The fly in the ointment of appraisal regulation and enforcement, in my opinion, is that real estate appraisal by its nature is both an art and a science. The art comes into play in highest and best use determination. If a number of appraisers inspect a tract of land, some see a tract of land, some see a residential development, some see a park, etc. Then the valuation is based on the highest and best use opinion, (highest and best use not being a fact to be found but an opinion of the appraiser), as the basis of the appraisal. How do you regulate appraisal vision and creativity? In my practice, if I wanted to perpetuate a fraud, it would be a piece of cake. If I appraise a 100-acre land tract, I can say due to high timber prices the H & B use is as timberland at $800 per acre. Or, I could say the highest and best use is a gentleman’s farm, or suitable for subdivision into acreage tracts, or any variety of uses. How do appraisers make these decisions? How can you look inside of my head and determine my motives or vision?
The list is endless: Who can say my expense projection is wrong? Who can say my income projection is wrong? Who can say my estimate of absorption is wrong? With interest and equity rates making 4% moves in a 6-month period, who can say my estimate of a cap rate is wrong? With new technology and statistical methods on line, who can say my methods are wrong?
You can’t pass regulations and punish people because they don’t like the same color, or see the same vision, or have the same worldview and vision of what the future holds. For these reasons, as well as many others, the enforcement of appraisals regulations is a minefield of legal dangers.
In my opinion, the only legal charge that an appraiser could legitimately be convicted of is proven fraud as evidenced by a price estimate that is grossly out of reason with a clearly set forth case of doing it to the detriment of some third party.
Any time I hear an appraiser say something like, the board will rule on whether or not an adjustment was justified or supported, I shutter. Why? Because in my experience the whole adjustment process is logically and mathematically wrong. Even the AI changed the sequence of adjustment in recent volumes of their book, “The Appraisal of Real Estate”, or so I have been told. The bottom line is that the subject of appraisal regulation is a minefield of horrors and a magnet for small minds with a “Witch Hunt” mentality, and the political appointment of appraisal board members is a filtering system for the selection of those with small minds and little scope of vision. To wit: Any American adult that would agree to a policy of suspending due process because due process is to expensive and time consuming for the appraisal boards is a small minded Witch Hunter. Unless the price estimate is proven to be out of bounds, where is the crime? This is constitutional law 101. You can't convict people for the methods they used in doing a crime that no one has demonstrated has been committed. In my mind, this whole question is insane.
