An Open Letter to the Valuation Profession
An Open Letter to the Valuation Profession from the Appraisal Foundation regarding the rift with the Appraisal Institute
Value. Appraisers grapple with this concept daily as they analyze data and information to arrive at an opinion that is credible. Some information found is valid, some is tainted, and appraisers work diligently to separate the good from the bad to arrive at their conclusions – opinions that can withstand future tests.
Likewise, The Appraisal Foundation (TAF; the Foundation) remains constantly attuned to what is going on in the valuation realm, conscientiously analyzing information and working to uphold the appraisal profession so its actions continue to earn public trust. TAF embraces the whole and serves as a single guide that encompasses all appraisers and users of appraisal services equally regardless of association affiliation, credential, or area of practice. TAF is proud that through the voices and open input of tens of thousands, and under the watchful eye of a balanced state and federal regulatory system, a foundation has been built over the last quarter century that provides stability and a solid base upon which this noble profession can flourish.
It is very concerning that lately much of the information filling the valuation space is tainted. Recent communications by the Appraisal Institute (the Institute) are calculated attempts to fracture the whole. This month marks the fifth anniversary of the Appraisal Institute’s decision to resign from The Appraisal Foundation, rather than face a suspension for violating the Foundation’s Code of Conduct for Sponsoring Organizations. Instead of coming together with their peers, working collaboratively, and respecting the opinions of others to further a common purpose, leaders of the Appraisal Institute aim to splinter the profession. This divide and conquer approach is short-sighted, damages the profession, and must stop.
We are often asked what the Foundation is doing to repair the relationship and solidify what has been collaboratively built over the last 28 years. Following is an accurate overview of the current state of affairs.
Offering Olive Branches
The Appraisal Foundation strongly believes that for the good of the profession the Appraisal Institute should return to the fold with its peers. Over the past two years there have been three face-to-face meetings between the leadership of the Appraisal Institute and The Appraisal Foundation, none of which were initiated by the Institute. At those meetings, The Appraisal Foundation offered that, in an attempt to restore trust between the organizations, we undertake collaborative efforts to: 1) attract young and minority professionals to the field of valuation; 2) analyze reasonable and customary appraisal fees; or 3) consider other topics or concepts the Appraisal Institute might consider appropriate for joint collaboration. To date, we have received no response from the leadership of the Institute.
Fortunately, while our relationship with the Institute leadership remains strained, we continue to have an excellent relationship with the individual appraiser members of the Institute and appreciate all of their work on behalf of the Foundation and the profession. As an example, over the last year three former National Presidents of the Appraisal Institute served on our various Boards.
Correcting A False Narrative
The Appraisal Institute claims that the Foundation’s Code of Conduct for Sponsoring Organizations prevented them from adequately representing their membership. The Code states:
“Sponsors shall not engage in conduct prejudicial to or which undermines the purposes, interests and work of the Foundation, nor shall Sponsors conduct themselves in a manner which brings disrepute to the Foundation.”
Rather than being restrictive as the Institute implies, this language is quite common for non-profit organizations. In fact, it is very similar to the standard of conduct that the Appraisal Institute requires of its own members in Canon #1 of their Code of Professional Ethics which states, in part:
“One Must Refrain from Conduct that is Detrimental to the Appraisal Institute…”
Of note, no other Sponsoring Organization of the Foundation has complained about the TAF Code of Conduct. In the five years since the Appraisal Institute chose to leave, the Foundation welcomed three additional Sponsoring Organizations. Sponsoring Organizations such as the American Bankers Association, the National Association of Realtors, the American Society of Appraisers and the Royal Institution of Chartered Surveyors have been able to comply with the Code of Conduct and represent the interests of their members without any issues.
Overcoming Attempts to Undermine the Stability of a Common Set of Standards
In recent months the Appraisal Institute has made a concerted effort at both the national and state levels to promote the adoption of valuation standards other than USPAP. The justification for this is perplexing, as the Appraisal Institute itself stated in an August 2013 press release, extolling the virtues of a single standard to include:
“…creating a more transparent marketplace, greater public trust, stronger investor confidence and increased market stability.”
The need for additional standards is also puzzling since USPAP has been tested in state and federal courts for over 25 years and is considered one of the finest sets of domestic valuation standards in the world.
Fortunately, there appears to be little support within the valuation profession for multiple sets of standards. Membership organizations and coalitions of appraiser professionals along with recognized leaders in the profession have rallied to successfully thwart such efforts on multiple occasions. An informal poll of over 170 state appraiser regulators at a recent Association of Appraiser Regulatory Officials Conference indicated that not one regulator thought enforcing multiple sets of valuation standards made sense. If anything, stakeholders are looking for more uniformity and consistency in the appraiser regulatory system, not less.
Additionally troubling to these organizations is that the Appraisal Institute’s Standards of Valuation Practice are insufficient in many ways, including the lack of any recordkeeping requirement (no workfile) and the allowance of contingent fee compensation without disclosure. Performing an assignment on a contingent fee basis without having to disclose that arrangement is a recipe for disaster in the opinion of many in the valuation profession.
The Appraisal Institute staff proclaims their hope is that rather than facing government enforcement, their standards would eventually be “self-policing” by the trade association. This is entirely consistent with the stated desire of the Appraisal Institute leadership to return to the pre-FIRREA environment of the 1980’s – undoing the stability and conformity brought about over the last quarter century.
The rift between The Appraisal Foundation, the Congressionally-authorized source of valuation standards and qualifications, and the Appraisal Institute, one of the nation’s largest appraiser trade associations, is a detriment to the profession and needs to be resolved.
Be assured that absolutely no federal funds are involved with The Appraisal Foundation’s efforts in these matters, but they do come at a cost as attentions are diverted from more worthy endeavors. The cost is even greater for the dues-paying members of the Appraisal Institute. Many Appraisal Institute members who are aware of these actions by the Institute’s leadership are not pleased that their hard-earned dues are being spent on such wayward activities. Their dues could instead be used to lower the cost of educational offerings, develop new education, increase outreach to promote the profession, and a whole host of far more positive activities.
Until the Institute’s leadership stops these harmful activities, we will be vigilant about providing you factual information so that you can disregard that which is tainted and not credible. We will continue to work to uphold the profession to the best of our ability and ask you to join us and our nearly 100 supporting organizations to encourage the Appraisal Institute to find its way back and work together with The Appraisal Foundation for the good of the profession. Together we may overcome their lack of willingness to do so.
We fully understand that this public discord is unpleasant and we appreciate your taking the time to read this open letter. The Appraisal Foundation welcomes any suggestions you may have that could result in bringing our two organizations together.
The Appraisal Foundation
September 9, 2015