant]

They have been dumbed down incredibly. My nephew's step-son, high grades in HS, chose philosophy, of all things, for a degree. It was easy and he didn't have to do jack to get a degree. Then he got out and went "now what?" He had no foresight of what that degree meant apparently, although his teacher-parents warned him. So now he is working on a second degree...something that might actually result in a job.

Even "good" degrees change with demand. Geologists were once key to finding oil and minerals. Today, unconventional drilling demands engineers, not geologists. The geological basins are known. So the engineers are now dominating the exploration field not just the production side of the business. Most geologists are in demand for environmental work now. Most archaeologists are employed by that same oil and construction business to do surveys of construction sites to avoid damaging artifacts. A huge team of them are working near me in the path of the expansion of a new 4 lane road near Fayetteville - they've uncovered an antebellum farm with many artifacts. In Missouri a few years ago they uncovered a cave with skeletons of natives from thousands of years earlier. Research archaeologists are few and jobs for them scarce.

Many of us hated math. Even though I had a calculus requirement, it does not mean I liked it. But today that same degree in that same college I attended does not require calculus, nor does it require invertebrate zoology. It does require certain computer classes we didn't even have available.

If compensation had kept pace with housing prices, do you think appraisers would be more likely to not only train folks better but to seek the kind of education for themselves that would 'up their game'? Why do I want to invest is Bert's 'MARS' and the learning curve it takes to earn the sort of disgusting $295 fees of an appraiser who knows the AMC will make $400-800 on top of that for doing basically nothing beyond assigning the job and having Punjab in Kolkata 'review' it for $12 to collect their cash. Maybe I should become an AMC instead.

God, for him, he is working on a second degree - philosophy is a GREAT major for life in general and for many professions - even as a specified major, it may not command instant entry or employment in certain professions -teachers are needed to teach philosophy and other subjects to the next generation.

We all could benefit from more reading and education in it =I read online segments and quotes from the ancient Greeks or philosophers of any century, and the timelessness and relevance to today are astonishing. If more of our politicians came from the ranks of philosophers we would not be in this mess -imo.

 

[George Hatch]

Yes, we can deny it because the reality is fees on the eAMC side were significantly lower than direct lenders and private order work PRIOR to COVID-19.

During COVID-19, when volume was high due to low rates, we saw a temporary rise in appraisal fees on the AMC side, which went back down as soon as the volume slowed. Appraisal fees are not supposed to be S/D based for mortgage lending due to the imbalance of concentration of demand into few channels due to regulations about who can order. That is why the C and R were specified in the HVCC regs, but it got neutered when the change was approved in the regs that AMC's own surveys of their own fees could form C and R for their sector.

If appraisers had better alternatives in the market the fees would be different regardless of what the lenders or the AMCs wanted. If there were not enough heads for too many assignments the fees would be higher. AMC or no AMC. The only reason the AMCs have the leverage they have with fees is because the appraisers don't have enough outside alternatives to skip the AMCs. Too many heads still chasing not enough work to keep them all fully engaged.

Laws/regs function by prohibiting certain acts. They don't "give" anyone anything. That which is not prohibited is ... not prohibited. That's what makes your "HVCC and D-F gave the AMCs the market" a wholly illogical argument. They did no such thing. Your real problem is with what the govt didn't do, which was to further prohibit the lenders from using AMCs or prohibiting bundled fees or prohibiting appraisers from competing for more assignments by offering to work for less.

What you need is for the govt to enact and enforce more prohibitions on the conduct of the lenders and AMCs. To intervene into the marketplace on behalf of appraisers.