Lawsuit Alleges Appraisal Institute Has Given States Fraudulent Test Results For Years

[djd09]

Not when a $500,000 kickback is on the table.

how much under the table...

 

[Mejappz]

 

[RCA]

I have served on exam committees at both AI and TAF. There is far more to developing the exams (and the passing scores) than most know.

Both engaged the assistance of professionals in the development of exam content outline, the item bank of questions, the exam content outline, and the calculation of the passing score. All work was done with the oversight of professional psychometricians and in accordance with recognized psychometric methods and techniques, and there is significant supporting documentation.

Yes, it is good to hear they have some mathematicians involved. I turned to Grok-3, Claude and ChatGPT which seem to be quite knowledgeable on professional licensing tests for all professions in the use, including appraisers - as well as those overseas in countries like Germany. For example, Claude says:

Me: "Can the minimal required pass scores for appraiser licensing in the US, by modified be the states?"


Claude: "Yes, the minimal required pass scores for appraiser licensing in the United States can be modified by individual states. While the Appraiser Qualifications Board (AQB) of The Appraisal Foundation establishes the minimum qualification criteria for real property appraisers, states have the authority to implement requirements that exceed these federal minimums.

States can impose higher passing score requirements, additional education hours, or more experience hours than the federally mandated minimums. They can also implement other state-specific requirements as long as they meet or exceed the federal baseline established by the AQB.

Each state's real estate appraiser regulatory board or commission is responsible for implementing these requirements within their jurisdiction, which is why licensing requirements can vary from state to state despite the federal minimum standards."



Me: "Can they make the state minimum requirements less than federal standards?"


Claude: "No, states cannot make their minimum requirements for appraiser licensing less than the federal standards. The minimum qualification criteria established by the Appraiser Qualifications Board (AQB) of The Appraisal Foundation represent a mandatory baseline that all states must follow.

States have the authority to implement requirements that are more stringent or exceed these federal minimums, but they cannot reduce or lower the requirements below the federal standards. This ensures a consistent minimum level of competency for appraisers across the country, while still allowing states to add additional requirements based on their specific needs or market conditions.

This structure is part of the regulatory framework established under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989, which created the current system of appraiser certification and licensing following the savings and loan crisis."


===

So we are left with the question as to what actually happened with respect to the AI communication of test results to the states. Can you say anything in that regard?

 

[RCA]

Also, Grok-3's take:

Me: "In the US, would states with lower education standards like Mississippi, Louisiana and New Mexico have lower passing scores than states such as Massachusetts with the highest standards?"

Grok-3: "I assume you’re asking about the testing process for real estate appraisers in the context of licensing, building on your earlier questions about standardization in the U.S. and comparisons with Germany. I’ll focus on how testing for appraisers is handled in the U.S., with a nod to how it might differ in a country like Germany, based on typical practices for professional licensing.

United States
In the U.S., testing for real estate appraisers is a key step in the licensing and certification process, governed by the Appraiser Qualifications Board (AQB) under The Appraisal Foundation. The AQB sets national standards, but states implement them, often with slight variations. Here’s how it works:

• National Uniform Licensing and Certification Examination: This is the primary test for appraisers, required for all levels—Trainee, Licensed Residential, Certified Residential, and Certified General. The exam is developed by the AQB and administered through third-party providers like Pearson VUE or PSI Services.
  • Content: It’s a multiple-choice test covering topics like real estate market analysis, valuation approaches (sales comparison, cost, income), property description, and the Uniform Standards of Professional Appraisal Practice (USPAP). The Certified General exam, for example, has 125 questions and a 6-hour time limit.
  • Difficulty: Pass rates are relatively low—around 50% for Certified General and 60-65% for Residential levels—reflecting a focus on technical knowledge and calculations.
• Standardization: The exam is standardized nationally using psychometric methods (e.g., Item Response Theory) to ensure consistency in difficulty and fairness across test versions. Questions are pre-tested, and passing scores are set via methods like the Angoff method, where experts determine the minimum competency threshold (not adjusted by state).
• State Administration: While the test itself is uniform, states handle scheduling, fees (typically $100-$400), and prerequisites like education and experience. For example, Mississippi requires 150 hours of education for a Licensed Residential credential, while Massachusetts follows the same AQB minimum but might have stricter oversight.
• Scoring: Scores are scaled (e.g., 75 out of 100 is a common passing mark), and results are immediate at testing centers. States don’t lower passing scores for weaker education systems—everyone faces the same bar—but pass rates may differ due to preparation disparities.

Germany
Germany’s approach to appraiser testing (e.g., for Immobiliengutachter or real estate valuers) contrasts with the U.S. due to its integrated education and centralized regulation:

• Testing Process: There’s no single national exam like the U.S.’s AQB test. Instead, certification often ties to vocational training or university degrees (e.g., in real estate economics), followed by practical experience. The Chamber of Industry and Commerce (IHK) oversees qualifications for publicly appointed and sworn appraisers (öffentlich bestellte und vereidigte Sachverständige).
  • Content: Exams focus on German property law, valuation methods (e.g., Vergleichswertverfahren—comparable sales, Ertragswertverfahren—income approach), and national standards like the Immobilienwertermittlungsverordnung (ImmoWertV). They’re often oral or practical, not just multiple-choice.
• Standardization: Standardization comes from the curriculum and IHK oversight, not psychometric scaling. Passing is criterion-based (e.g., demonstrating mastery), not norm-referenced like in the U.S. There’s less emphasis on equating across test versions since exams are less frequent and more tailored.
• State Role: The process is uniform across Germany’s federal states (Länder), managed by regional IHKs under federal guidelines. Unlike the U.S., there’s no state-by-state variation in passing scores or test format.

Key Differences

• Structure: The U.S. uses a standalone, high-stakes exam post-education, while Germany integrates testing into broader training, often with practical assessments.
• Standardization Approach: The U.S. relies on statistical rigor to normalize a national test; Germany ensures consistency through centralized curricula and professional bodies.
• Flexibility: U.S. states can’t adjust passing scores but can tweak prerequisites; Germany’s system is less flexible but more uniform nationwide.
• Focus: The U.S. test emphasizes technical appraisal skills and USPAP compliance, while Germany’s includes legal and practical expertise specific to its market.

In short, U.S. appraiser testing is a standardized, exam-driven gatekeeper with a national framework, while Germany’s is a holistic, curriculum-based process with less reliance on a single test. If you meant a specific type of appraiser (e.g., personal property) or a different angle, let me know!"

 

[RCA]

Run it through Claude if you’re having trouble.

In the context of this thread, Claude says the same as me - your response is BS:

Me: "Does the State of California audit the Appraisal Institute?"


Claude: "No, the State of California does not audit the Appraisal Institute. There's an important distinction to make about the roles of these organizations:

The Appraisal Institute is a private professional organization that provides education, designations, and professional development for appraisers. It's a membership association, not a regulatory body.

In California, the regulatory authority that oversees appraisers is the California Bureau of Real Estate Appraisers (BREA). BREA is responsible for licensing, regulating, and if necessary, disciplining real estate appraisers in the state.

While BREA may recognize education provided by the Appraisal Institute for licensing purposes, it doesn't have authority to audit the Appraisal Institute as an organization. The Appraisal Institute, being a private professional organization, is subject to different oversight mechanisms than state-licensed appraisers or appraisal management companies.

If you're interested in regulatory oversight of appraisal activities in California specifically, BREA would be the relevant authority to examine."

 

[alebrewer]

A word of advice to the gods who create the exams, most of us mere mortals discovered early in life that if the question has 4 possible answers and you're stumped, the old mantra "when in doubt check C" works more than 25% of the time.

If we assume random distribution, the probably HAS to be 25%. However - to your point - most question writers do not randomly distribute the correct answer, so I'd hazard you're correct.

 

[RCA]

I have served on exam committees at both AI and TAF. There is far more to developing the exams (and the passing scores) than most know.

Both engaged the assistance of professionals in the development of exam content outline, the item bank of questions, the exam content outline, and the calculation of the passing score. All work was done with the oversight of professional psychometricians and in accordance with recognized psychometric methods and techniques, and there is significant supporting documentation.

Actually, with respect to my comment that you were referring to

"Well, do you really expect the appraisers at TAF or the AI are competent to create such tests? Of course not and in any case no one is going to pay for that. They just decide to flunk a certain percentage with the lowest scores. That's easy-peasy."

It's good to hear that they take a more serious approach. Did you play a role in their test for the Appraisal Institute's Statistics course?

 

[CGinMN]

Huh, weird. It's almost like LLMs are programmed to confirm each user's bias.

Me: Can the California Bureau of Real Estate Appraisers (BREA) audit an educational provider like the appraisal institute to ensure their testing mechanism comply with state regulations?
Edit

Claude: Yes, the California Bureau of Real Estate Appraisers (BREA) has the authority to audit educational providers, including organizations like the Appraisal Institute, to ensure their testing mechanisms comply with state regulations.

As the regulatory body responsible for licensing and supervising real estate appraisers in California, BREA has oversight of educational providers that offer qualifying and continuing education courses for appraisers. This includes the authority to:

1. Review and approve course content and testing mechanisms
2. Conduct audits to verify compliance with state regulations
3. Require educational providers to maintain specific standards for course delivery and testing
4. Take enforcement actions against providers that fail to meet these standards

BREA's primary concern is ensuring that educational programs adequately prepare appraisers according to state and federal requirements, and that testing mechanisms properly assess competency in the required knowledge areas.

If you have specific concerns about an educational provider's compliance with regulations, you could contact BREA directly for more information about their audit procedures or to inquire about a particular issue.

 

[Carnivore]

from Co-Pilot

AI is transforming the real estate appraisal industry, but rather than outright replacing human appraisers, it's more likely to augment their work. Here’s how AI is influencing the field and the expected timeline for its impact:

AI’s Role in Real Estate Appraisal​

1. Automated Valuation Models (AVMs) – AI-powered AVMs analyze vast amounts of data, including previous sales, tax assessments, and market trends, to estimate property values quickly. However, they struggle with unique property features and condition assessments.
2. Efficiency & Accuracy – AI can streamline data collection and preliminary analysis, reducing human error and improving valuation precision.
3. Remote Appraisals – AI-driven tools, such as aerial imagery and machine learning algorithms, enable remote property inspections, making appraisals faster and more scalable.
4. Limitations – AI lacks the human touch needed for judgment calls, local market knowledge, and ethical considerations. Unique properties, historical significance, and community sentiment still require human expertise.

Timeline for AI in Real Estate Appraisal​

• 2025: AI-assisted appraisals are expected to become more common, with new technologies integrating into appraisal workflows.
• Mid-2020s: AI adoption in real estate is growing at a 37.4% annual rate, indicating increasing reliance on AI tools.
• Beyond 2030: AI will likely handle routine appraisals, but human appraisers will remain essential for complex valuations, ethical oversight, and nuanced decision-making.

While AI is revolutionizing the industry, human appraisers will continue to play a vital role, especially in cases requiring subjective judgment and local expertise. AI is a powerful tool, but it’s not a complete replacement—at least not anytime soon.

 

[Carnivore]

co-pilot

That sounds like an interesting approach! AI can definitely help streamline training and make the licensing process more structured. Grok is designed to process and synthesize vast amounts of information, so it could potentially outline key steps, study materials, and even testing strategies. If they manage to refine the process well, it could make training more efficient for future appraisers.