AQB Update On Proposed Changes To Appraiser Qualifications

[George Hatch]

What I am saying is that for a while now we have had incompetent appraisers training more incompetent appraisers. Now we are in a mess. I am understanding now that it all started with licensing. I am not saying all designated appraiser are great. I am not saying non-designated appraisers are incompetent. I am saying we need very competent appraisers that are in charge and have some authority at the local level. The closest thing we had to that was probably pre-licensing.

The 2 dominant models at the time involved a combination of lender-employed appraisal departments and fee shops of various sizes, the functional ones starting at about 4 heads but the largest ones having dozens. There weren't that many SFR appraisers who worked solo because you basically couldn't make the overhead work unless you divided the costs between several people's production.

Back then the appraiser/client relationship was a big deal because whether you were a genius or a fool it was all about your personal connections. The quality control came in at the lender level via their review appraisers, with most disagreements and disputes settled via the appeal to authority; either "I'm right because I work for the lender", or "I'm right because I'm an SRA or an RM". The only appraisal standards that applied were whatever the lender thought was good appraisal practice.

If you want to know where that underlying sense of paranoia about there being no such thing as an acceptable appraisal because someone can always interpret things their own way, it came from that. The reviewers could just about make stuff up as they went along and you had to submit to them as if they were right because if you didn't THE REVIEWER would cut you off based on their personal say-so.

The thing now where if someone at the lender tells you to do something dumb and you explain your way out of it using the same rules that apply to them? That basically didn't exist back then. You were always in the subordinate position and you'd only come out on top if you could get the Chief Appraiser to agree with you over their own reviewer - which would happen on a rare occasion but not very often.

Yes, there were some appraisal shops that ran a real tight ship but there were also some that looked like a special education camp. There were any number people who had trained themselves by buying/reading a couple Henry Harrison books on how to fill out the URAR and how to appraise 2-4s who went on to build/run their own shops based on a single client relationship - often a marital or familial or friendship relationship. Some of those appraisers did okay and some didn't.

I knew one appraiser whose business plan was to hit up the bars where the loan processors from the big appraisal departments at the banks and the mortgage brokers would frequent after work. He'd "date" them and build his client base that way; and lemme tell you that was a very successful program for 20-something surferdude from Australia. Fortunately he was also a conscientious appraiser - which also helped - but not just anyone would be able to make a career out of that.

He was able to get a license at the outset but he was unable to renew it because although he was a good appraiser he was also an illegal alien. He eventually got deported.


The circus went on with the commercial side as well, although less commonly because commercial appraising has such a wider scope of practice and consists of a much smaller number of assignments that include far more complicated situations. But when those deals went bad the fallout was often much worse just because of the larger scale in some of those projects. Sometimes an SFR appraiser would just haul off and do an apartment or commercial appraisal simply because they got an order from their client to do one. Especially if it was a hard money lender or a small community bank with all that nepotism.

Long story short is that it was a mixed bag. There were appraisers who were rock stars back then, just like now; but there were also some real retards the likes of which don't exist any more no matter how badly people think our worst donkeys are. There were appraisers who were *routinely* fabricating comps out of thin air just to make a deal work and unless it was a multi-million dollar deal the worst that would ever happen to them if they got caught was they'd lose their status on the one lender's approval panel. Meaning, an appraiser could go do fraudulent work indefinitely so long as the actual losses weren't enough to justify bringing in the lawyers.

Single signed appraisals, performed by people masquerading as someone else and signed by appraisers who never saw anything, were not only routine, but weren't even considered wrong if they go caught; much less punished in any way.

So no, licensing did not improve the performance of the rock stars because they were already motivated to be the rock star. But what licensing did do is improve the functional level of the bottom tier of appraisals - which was the whole idea of licensing in the first place. Those programs actually forced people to take appraisal courses (which was a first for some appraisers) covering the basics and demonstrating some experience prior to being cut loose on the world. As is inevitable, the initial transition period was chaotic and some of the idiots got in by faking their experience, but everyone had to document their appraisal courses and pass the exams; and as mentioned those exams were sufficient in difficulty that even experienced appraisers were flunking it multiple times if they tried to wing it or not take it seriously. And then there were A LOT of appraisers whose output improved significantly over the years that followed because they had a license to protect.

Moreover, we quickly got to the point where a dispute or disagreement between an appraiser and a reviewer or other party would get resolved based on which side actually knew more of what they were doing, not by status. If you had never experienced it the other way around - which many of the current critics of licensing never have - you cannot fully appreciate how much of a difference that makes in the way you approach your assignments and your client relationships. We now have a level of parity with our clients and our peers that we never had before; and it's precisely because of the external appraisal standard that greatly reduces the amount of interpretation that can be applied. To the extent that appraisers and others defer to them, those standards support the legitimate interests of both sides of that dispute, not just the one side with the money or the "I'm licensed" status.

 

[DTB]

Any effect that the college degree requirement will have on appraisal fees has not had time to taken hold yet as it just became effective on 1/1/2015 and very few appraisers have entered the profession in the past few years due in part to the fact that the profession is still working off the oversupply of appraisers in most areas that resulted from the huge expansion in the number of licensed and certified appraisers from 2000 to 2007. Eventually, increased barriers to entry in the profession (such as the college requirements) do affect the supply of appraisers, which in turn will affect fees, but not enough time has passed since the increased requirements were adopted to make significant difference in the supply of appraisers yet.

There it is in a nutshell. It is not about improved appraisers it's about restricting the number of appraisers.

If the college degreed appraiser were in fact a better choice for a client, it would be clear that they would make that choice and pay them at a higher rate. It would not require a reduction of inferior, non degreed, appraisers to move the fee needle.

It's not about a better mousetrap, just less mousetraps.

Craziness.

 

[DTB]

I've never been directly involved, but from what I've been told service on one of the boards is a money-loser compared to their day jobs. I heard what the hourly rate was some years ago. IIRC it was about equal to what they'd have made per hour doing an SFR appraisal at full fee. The difference being they only get paid when they're actually on the clock; not when they're in transit and the like.

I will cede the point that some of these members have an institutionalized view of appraising, but with at least some of those individuals its because their day jobs are working on staff at the banks and in government as opposed to being fee appraisers. In that the appraisal profession consists of more than just fee appraisers I don't necessarily object to the corporate perspective being represented on those boards.

C'mon George you know better than that. Those positions are just used as a loss leader. The connections, glad handing and future work that flows from the position is what it's about.

Some people seek that, other don't.

 

[DTB]

Really? So college grads don't have a much higher average income than non-college grads? https://www.usatoday.com/story/mone...lege-grads-and-everyone-else-record/96493348/
College grads make 56% more on average than non-college grads for a reason.

.

You think that the artificial requirement of a degree for nearly every job might have something to do with that as opposed to the degreed person actually being better or smarter at those jobs?

Additionally, these surveys are referencing jobs as in employee. So, in the larger picture I do not believe that degreed persons make 56% more on average across all employees and entrepreneurs.

 

[J Grant]

You think that the artificial requirement of a degree for nearly every job might have something to do with that as opposed to the degreed person actually being better or smarter at those jobs?

Additionally, these surveys are referencing jobs as in employee. So, in the larger picture I do not believe that degreed persons make 56% more on average across all employees and entrepreneurs.

I doubt that decade after decade, employers would keep paying people more who were worse at their jobs. A number of fields that require a degree evolved over time and originally did not require degree. And employers have their choice of candidates among degree people at the hiring stage and it can be very competitive for a good job. People with a degree have a varying range of aptitude, ambition, qualifications and experience they bring to a job..

As far as entrepreneurs I don't know which groups total makes more/run successful businesses. Some non degree people of course make far more $ than some degree people. But a degree is not just about earnings, as some fields requiring a degree are not especially high paid and not every person with a degree have the same goals or ambitions. A degree is about qualifying or preparing people and educating them. Those interested in more $ will choose a high pay or potential for high pay field,, those with other priorities will choose a different path.

 

[DTB]

I doubt that decade after decade, employers would keep paying people more who were worse at their jobs. A number of fields that require a degree evolved over time and originally did not require degree. And employers have their choice of candidates among degree people at the hiring stage and it can be very competitive for a good job. People with a degree have a varying range of aptitude, ambition, qualifications and experience they bring to a job..

As far as entrepreneurs I don't know which groups total makes more/run successful businesses. Some non degree people of course make far more $ than some degree people. But a degree is not just about earnings, as some fields requiring a degree are not especially high paid and not every person with a degree have the same goals or ambitions. A degree is about qualifying or preparing people and educating them. Those interested in more $ will choose a high pay or potential for high pay field,, those with other priorities will choose a different path.

Paying more isn't even necessary. Let's say you have 2 people equally smart and competent to do a job that pays 30K. Throw in a degree requirement, just because. Now the non degreed but qualified person becomes ineligible, so he gets another job that pays 20K. Tough to see how the wage gap occurs? Did the employer get the best candidate? He may think so because he raised the job requirements, most times unnecessarily.

The solution, if the problem actually was dealing with substandard appraisals, was to put highly competent reviewers in places and weed out the bad appraisers. Why do you suspect that wasn't done? And why do you suspect the powers that wish to further limit entry into the field? Public trust? Lower fees? The intent to remove the appraisal requirement from most residential financing?

 

[J Grant]

There it is in a nutshell. It is not about improved appraisers it's about restricting the number of appraisers.
If the college degreed appraiser were in fact a better choice for a client, it would be clear that they would make that choice and pay them at a higher rate. It would not require a reduction of inferior, non degreed, appraisers to move the fee needle.
It's not about a better mousetrap, just less mousetraps.
Craziness.

It can be both. As with anything else, it is not black and white either this or that. A degree overall has the goal of improving appraisers, and it can also restrict the number of appraisers. Which is not a bad thing from the appraisers point of view, but it is a bad thing from an AMC point of view who wants a continual over supply and low barrier to make it a low pay, easy to manipulate populated field.

What the degree requirement will achieve is preventing the res lending side of appraisal from becoming a low paid nightmare ( which it already has become in part) : field that is a low paid nightmare will only attract the most marginal people. The problem is that the goal of an AMC is not about which appraisers are "better", it's about which appraisers are cheaper and faster. There are still lenders who order direct who want the best appraisers and the private wealth divisions of banks still want the best appraisers, though these same banks will turn over their regular work to an AMC for convenience sake. Those who who argue for the alternate paths are arguing from a point of view that does not take into account the sea change AMC's have made in the field since 2008, , or they have the AMC interests embedded in their argument, I am not sure which to be honest but either way the result will be the same. Dropping the degree requirement will cede more power and control to the AMC's who will exploit it to recruit and offer in house training or alt path programs resulting in a larger number of trainees ( even while some blame conditions now on too many trainees having been hired back in the day)

 

[djd09]

They also have degree in brainwashing.

Seems very anti competitive to limit supply to degree only.

Why is it the appraisers always gets the blame for bad appraisals, some one accepted it, the same ones that write USPAP compliant assignment conditions.

All is well, people like Robert Madsen will make off with 56 million to be honest. That is the job i want.

 

[J Grant]

Paying more isn't even necessary. Let's say you have 2 people equally smart and competent to do a job that pays 30K. Throw in a degree requirement, just because. Now the non degreed but qualified person becomes ineligible, so he gets another job that pays 20K. Tough to see how the wage gap occurs? Did the employer get the best candidate? He may think so because he raised the job requirements, most times unnecessarily.

The solution, if the problem actually was dealing with substandard appraisals, was to put highly competent reviewers in places and weed out the bad appraisers. Why do you suspect that wasn't done? And why do you suspect the powers that wish to further limit entry into the field? Public trust? Lower fees? The intent to remove the appraisal requirement from most residential financing?

The powers that be DO NOT want to limit entry into the field. The thrust to increase education and or training came from the educator side of the AQB and AF. The business side, the AMC and lender interests aka " The Powers That Be" are the ones who have been lobbying for removal of a degree requirement and to cut training hours.

 

[DTB]

It can be both. As with anything else, it is not black and white either this or that. A degree overall has the goal of improving appraisers, and it can also restrict the number of appraisers. Which is not a bad thing from the appraisers point of view, but it is a bad thing from an AMC point of view who wants a continual over supply and low barrier to make it a low pay, easy to manipulate populated field.

What the degree requirement will achieve is preventing the res lending side of appraisal from becoming a low paid nightmare ( which it already has become in part) : field that is a low paid nightmare will only attract the most marginal people. The problem is that the goal of an AMC is not about which appraisers are "better", it's about which appraisers are cheaper and faster. There are still lenders who order direct who want the best appraisers and the private wealth divisions of banks still want the best appraisers, though these same banks will turn over their regular work to an AMC for convenience sake. Those who who argue for the alternate paths are arguing from a point of view that does not take into account the sea change AMC's have made in the field since 2008, , or they have the AMC interests embedded in their argument, I am not sure which to be honest but either way the result will be the same. Dropping the degree requirement will cede more power and control to the AMC's who will exploit it to recruit and offer in house training or alt path programs resulting in a larger number of trainees ( even while some blame conditions now on too many trainees having been hired back in the day)

Is that most resi assignments will disappear and morph into an "inspected" AVM for $50 (to the appraiser)

Anyone that gets a degree to become (intentionally ) an appraiser is a fool who deserves their fate. What person with the smarts and financial where with all would aspire to the lowest paying rung on the real estate food chain?