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The Georgia Trying to Eliminate Appraisal Subcommittee

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I think this is a great thread. It's very timely.


Steven,

In regards to your $100,000,000 condo, it's my opinion that no board should be going after the appraiser for their opinion of value. After all, its an opinion and that always involves some subjectivity on the appraiser's part. That is, unless you're dealing with Austin and one of his regression models (just kidding!).

Instead of going after the opinion, which is what a few of the boards do, the boards should be going after the USPAP violations that must have been necessary to arrive at that value. Violations like not reconciling the applicable data or not considering the relevant comparables. Failure to disclose. Violations of the minimum standards for the appraisal process and the appraisal report. You can't get to the $100,000,000 mark or even the $110,000 mark on that property without making a number of serious and easily enforceable violations of USPAP. Opinion notwithstanding. As it is now, at least some of the states take the 'process-report' approach to enforcement; apparently with quite some success because we never hear of appeals in these states standing up.

Admittedly, the weak spot is the interpretation of the standards, hence Illinois' ban on the royal 'we' and other minutae. Focusing on trivia like this detracts from the very real problems that continue to exist and perpetuate the myth that the state boards are only interested in witch-hunts.

As for the AQB requiring the state boards to take the USPAP instructors course, that isn't their job. The job descriptions of both the ASB and the AQB involves setting standards only. Enforcement has never been their responsibility, nor do they appear to want it. If the state boards are to be compelled to do anything (other than by state authorities), it would be a result of the ASC requiring them to do so. Remove the ASC from the loop and the state boards would be essentially free agents, answering to no one, at least no one who is technically competent to judge their work. Which I believe it the intention behind this drop-the-ASC movement. Cynical me.

That said, if the state boards want to know what appraisers are being taught about USPAP, and they should, then they should schedule the course. I'm pretty sure the Appraisal Foundation would run separate classes for the regulators, so they won't have to mingle with us common folk. If the state boards aren't familiar with the standardized interpretation and explanation of USPAP currently being offered by the Foundation in the instructor courses, how can they be technically competent to judge the conduct of appraisers who are being required to take instruction from the authorized instructors?

I just took the qualification course from the Appraisal Foundation this last month in Los Angeles. I think the Foundation has at least one scheduled somewhere in the U.S. every month for the next year. I don't remember any of the participants of that L.A. class as having come from a state board. Matter of fact, I heard that at least one state board was going to be provided 10 bound copies of the text, for free, by one of the participants. It's not like it's supposed to be a secret or anything. We're all supposed to get it.


Thus concludes my rants for today.

George Hatch
 
<span style='color:darkblue'>George,

I was enjoying the rants! Hope there're more in store for tomorrow. Yes, the "airing" is interesting. I am in agreement with you and Steve Vertin on the issue.

Here's what I see:

Increasingly our profession needs to be as coherent and coordinated as possible to be responsive to the changing market for our services. Business-hungry property-valuing accountants are waiting at the wings (is that the right expression?). Why build-in a thoroughly crippling competitive disadvantage. Fifty separate, ever-changing, completely autonomous (personalities-packed) bureaucracies free to whim and wing it on their own with no accountability or oversight must be a recipe for sure disaster -- or better depicted, retardation. Our new future would impacted right from the start.

This proposal somehow reminds me of the chaos and counterproductivity experienced for decades by European countries due to their multitude of national currencies: very counterproductive and almost prohibitively expensive to ever cure -- just ask the Europeans. The difference is, their problem was one of growing pains; it evolved. It was then carefully studied by experts for many years, and then as strategically as possible (but still painfully) solved in the end. On the other hand, we may actually be contemplating the active segregation of our currencies?

We currently have what some might describe as a particularly ill-conceived proposal on the table from Georgia's current set of appointed personalities. But fortunately, due to the existence of an overseeing authority, it is just that, a proposal -- not a decree. Picture many mini-decrees (by a power of 50). This is not intended to be demeaning to members of Georgia's board. As far as I know they do an excellent job, and I happen to know for sure they are among the most financially sensible and frugal (yep, I did a survey about a year ago) appraisal board's in the Southeast (as is Florida). But too many cooks spoil the broth.

Further fragmentation is probably not the answer. In fact, collectively, as a profession, repeatedly and without exception, we have identified the need for unification.

dcj</span>
 
George,
I appreciate your feedback. I am trying to reconcile what you said, about how without USPAP that appraisals in GA and FL would be "done different." I noted how little agreement there is among appraiser on may key issues and bereft the literature is on many funndamental points undercutting all the standards in USPAP. My example is one where an appraiser comes in a thousand fold too high.

You say,
"You can't get to the $100,000,000 mark or even the $110,000 mark on that property without making a number of serious and easily enforceable violations of USPAP."
And that Board go after, "the USPAP violations that must have been necessary to arrive at that value. " like
"not reconciling the applicable data or
not considering the relevant comparables."

Let me teke them point-by-point:
The first one sounds like what is now SR 1-4 and 1-4(a). However, the verb "reconcile" has been removed leaving only "collect, verify and analyze." So there is no USPAP requirement to "reconclie" anything.
The ASB purged the verb "consider" from the standards. There is no USPAP requirement to "consider" anything.

George, I am not trying to go after you. I am just trying to show you that using USPAP to prove error is not that easy without the power to draw an "argitrary" line between right and wrong. We both agree that something "wrong" was done. For example, maybe our appriaser made a 1,000% line adjustment. What I am trying to show you is that USPAP is so vague and broad (and has to be) that in a litigation setting, like a board hearing, absent a "recognized" (like in texts) reference that a 1,000% line adjustment is wrong, the Board's ruling if always going to be an "arbitrary" line, dividing out what "everyone knows" is wrong or whatever the caprices and whims of the board says is not "credible."

Getting back to square one - The thing that touched me off was the idea that without USPAP appraisal in GA or FL might be "done different." I am arguing that USPAP does not promote, insure, create or establish any uniformity by itself. The excercise of -
-explaining why someone drew the neighborhood boudaries in the wrong place and chose the wrong comps, or
-explaining why the wrong comps from within the right bounaries, or
-explaining why someone "reconciled" the comps the wrong way, or
explaining that the pattern of "error" shows "intent" to deceive -
is exactly the same with or without USPAP, that USPAP does not solve the "problem" of appraisals "done different" in GA and FL, if it is a problem at all.
 
This is the best thread to grace this BB in a l o n g time!

There's much to be said. Just wish I had more time to contribute.

Some observations:

Remember, Title XI of the FIRREA was passed to correct so-called deficiencies and abuses in the appraisal profession and to right the perceived wrongs of the Savings and Loan debacle of the 1980's. After reading the Forty-Eighth Report by the Committee on Government Operations, (among other evidence) it's clear, in my opinion, the appraisal profession was not the main culprit in the fiasco. Inflated and improperly prepared appraisals were but a byproduct of the Savings and Loan and Banking culture of the late 80's. Nevertheless, Congress initiated the currently regulatory scheme for the appraisal profession to cure the ills.

Ever since I've been involved in this real estate specialty, there have been bad players.

Prior to the advent of Federally Mandated regulation of real property appraisers, entry to the profession seemed (to me) to be predicated upon education and experience and building a reputation of ability and credibility. Granted, there was a certain amount of politics and family connections in many areas, including my own.

Since Federal Regulation, legitimacy of an individual appraiser is much easier to attain. After all, the individual has a license or certification from a State Licensing Agency as evidence of their ability. As a result, in my opinion, the standards which existed prior to regulation are much lower.

Appraisers, by and large, are the most critical of their peers and most willing to throw bad players to the wolves.

Has the current regulatory scheme solved the problems it was created to deal with?

Since many of the bad players which contributed to the collapse of the Savings and Loan industry were lenders and regulators, does it make sense to put them in control of the Appraisal Subcommittee?

What group should be the driving force behind Appraisal Standards and Appraisal Qualifications? Should it be the bankers, the secondary lenders, FHA and VA? Should it be the Appraisal Profession?

Uniform interpretation of the USPAP is a laudable goal, but diffucult to achieve for a number of reasons. The first being the structure and content of the document itself. It is not the job or responsibility of the ASB to interpret the Standards; it's their job to develop them. For example, Legislatures do not interpret the laws. Courts have the task. Courts and State Regulatory Boards have the repsonsibility to interpret and enforce the USPAP. Just as Appraisers have differences of opinion, these entities will interpret from their point of view and perspective.

In my mind, the current regulatory scheme, after more than ten years, has not achieved the goal it was created to attain. Georgia has proposed an alternative. Maybe it's on the right track; maybe not, but at least the dialogue has begun. Hopefully, we're on the road to taking a long hard look at the experience and data from the the last ten+ years and developing some well thought out suggestions for improvement.

If what we have in place has failed to improve the profession, we owe it to our profession to make improvements.

More later,
 
You guys know I could not stay silent on this one!

While I am an ardent state rights kind of guy, I see no hope for a reasonable appraising environment without increased regulation and oversight of the state boards, at least on the criteria for entry into the profession and on the enforcement side.

The ASB and AQB can promulgate criteria and standards all they want, but unless the state regulators act in accordance with these national directives, it makes the whole process a lost cause. The ASC is set up to be the oversight, but they have historically done nothing. Now that the ASC is flexing their muscles a little bit, some boards are complaining and wish to get rid of their regulatory agency.

Sounds familiar, after all it is the same concern expressed by many appraisers on this forum over the past year, when punitive action is taken by a state regulatory agency, the first cry is to abolish the board.

I see the problem as one of consistency.

We have state boards that do absolutely nothing about bad work; they ignore fraud and incompetent work. We have boards that are very aggressive about "bad appraisers" but who regularly misinterpret or reinterpret USPAP on a whim. They ignore incompetent work but have those who admit to not having their work done in accordance with USPAP testifying that others work product is so bad they deserve to have their lcense pulled.

We have states who tell their investigator/appraisers they do not have to comply with USPAP in doing my reviews/investigations. One investigator told me recently that this kind of action was OK because his legal counsel said compliance with USPAP was not needed for an expert witness, all the expert needed was to tell the truth. What an incredible slap in the face to our profession. Another regulator recently told one of the ASB board members ( who was teaching a USPAP update for regulators and instructors) that if the board member came to his state and did what the board member said was allowed under USPAP, that the regulator would pull his license. This contempt for USPAP and the national interpretations of standards is routinely expressed by some members of the regulatory agencies; it is no wonder that the crediblity of our profession is in trouble.

George has pretty much pegged this in my mind. Both the lack of enforcement and the overzealous approach to enforcement lead to confusion with virtual free for alls in some states and witchhunts in the other.

There are only two possible fixes, removal of the whole system started (AF/AQB/ASC/State regulators/Title XI) or effective oversight of the states. The first will never happen, the only recourse for consistency is increased regulation of the regulators.

I like the idea of all board members and investigators taking high level USPAP tests. I originally thought the USPAP instructors course test might be appropriate, but having recently taken it, I think the regulators need a different test, perhaps one more geared to solutions to case studies rather than the concepts oriented type test.

Regards

Tom Hildebrandt GAA
 
Frank,

You are, of course, correct about appraisal and S-L Crisis. As early as the late 70's, all sorts of siren calls were ignored about questionable non-FASB accounting practices camouflaging S/L insolvency. In the early 80's, the typical mixed-bag, politically-motivated "solutions" to the "problem" included making accounting practices even looser, allowing the pumpig up of "goodwill" figures which further camouflaged a deterioating financial conditions of the banks.

On the slightly political side -
Anyone see 60 Minutes this week, about the INS, their failing computer system and how they still don't have a clue who is coming in to the country - even after we discovered that 2 of the 9/11 terrorists were on the CIA watch list when they came in. Of course,airport security guards are still shaking down Granma Moses because her underwire bra set off an alarm. These top-down regulatory schemes always remind me of hiring John Bunyon to kill a cockroach. He swings his giant ax until the house is completely destroyed - and somewhere down in the rubble is one happy cockroach because the chopping busted open the sealed pantry containers.
 


That said, if the state boards want to know what appraisers are being taught about USPAP, and they should, then they should schedule the course. I'm pretty sure the Appraisal Foundation would run separate classes for the regulators, so they won't have to mingle with us common folk. If the state boards aren't familiar with the standardized interpretation and explanation of USPAP currently being offered by the Foundation in the instructor courses, how can they be technically competent to judge the conduct of appraisers who are being required to take instruction from the authorized instructors?

I just took the qualification course from the Appraisal Foundation this last month in Los Angeles. I think the Foundation has at least one scheduled somewhere in the U.S. every month for the next year. I don't remember any of the participants of that L.A. class as having come from a state board. Matter of fact, I heard that at least one state board was going to be provided 10 bound copies of the text, for free, by one of the participants. It's not like it's supposed to be a secret or anything. We're all supposed to get it.
Click to expand...

George,

Could not resist commenting on these statements. If you do not know your state appraisal board members, make an effort to meet one or more of them. Most likely they will not fit your current perception. I might be wrong, but in my experience (with a couple of notable exceptions), they are normal folks and do not view themselves as being "high and mighty". There's no problem with mingling with the "common folks" as they are common folks.

File this under "You can lead a horse to water...."

On January 5, 2002 The Appraisal Foundation presented USPAP Update for Instructors and Regulators in Washington DC. There were a few State Appraisal Board Members in attendance, an AQB Member, the Chairman of the ASC and a bunch of Instructors. One State Regulatory Board had at least four members in attendance. No other state had more than one. Which State Appraisal Board? Ask David Johnson, Tom Hildebrandt or Bob Ipock.

Standards are subject to interpretation. Even if all State Regulators are forced to attend a class conducted by the same USPAP Guru, there will be differences of opinion and variations in interpretations. In my view, this is not necessarily a bad situation. Every situation is different and subject to some nuance. The judgement of the human mind is important in weighing all the available and relevant information prior to making a decision. Wouldn't you agree? Would you rather be judged by a human or a machine? After all, isn't this the argument in favor of an Appraisal versus a point estimate by an Automated Valuation Model?

Let's keep this up. It's healthy and informative.
 
Frank

I will confirm that North Carolina had two board members, the new deputy director and one investigator at the January meeting. Our board is the "jetset" model for regulators in the country.

I am pleased that the NCAB attends these USPAP training sessions, but as you point out, you can lead a horse to the water but you can not make him drink. One of the NCAB board members, an MAI, told the ASB presenter that NC would take his license if he practiced appraising in NC under his interpretation of USPAP. This is the same board member who, at the update presented by Ken Kaiser in Las Vegas as part of Valuation 2000, went on a diatribe about attorneys, and appraisers who work for them, are the biggest violators of USPAP.

If we had mandatory testing of board members on USPAP before they could sit on boards, a lot of this "old school" mentality would be eliminated. We would have more consistent enforcement. Just as an appraiser who has done competent work should not fear a competent investigator/appraiser reviewing his work product, competent board members should not fear a simple test that measures their knowledge of the standards they are to enforce.

The reality is that these appointments are political, and many board members, and even the staff they hire, have weak grasp of USPAP, and this incompetence is aggravated by their own public and personal agendas. You are right, you can not get bias out of the process entirely, but we can, and should, be able to get thorougbreds, rather than jackasses, on our boards.
 
Frank,

First off, let me apologize for my "not mingle with us common folk" crack in my previous post. That comment has a tone that is a little more beligerent than I intended. All of the state board folks I have dealt with over the years have been very professional and helpful.

Second, let me say that I have no problem with the fact that different people will always have slightly different interpretations of the USPAP and how it applies in practice. I do have a problem with the concept that its OK for a state board to conduct their business without actually knowing what they are supposed to know. Technical competence is all we're talking about here

Third, not all boards are on the wrong side of this issue. Correct me if I'm wrong, but there are a number of boards that already have this level of competence and demonstrate this level of enforcement. Including your state, Florida, and my state, California, to mention only two of the many. I would not paint all of the boards with the same brush.

Lastly, we are all in this together. We share a common goal of promoting and striving for higher degrees of professionalism among appraisers. A rising tide lifts all boats. The main area of debate centers around the means to achieve these goals. There are those who would scrap the present system and basically go back to the way things used to be; and there are those who would work from within to modify and strengthen the system already in place.

I still fail to see how removing the federal oversight will contribute to uniformity among the states. Is that not the primary goal? Maybe that is the real question here.

George Hatch
 
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