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Are You Better Off Today..............

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Don Clark

Elite Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
B) For the record, this is not a post to bash anyone. Just a post to get your input. As background, may I offer the following:

In the early to mid 1980's I was a member of an Organization called the Real Estate Educators Association. I was on a committe to study the need for mandatory licensing. At that time we took the results of several surveys completed by the National Association of Realtors, The predecessor's of the Appraisal Insitute, and our own survey. At that time we estimated that there were between 200,000 and 300,000 people doing real estate appraisals, at some time during their career. This included some states that required a brokers license to do appraisals, and real estate agents who occassionly did an appraisal. We surmised(guessed) that probably no more than 100,000 were doing appraisals for a living, either full time or part time. My state of Virginia sent out over 6,000 applications when licensing became mandatory. We have always had about 2,500 from day one. In those days one rarely heard of an appraiser being involved with a scam, or going to jail.

Now, after 10 years of mandatory licensing we have about 75,000 appraisers(85,000 due to some licensed in more than 1 state), a standard of practice, laws, regulations at every level from the state to major client groups. Yet we have major problems with over valuation, flip schemes, fraud, abuse, and a host of other problems. We hear at least once a week of appraisers going to court and going to jail.

So, the question is..............are we better off today than we were 10-15 years ago.

Make your argument, pro or con.

Don
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Prior to licensing, we had all sorts of people doing appraisals, including real estate agents doing appraisals on a letterhead...1 page, no support. To be an acceptable appraiser to most lenders, you had to be a member of the Society, the Institute, the ASA (those were the big 3 at the time). If you had those letters after your name, it meant something. You had passed strong education classes and taken ethics classes. That changed when licensing came in. In Texas we had bankers, tax agents, and anyone else that could claim ANY relation to real estate taking the licensing test and getting their license.

Since then, the education mills have been cranking out appraisers without ethics or heavy education classes. Instead of taking classes sponsored by the appraisal organizations, any one that can get a class through the approval process (or agrees to teach an already approved class) can start an appraisal school.

Appraising has become a business as opposed to a profession. Instead of becoming centralized as envisioned at the time of the merger between the Society and the Institute, the industry has become fragmented as there is no need for an apraiser to join a professional organization. A state license is sufficient. USPAP has replaced the ethics classes that a responsible appraiser would be taking. So the newer appraisers have recognized that ethics is something to get around to keep the business running. No different than Enron, just at a smaller scale. Trainees are used in "appraisal mills" with some appraisers showing several thousand "inspections", totally impossible but not followed up on by the regulators.

Lenders used to be held responsible, both professionally and economically, for the bad loans. Now they are sold "without recourse" so there is no liability for an "occasional" bad loan. Prior to licensing, the good appraiser made good appraisals and the Feds would hammer a bank with bad loans. Now, the bank is concerned with whether the appraisal uses "code words" and how many loans are made in low-income areas, not whether the appraisal is any good.

Licensing is not the problem, but rather a fragmentation of regulations. Appraisers are subject to regulations, while most lenders have very minimal regulations, and virtually none with any teeth. A lender essentially has to have committed an offense equal to robbing the Bank of England to get the attention of the Feds. Regulators are underfunded and overworked. In some jurisdictions, appraisers get hammered depending on how they fit into the "good 'ol boy" network. But for every bad appraisal, there's a lender who was involved in direct or indirect coercion, but will get off scott free. As an example of problems with licensing, in Texas, until this year, you could say you were an appraiser and do appraisals without a license. Licensing was in effect but the licensing board had no authority to take action against someone who wasn't licensed.

In summary, while licensing was a reasonable idea, it really doesn't work. It needs strong regulations in the part of the lending industry to cut down on the "lets make a deal" mentality and pressure on appraisers. On the appraisers side, it will take a unified body to be created for licensing and lobbying, such as the CPAs or the ABA. Otherwise, licensing is just a waste of money and effort.



This from an appraiser who has been in the business since 1970.

Roger Strahan, IFA
 

Darrell Hignite

Sophomore Member
Joined
Jul 16, 2003
Professional Status
Certified Residential Appraiser
State
North Carolina
I began in the real estate business in 1976, listed and sold houses and did some appraisals mainly because I was asked to. Went into the appraisal profession in 1980, while still listing and selling homes.

Many of the real estate agents/appraisers didn't go to school and get an appraiser's license in l990 and retired from appraising. There were good appraisers in that group too. I encouraged many of them to go to school with me, but alas, they did not. So, we lost a lot of appraisers then.

When I took c.e., the classes were basically a joke. I took the classes because I had to, and the instructors taught the best they could...Many appraisers still take classes that way and agree that their c.e. is a joke. I made the mistake to say to a group of appraiser's that I could teach better than him and now I'm an instructor. We recently lost a large number of instructors because they didn't want to go to school and they have retired from teaching.

The Moral of this story is, there are less appraisers, less FHA appraisers, less instructors, and more work to do, more appraisers to teach....I guess you could say, it's a good thing for licensing and teaching better. I guess you could say, I've very very happy to be an appraiser and a teacher.

I'll make more money this year than last year and more money next year than this year. After all, isn't that the reason I wake up in the morning. I love this work and hope to see it continue to florish. Thanks to Don for starting this thread and I know the appraisal Profession is better off with the changes that have happened over the last 14 years.
 

Mike Simpson

Senior Member
Joined
Jan 30, 2002
Personally I'm better off...that's because we've invested in our business and education.

However, I do worry about our industry and those who've come into it as of late. It would appear budgets are insufficient to deal with a lot of the fraud which seems rampant at times in the industry.

There's a new trend in our region which I imagine is taking place in other areas throughout the county (especially in larger cities). I've run across a number of unlicensed appraisers selling their services to mortgage brokers. They go into the field daily (unsupervised) and their greedy fraudster bosses sign their reports "did inspect," when in fact they have not. The newbies mouths are writing checks their supervisors appear only too willing to cash.

I have every reason to believe they're telling their lender/clients they overlook conditions and inflate properties to get the amount of work they are. I attended a real estate class (two years ago now) in which the LO had a guest speaker--one of these newbie appraisers--he told the entire class that "only crusty old appraisers call for conditions." I've checked recently & this individual still isn't licensed--yet he markets and services clients on a regular basis.

If fear what could potentially happen to this nations economy if something isn't done to curb this tide & quickly. The AQB needs to instate that two (2) trainee limit--more importantly enforce it, and it needs to happen ASAP--everyday that passes, these people endanger our & our childrens financial future!

-Mike
 

Oregon Doug

Senior Member
Joined
Jan 15, 2002
Professional Status
General Public
State
Oregon
Don - Basically, licensing put me out of business. I had a nice career going doing appraisals and acquisition studies of large "trophy" properties for the big blind pool investment trust funds - big (1,000+) unit apartmenx properties in TX, GA & FL, shopping malls from Seattle to Long Island and some flagship hotels from coast to coast.

Licensing was mandated by the Feds and enacted by the states - can you imagine having to be licensed/certified in all 55 jusistictions? Think of the cost and the time required to just stay current in every one of them. A national license/certification issued by the Feds and uniformily enforced by each state would be a good idea' but I dream on. Can you imagine those good ole boys over there in the Tobacco Cartell going along with that?

Now, I appraise houses and go way over there to the other side of town.

When licensing was first initiated, it was thought that there would not be a sufficient number of qualified appraisers licensed to meet the demand. So the entry qualifications were set very low so as to allow the maximum number of applicants to qualify. Very low! The intent was to raise the bar over time as the market began to identify the number of appraisers it needed. A noble idea.

Unfortunately, the larger users of appraisal services had no use or desire to use knowledgable or qualified appraisers (mostly residential lenders) as that would shine a light on some of their questionable lending practices. Remember how lots of S & l's got tripped up by entering into the bright lights of the commercial lending field? Same basic story line - greedy/incompetent lenders and supportive/compliant appraisers.

After the S & L's sucked the FSLIC dry they re-named themselves "Banks" and stuck their straw into the FDIC. How many "Big Box Savings Banks, fsb" can you count? That little "fsb" at the end of their names stands for Federal Savings Bank - they are nothing more than Savings and Loans in bank's clothing. And the beat goes on.

Licensing was not enacted to protect the American consumer - it was enacted to protect the lenders and their stock holders but I don't think it's doing a very good job of protecting them from themselves!

Are you supprised that we have such a number of incompitent and ethically challanged licensed/certified appraisers among us. I'm not. I doubt that of the 75,000 to 85,000 licence/certification holders we have not much more than maybe 10,000 real appraisers in the nation.

I know of residential appraisers that retired after having 1 year's experience 30 times over. Licensing didn't seem to matter to them much and just think how many families they touched over the years.

The concept of licensing/certification appraisers in the way it has been enacted has been a dismal failure that has driven the public's opinion of us to about the level of "used car salesmen". It's time to get on with the task of raising the bar within our licensing/certification structure and weed out some of the incompitent and lender comlpiant appraisers among us. It's up to us. The Feds ain't gonna do it and the lending institutions don't want to. So, who you gonna call?

Are we better or worse off? Let me phrase it another way - how many of you other old timers remember having to take a course in ethics?

I'll bet you just had 'em,

Oregon Doug
 

Don Clark

Elite Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
B) Just some food for thought..........after reading all your great responses:

Oregon Doug, you may appreciate this. The year before I "had" to be licensed I appraised a 96 unit apartment building that was being acquired by resolution tust. Won a $10,000.00 bid to do the job. Taxes had not been paid for 2 years on ths complex. The income statement was a joke with virtually everyone in the previous owners company getting some line item of profit from it. I did the report. My opinion of value was $3,300,000.00 At that time it was tax assessed for $3,100,000.00 and had sold 2 years previous for that same amount. I completed all 3 approaches to value as the building was only 14 years old, in a growing community 50 miles from Washington, DC with a metro line being built and opening that same year that would carry passengers daily to work in DC. Many new apartment complexes in the area.

About 6 months later I received a letter from the RTC attorney asking me to review another appraiser who had also been hired to do an appraisal of the same property(it was RTC policy to get 2 appraisals). The appraiser had expertise in appraising shopping centers and office buildings, not apartments. His trainee did all the work, he just counter signed the report. The reported value of that appraisal was $2,745,000.00 No wonder the RTC wanted my review, and they got an ear full. This guy and his apprentice said the cost approach was not necessary "due to the age of the building". His cap rate was based on what an investor would require as a return in stock investments, not a market derived cap rate. Also, he used comps from as far away as 50 miles in the DC outskirts of Maryland. The property was located in Fredericksburg, Virginia. I used all local comps, 3 in Fredericksbur, and 1 in an adjoining county.

Just to be sure I checked with the Director of Econonic Development in Fredericksburg, a local Realtor with a designation of CCIM, and the Assessor for the City of Fredericksburg. No one could belive what they were hearing, in a fast growing City with many new apartment buildings, we were expected to believe that the subject property that had 90% occupancy, was well run by an on sight manager, that this project would have declined from a sales price of $3,100,000.00 2 years previous to $2,745,000.00? Any way, that was the last I heard from the attorney. I still keep that workfile and a copy of the appraisal although it has been over 10 years now. BTW, the next assessment year, the assessment went to $3,300,000.00 and since the city at that time was a newly incorporated independent City, they had an appraisal company doing their assessments by contract.

Now, I had wanted to continue with doing commercial properties but was told by the state that I lacked enough experience hours to be certified residential :angry:

Now, food for thought:

Most people have more respect for:

1, The cable TV guy
2. Sear & Roebuck
3. Local utility company
4. Plumber
5. Electrician
6. FedEx, et al

Than they do for appraisers. We make solid, precise appointments for a exact time during the day. All of the above will tell a customer they will be there during the day, on a certain date, not a definite time. Customers willingly accept this. When we try and make appointments the customer wants us to come either after 5:pM or on a weekend. They say "we have to work" when given a different time.

If any of the above quotes a price, then the work entails more, they will cahrge more. We on the other hand are asked to cut our rates, or sometimes we are just not paid, or have to take precious time and money to go to court or hire a collection agency.

We are one of the few "professions" where our opinion is disputed by the untrained, ignorant, unwashed masses who know they know more about what we are doibg than we do.

I am sure the rest of you can add to this list. Again I ask.........are we better off?

Don
 

TC

Elite Member
Gold Supporting Member
Joined
Jan 31, 2002
Professional Status
Certified Residential Appraiser
State
Pennsylvania
Yes, for me personally, no, for the appraisal business.

I got into this business back in the mid-70's when you had to be a real estate broker to sign an appraisal report. That meant a 3 year apprenticeship after obtaining your real estate sales license. So you had to make a commitment if you wanted to get into this line of work. Having a designation meant something then as most lenders required them. While state certification leveled the playing field, I also think it lowered the bar as to training and education.

TC
 

Randy Beigh

Senior Member
Joined
Jan 16, 2002
No. I do not think licensing has been the boon that was believed. This field always had people that should be selling used cars, but licensing gave credibility to them that has had a negative effect on the whole profession.

As was said above, the fragmentation is mostly to blame. We have licensing, USPAP, FIRREA, FannieMae, ASB, AQB, and nobody is together. All of these, the private groups like the AI and more are all over the board and as a result, none can be trusted to be the final answer for appraisers. We have no final answer. There is no governing body for appraisers that is the end all. Some will say USPAP is the final answer, but the truth is that USPAP has more holes in it than swiss cheese.

In Washington, the buearucrats are part of the problem. They pull a fraudulent appraiser's license for 10 years, but since he is now unlicensed, he can go to work for somebody else with no problems and without breaking any rules. Bizarre.

I grew up in the capital city of Washington and used to skip high school just to watch the legislature work and got to see some of the inner workings of the political system. When I first heard that appraisers wanted government mandated licensing, I told my boss of the time to be careful watch you ask for as you just might get it. We've got it.
 

EDWARD BERRY

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Arkansas
All of you hit it right on.

Most appraisers, (about 10 in our area) (1976) were members or candydaates of AI, IFA, AFMARA or Society and were deathly afraid of making a mistake, advertizing etc.

Today we have about 100 "lic" appraisers filling in blanks, putting the happy #'s and doing about 3 a day.

They are better off.

We had 4 FHA appraisers that got 95% out in 5 business days and were reviewed each month.

Two of my friends, both RM's are out of business because they are honest.

I taught RE & Appraisal and now am out because of WWW courses.

Teaching the UKRAP is at the present a good endevor but it too will go to the WWW.(I do not teach it)

I have more business than I can do because I only do RELO and REPO-No sale price to hit, no stupid phone calls before the order gets thru the fax, etc.

So 80 others are better off, some are not.

I too was a member of the RE Educators Group.

Thus my teaching activities will be in Russia and Ukraine. They do not have loan officers yet.

Ed In Arkansas
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Licensing appears to have not really created more security and safeguards.....it has created.....targets. Then , those parties somewhere in the mix of claiming to be involved and caring show quite effectively how impotent or unconcerned they truly are at controling and effectively taking the bad apples out of the barrel. I do not have several decades of experience in this professional pursuit, and yet I have in slightly over 5 years observed such a rapid transformation in expressions of any positive attitude or supportive respect for what we do in our line of work. Of course, you can not take an appraisal report and use it to fuel a rocket to Mars, or use it to cure cancer, or use it be certain that every child in America will be able to read and write by the age of 12....no, by the age of 18. We do what we do, with most of us doing that as best as we possibly can, with utmost diligence and sincerity and commitment to the assignment. It truly only takes a small quantity of ROTTEN apples to spoil the entire barrel. How about starting with those who have MADE-UP comparables to enable a report to rise to a needed value amount ? Can we not just start with the FALSIFIERS first ? Then if you must assault one's opinions, judgments or deductive reasoning process in developing a report, go after that later. After all, we are asked to offer an opinion (about value), I find it hard to say that an opinion is inherantly wrong ! If unsatisfactory, then go get another opinion. No need to assail, slander and bad-mouth an appraiser for providing a logical and supportable opinion based on analyzed facts.

As Randy B. states in his 3rd paragraph.....the (now) un-licensed (and former) appraiser simply comes back into the arena providing services as a VALUATOR, and supplies willing clients with values upon which lending decisions can be made and whereby that individual now has no USPAP restraints and can act freely and without reproach. Take about having it both ways. Those who are most-likely to need valuation services will get what they want, from the licensed as well as the un-licensed. What a country ! Don't think for a moment that the PUBLIC does not see one article where an "involved bad appraiser goes down" in the context of some financial house-of-cards getting tripped up by authorities, and we ALL can get painted with the same brush. No wonder we have occasional "confrontations" with a homeowner when we do not them our "guess" about value before we leave the house. Homeowner interaction was certainly well-addressed in another recent posting thread. We are is such a position where we get kicked for not only being perceived as being "bad", but then we get kicked for when we actually do good....and never does doing good ever see us getting any Thank You cards in the mail. Talk about being thick-skinned, you'd better have some or survival will be intensely challenging.
 
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