As of late, there has been much chatter on the Internet about appraiser Independence, Customary and Reasonable Fees and Appraiser Designations. The main thrust of the conversations has been a flurry of concern expressed by appraisers that they have lost their ability to negotiate fees thereby limiting their independence and many can see no reason to keep up their professional designations since, “All licensed appraiser are equally accepted by the State” and “All certified appraisers are equally experienced”.
In short, these statements are made by appraisers out of an extreme degree of frustration and realization that the majority of residential mortgage related clients making these decisions are wanting to safeguard the interests of the lender, but the specific interests that are being safeguarded are the bottom line, “How much will it cost?”, “How long will it take?”, “Can I sell this loan package in the Capital Markets?” But the answer to these questions does not address whether or not the appraisal will accurately reflect the subject and how it relates to its marketplace.
I recently received a phone call from an appraisal management company who could not understand how I could show a market area was stable, when the press has explicitly stated that values are continuing to decline. The fact that I had conducted a “subdivision by subdivision” analysis for all home sales within 20% of the size of the subject and extended this analysis to include the previous four-years and presented this data in a tabular and graphical format would not appease the “lord of review”. “The press stated that prices are declining, and this knowledge is common so it must be addressed”, … okay.
Professional appraisers must continually exercise their independence and use technologies at our disposal to consistently present our findings in a way that is easily understood and relevant to the subject at hand. It is us, who lead the charge and shape the expectations of the marketplace. If we simply give into the silly questions and placate reviewers, then we will not improve this industry. As for me personally, I have given much of my life to this industry and asked for very little in return.
Customary and Reasonable? From my perspective what has become customary is no longer reasonable. So we can either have fees that the AMCs will pay (which they want to believe is Customary) or we can charge the public what is reasonable for the degree of expertise, knowledge and effort that we put into the production of an appraisal report. An appraisal office is not unlike any other business we have fixed costs, variable cost and a point at which we are able to break even. This point has broken the majority of independent appraisal offices and forced us to relegate ourselves to working as one man shops in small offices or out of our homes. Is this what Customary and Reasonable means to the current administration? Somehow I want to believe that was never the intent, but it sure has become the effect.
With regard to appraisal designations, I believe that lenders should use anyone who elects to educate him or herself in their chosen field and pursues an organization that governs itself and imposes a degree of professional ethics. The rub is that professional designations are only as good as the individual appraiser who has the letters behind his or her name. There are many professional appraisers who are very good at what they do who have never had a designation. There are others who have elected to drop their designations because they saw no benefit in maintaining the additional costs. And yes, there are some appraisers who obtained designations that are now serving time.
I would like to believe that “time wounds all heals”, and that the “bad guys” will eventually be caught and removed from the game. But as a realist, I am forced to believe that the only way to deal with the appraisal industry is to increase State budgets for investigation and prosecution when it is appropriate.