Integra’s Chairman On Current Appeal Of National Appraisal Firms As Acquisition Targets

[Gobears81]

Having had the misfortune of working on a number of very high profile litigation assignments, particularly after 2008, I do agree.

To the extent it happens, I would attribute a great deal of it to the oversupply of appraisers and the relative dearth of work. When people have their backs against the wall, ethics mean very little. It is for this reason we tolerate supply constraints on doctors, lawyers, accountants, and even taxi drivers.

That said, the Appraisal Institute does not enforce ethics violations to the extent one would consider appropriate. This is likely due to the impending demographic decline and poor planning on the part of the Institute. This is something that could potentially fixed very easily if we merged with the NAR.

You had me up until suggesting that we merge with NAR I strongly believe that AI should incorporate a consideration of ethics in its experience screening/ review for prospective designated members. It is easier to keep out those that have already crossed to the dark side than it is to kick them out or for some reason hope that they decide part of the way through their career to decide to operate in an ethical manner again.
I agree about the oversupply of appraisers having an adverse effect on ethics. But, I have heard about heavyweight appraisers who do an appraisal of a hotel for $20,000,000 for a bank, then turn around and do a tax appeal appraisal for $10,000,000. Someone like that probably wouldn't be struggling to find work. But I am also of the mindset that competency and skewed appraisals are not always exclusive, as a client or involved party might steer the appraiser more easily.

Ethics is a issue that all professions and businesses deal with including law and accounting. I think maybe we are not held to similar standards because we are seen as being on a similar level with those professions. I don't know. I don't know how big of a issue it is in appraisal.

I believe that it is a real issue for appraising. The changes that have been made on the banking side since the recession has weeded out some, but not all, of the ethical conflicts but as implied in my prior post, there is significant advocacy on some types of work such as tax appeal and divorce work. The aforementioned statement comes with the disclaimer that I am not implying that anyone doing those types of work are unethical simply for doing that type of work.
I don't know the ins and outs of law and accounting as well as appraisal, of course, but do not doubt that ethics are an issue there also. But, lawyers are hired to be advocates, so there is no conflict for them to seek the best result for their client. When clients are able to effectively purchase an appraisal with a value based on what the client is either thinking it is worth or hoping for, that reflects on the entire profession.

 

[Joe Flacco]

I would argue that separate licenses for residential appraisers should be eliminated. All licensed appraisers should have the ability to appraise any asset class. The simplicity and repetitive nature of residential appraisal work is not dissimilar to a lot of low end legal work. The business model should be similar. Just as licensed attorneys doing say, divorces, have virtually all of the work done by paralegals, residential appraisers should fall into a similar category. This would eliminate many highest and best use errors that residential appraisers don't understand, and it would better position the industry as a whole to adapt to the use of data mining and statistical analysis for residential appraisal.
.

The only thing I disagree with is the comment about the "simplicity and repetitive nature of residential appraisal work".

This comment shows a lack of understanding of how residential appraisal differs from commercial appraisal. The idea that residential is simple and repetitive is why I think that many residential appraisers think that commercial appraisers are not always great at appraising residential properties. I can appreciate that commercial appraisal requires additional skills or competencies.

 

[leasedfee]

The client has to be separated from and unable to select the appraiser. Until that happens, no amount of classes, licensing standards, etc., will make a difference. "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" ~ Upton Sinclair.

 

[Joe Flacco]

I don't want to pretend to know anything about commercial appraisal but generally a office building is a office building, data center is a data center, gas station is a gas station. But a house is not just a house. Every house or residential property is unique or different.

 

[leasedfee]

Over the past week, I sat through a meeting on the Chicago CBD office market that left me marveling at the depth of knowledge present in the room.

Interesting how much animosity there is toward national firms ... it's reminiscent of the AI envy often seen on these forums.

That may be so -- lots of smart guys. But it doesn't serve the big C's national brand when I see valuations stretched. Graphic below.



The subject was average. This is noted by both the appraisers, and appeared as much to me, the desk reviewer), the comps are average. The listings (not shown) are all lower than the appraiser's opinion of value. The only difference was that the subject had surplus/excess land clearly identified by the plat, the aerial, the ratios, so the appraisers said "None". Nevertheless, the surplus/excess wouldn't have come close to bridging the gap, nor did they make any such adjustment. The report was signed by an MAI who is 2,000 miles from Denver, and didn't inspect. . . . . . . . Then I see CBRE, and C&W claim that the income approaches aren't necessary on an income producing properties, or the cost approach isn't germane for a recently constructed building. . . . . . So I rub my eyes and go ask my local peers, "Is it me who's the kook? Or am a seeing a problem with the big C's??" The local small shop peers confirmed my concerns. But more prominently, a former fee appraiser, who works for a national bank says to me, "They're garbage, and she wouldn't use those firms." Something is rotten in the state of Denmark.

PL1957, you post intelligently on the forum, I'm sure your work is awesome, that you rightly take pride. What am I missing? The greatest gets tainted by those who dilute the brand. (Yes, I know there are incompetent and/or crooked small local appraisers, but they don't have a brand to defend, so they can, eventually, be pushed out; one would hope.)

 

[Joe Flacco]

That may be so -- lots of smart guys. But it doesn't serve the big C's national brand when I see valuations stretched. Graphic below.

View attachment 30859

The subject was average. This is noted by both the appraisers, and appeared as much to me, the desk reviewer), the comps are average. The listings (not shown) are all lower than the appraiser's opinion of value. The only difference was that the subject had surplus/excess land clearly identified by the plat, the aerial, the ratios, so the appraisers said "None". Nevertheless, the surplus/excess wouldn't have come close to bridging the gap, nor did they make any such adjustment. The report was signed by an MAI who is 2,000 miles from Denver, and didn't inspect. . . . . . . . Then I see CBRE, and C&W claim that the income approaches aren't necessary on an income producing properties, or the cost approach isn't germane for a recently constructed building. . . . . . So I rub my eyes and go ask my local peers, "Is it me who's the kook? Or am a seeing a problem with the big C's??" The local small shop peers confirmed my concerns. But more prominently, a former fee appraiser, who works for a national bank says to me, "They're garbage, and she wouldn't use those firms." Something is rotten in the state of Denmark.

PL1957, you post intelligently on the forum, I'm sure your work is awesome, that you rightly take pride. What am I missing? The greatest gets tainted by those who dilute the brand. (Yes, I know there are incompetent and/or crooked small local appraisers, but they don't have a brand to defend, so they can, eventually, be pushed out; one would hope.)

I think we are supposed to file a complaint when we see things like this. I know. It is a difficult thing to do.

 

[Terrel L. Shields]

Every Appraisal Journal that I read shows court decisions and not only are some of the appraisers favoring their client, they are outright changing their methodology to accommodate them.

I don't recall it in every issue but do see a relative split in which side is which. I see too many condemnation appraisals that overvalue the after, even one where someone losing several acres was told the after value was MORE than before and the appraiser was MAI and has since served on the state board. Eventually the city paid over $1 million. Too many assessor hired guns with high valuations against equally low-ball appraisals.

if we merged with the NAR.

The reason they split in the first place was the obvious conflict of interest and the domination of appraisers by brokers. These two didn't part ways willingly but FIRREA at that time suggested the two needed to be separated. A shotgun divorce. You did know that didn't you?

 

[Terrel L. Shields]

Why do you feel it necessary to emphasize USPAP?

Because prior to adoption of FIRREA there were no required USPAP, but in 1992 NOBODY had experience hours that included USPAP. So we submitted work experience from non-USPAP reports, or started at ground zero and submitted compliant reports two or three years later. AI had a similar document and other organizations had ethics documents of sorts. As for BS I'll stand back for a pro like you. If you didn't take the test in 1992 then don't tell me it was easy.