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

[Terrel L. Shields]

residential appraising hasn't become more complex than in the past....

Houses have become more complex. Software has become more complex. So, the right question might be, 'Within the parameters of the lender's needs, how close is close enough to perfection?' Is 'perfection' a goal? Apparently, it is to FNMA. Except when the lender is 'solid'. Then an AVM, hybrid, or waiver is fine. All or nothing.

Despite all the hoopla

If there were not enough heads for too many assignments the fees would be higher.

The last time that happened in key markets, the demand was for more waivers, less use of appraisers, and the end result was higher compensation was a temporary condition tamped down by the bankers and regulators. PAREA came from that mindset. So 'higher' fees that stick are a delusion and disappointment is inevitable. And, of all professions, appraising is supposed to be free of pressure but the cruel pinch of want suggests the appraiser is constantly under pressure to bring home the bacon for the lender or that steady work goes away.

 

[George Hatch]

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.

First off, the NCO corps includes a very high percentage of undergrad and post grad degree holders as a necessary element of their promotion programs, so stop "denigrating" the enlisteds. Its common for NCOs to hold more education than the commissioned officers, some of whose degrees are otherwise unmarketable in commerce.

Secondly, I'd ask how many appraisal assignments you think it takes the average trainee to learn how to perform an appraisal assignment, inclusive of the reasoning required for that function. How many iterations of going through the process in order to learn how to effectively use the process. Because whatever is that level of repetition, whatever level of reasoning it takes in order to work to specs, that marks the point of diminishing returns.

We wouldn't have so many grossly underemployed BA degree holders out there if there was enough demand in the marketplace for that level of education.

 

[George Hatch]

Houses have become more complex. Software has become more complex. So, the right question might be, 'Within the parameters of the lender's needs, how close is close enough to perfection?' Is 'perfection' a goal? Apparently, it is to FNMA. Except when the lender is 'solid'. Then an AVM, hybrid, or waiver is fine. All or nothing.

Despite all the hoopla

The last time that happened in key markets, the demand was for more waivers, less use of appraisers, and the end result was higher compensation was a temporary condition tamped down by the bankers and regulators. PAREA came from that mindset. So 'higher' fees that stick are a delusion and disappointment is inevitable. And, of all professions, appraising is supposed to be free of pressure but the cruel pinch of want suggests the appraiser is constantly under pressure to bring home the bacon for the lender or that steady work goes away.

All I'm getting out of this is a further support for the idea that the market for services will self regulate and fees will float based on market conditions. Possibly becoming so sensitive to demand that there may end up being fee volatility from one month (or one week) to the next. Higher in some months, lower in other months.

 

[Francois K. Gregoire]

There sure is quite a bit of discussion on this topic. It would be great if the AQB heard some of it. Their Concept Paper seeks answers to 8 specific questions. Why not take a few minutes and provide the AQB with some reading material?

Concept Paper

Comment Link

On a separate note, it's nice to see my take on the College Degree Requirement acknowledged in the Reference Material provided by the AQB. Although my comment in the 2001 Public meeting of the AQB was made on behalf of NAR, it is also my personal view as an appraiser, and (at that time) as a state regulator. My personal view is still the same. FTR, I do not have a four-year degree.

 

[TerryRohrer]

I don't have a degree.

That was clear in the opening diatribe denigrating the notion of a degree.

 

[George Hatch]

I think there's a distinction to be made between denigrating the notion of a degree vs believing the completion of a degree is overkill WRT appraiser competency.

Supposedly the New York Times is written at the 12th grade reading level, whereas most other papers are aiming at a 10th grade reading level. They do this deliberately so in order to be accessible a wide cross section of their readers. I think the report writing cops are trained at is at the 10th grade level. I think my own writing is at the 11th or 12th grade reading level, which is also intentional on my part. I aspire to use an "average" vocabulary to express ideas that can sometimes get a little complicated.

I don't try to emulate a college thesis in my writing. I'm trying to sell my readers on the credibility of my analyses, not increase my social standing with people who think they're better than everyone else. I eat fried chicken with my fingers, too.

 

[Mark K]

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

There's never been a housing crash due to inept valuations and the next one will be no different. My guess is the next one will be just like the last one...the lenders gave close to 100% loans to marginally or unqualified borrowers, prices dropped, and millions of people were instantly underwater. Borrowers walked away leaving taxpayers holding the bag, thanks to F/F. If the deadbeats would honor their obligations and make the mortgage payments, there would never be a housing crash.

I recently sold my late Mom's house in Pt. Charlotte FL. $265K sales price, FHA. The estate paid about $10K in concessions, the buyer got a second lien for about $12K or so for their down payment, this lender charged nearly $5K in fees, etc. Bottom line is the borrower had $280K in loans to buy the $265K house and had a total of $1,500 out of pocket to buy the house. Borrowers were $15K underwater the day they closed. Prices are falling in that area and they are now about $30K under. Classic case of no-skin-in-the-game, too easy to walk away. This kind of silly crap causes housing crashes.

All I'm getting out of this is a further support for the idea that the market for services will self regulate and fees will float based on market conditions. Possibly becoming so sensitive to demand that there may end up being fee volatility from one month (or one week) to the next. Higher in some months, lower in other months.

Its called "dynamic pricing", the model used in the hotel and airline industry. Perfect example of supply and demand.

Not long ago, on this forum, some appraisers were bragging about getting $750 - $1,000 for a simple residential report due to the demand for the low interest loans and 'shortage' of appraisers. I'm thinking some of these same people are now the ones crying about the waivers and AVMs. Gouging clients when business is booming is not a good business model for longevity. Clients will and have found alternatives.

 

[Joe Flacco]

I think supervised experience is valuable but at the same time the supervised experience provided has been a massive failure.

QE fine. You are taught very broad concepts.

Critical thinking and problem solving skills which are essential do not come either appraisal education or supervised experience. I think I might argue that you are born with these skills. Others may say that these skills are developed through high school and college education. More specifically math and science education.

 

[George Hatch]

The question for our profession is "how much"?

 

[J Grant]

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.

The current laws "give" a huge perk to the lenders ( free of cost to them AMC service ) and give a huge market share advantage to the AM< C's by the split fee, allowing them to offer free of hard cost service to lenders (I an aware the lender sends a pass-through payment to the AMC which comes from what the borrower paid for the appraisal, that i snot a hard cost to the lender ).

If two restaurants were serving similar food in the area, and one was free , and the other charged for a meal, which would you go to ? That is the kind of market share advantage the HUD fee split sees the AMCs get from gov regs, and that is why, regardless of how many appraisers are in an area. S/D does not normally work in the AMC realm vs. the non-AMC/private sector realm. Of course, fewer appraisers might see higher fees in all areas of appraising.

Of course, nothing is ever free - the AMC compensation comes from seeing appraisers get paid far less for an AMC assignment with their part of the appraisal fee going to the AMC, and in teh case of a restaurant, the "free" meal to customers might be paid for a govt perk to that restaurant that sees them pay far below min wage to employees and outsourced and expired food free of cost to serve -