Response to "A Wakeup Call for the Valuation Industry: Is anybody listening?"
RE: Richard Gilmore, ARA article – "A Wakeup Call for the Valuation Industry: Is Anybody Listening?"
I would like to offer some comments regarding Mr. Gilmore’s article in the April 9, 2013 issue of Ag News. I also read most of the NAHB report – "A Comprehensive Blueprint For Residential Appraisal Reform" dated February 2013. I disagree with most of Mr. Gilmore’s comments regarding the NAHB report. The NAHB report lacks a realistic understanding of what is taking place in the real estate appraisal profession today.
Most of what is commented on in the NAHB report has been required and/or in place for more than 20 years in the form of USPAP and FIRREA and other standards required by various professional appraisal organizations. Since licensing has been in place, the value of a professional appraisal designation has declined significantly. In my market (Phoenix metro), appraisals are awarded based on a low bid basis. The number of appraisers increased exponentially as a result of the licensing. Everyone was painted with the same brush and viewed as “equal” as long as you had a license. Nothing could be further from the truth. These large numbers opened the doors to intense bidding for appraisal work. I understand this low bid approach is used in almost every market in the USA.
The efficiency and accuracy Mr. Gilmore refers to is difficult to attain under the current arrangement of contracting work out to the low bidder. Lenders are and have been shopping appraisers for the lowest possible appraisal fee. The appraisal profession has been afflicted with a “low bid” mentality for at least the last 15 years. Appraisers are not being paid enough money to provide a quality appraisal report. With low fees come shoddy sloppy appraisal work and then AMC’s enter the picture which further compromises appraisal quality because the AMC’s take part of the already low appraisal fee.
NAHB report suggests that appraisals need to report a range of values – this has been discussed many times in the past. It is never accepted by bank regulators. I don’t see how loans can ever be securitized with appraisals based on a range of values. NAHB also states that appraisers should always consider all 3 approaches to value. This is not new. If all 3 approaches to value were applied for a house appraisal, the appraisal fee should be about $1,200. I doubt many home buyers want to pay that much for an appraisal.
Mr. Gilmore’s article suggests a national appraiser’s license. This will only invite more involvement from the federal government. Government involvement on a national scale will only create more problems for appraisers and the users of appraisal services. It will also result in higher licensing fees and more “red tape”. Senator Doug Barnard (Dem. Georgia) introduced the appraisal licensing act. At a large conference held in Anaheim California, just before the implementation of the appraisal licensing law, Senator Barnard told the audience that appraisal licensing fees should be no more than $35.00 a year. Need I say more about that point? I don’t know of any state with licensing fees that low now or back then.
We have a standard which is USPAP. But, in my experience, USPAP has taken the “high road” toward professionalism and the users of appraisal services have taken the “low road”. It’s all about getting the appraisal report at the lowest possible price and at the fastest possible delivery date. That leaves little room for accuracy, professionalism or profitability as desired by NAHB.
Also, NAHB is not one of our “biggest customers” as Mr. Gilmore asserts. The customer is the lender in accordance with current regs.
By Marc Barlow, Appraiser in Arizona
~ Source American Society of Appraisers (ASA)