AGA Open Letter Regarding Changes to the Criteria

Michael Ford

Michael Ford

General Certified Real Estate Appraiser at Michael F. Ford Appraisal
Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory
Michael Ford

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Experience, Education Criteria Input Request & AGA Open Letter

Request for Appraiser Input

The AGA sent the below letter to the AQB in response to their outreach asking for comments. Please write them and tell them YOUR views. If you agree with what we have said, then just copy it and add your name to it saying “we agree”.

Or don’t copy it, and just say “We agree with the AGA letter”.

If there are any significant parts you disagree with, then please ‘except’ those. If you have additional thoughts or suggestions for them (civil ones), feel free to add them.

I’ve already received an acknowledgement so I KNOW they are reading them.

Email to aqbcomments@appraisalfoundation.org or mail to: Appraiser Qualifications Board, The Appraisal Foundation, 1155 15th Street, NW, Suite 1111, Washington, DC 20005.

An Open Letter to the Appraiser Qualifications Board of the Appraisal Foundation from the American Guild of Appraisers:

February 29, 2016

Honorable Board Members:

I am writing on behalf of the American Guild of Appraisers (AGA) of the OPEIU, AFL-CIO and our thirteen million taxpayer & consumer members, their families, retirees, and our Guild Member-Appraisal Professionals.

In response to the AQB request for input on current and future educational / experience requirements for licensing and certification the following is offered.

The first and foremost concern of our members and associates is preserving the integrity of and the public trust in the AMERICAN R. E. appraisal process, so that there will never again be a need for taxpayer funded federal bailouts arising from bank and mortgage re-insurers failures attributed to deficient real estate appraisals.

FIRREA was supposed to achieve this after the Savings and Loan Crisis of the mid 1980’s. If left as originally drafted, it might have continued to do so but it has been whittled and chipped away at until it is merely a weakened shadow of the original legislation. It originally proposed a deminimus limit of $25,000 that was actually passed as $250,000. Ten times higher than proposed! Now there is talk of increasing that to half a million to even a million dollars!

FIRREA also originally encouraged a significant volume of field review appraisals that have since been replaced by spurious BPOs and / or so called “reconciliations” of AVMS & BPOs by appraisers.

FIRREA also prohibited requiring a specific designation as a requirement for obtaining work involving federally regulated transactions (and employment in the federal government). That too has been modified for the primary benefit of only the Appraisal Institute Members. No federal and state regulated profession can achieve true respect as a profession as long as only certain members of that profession are given federal agency & GSE recognition as professionals!

Since FIRREA-1989 was passed, numerous implementing and or supplemental regulations and laws have also been passed to the point that the entire business model of real estate appraisal in America has changed.

Banks no longer maintain the level of in house appraisal expertise that used to prevail. Independent fee appraisal firms hard won reputations for decades of quality work and integrity were destroyed overnight by GSE adoption of the knee jerk settlement of one state’s Attorney General and the major infamous corporate appraisal abusers that gave us HVCC.

A new layer comprised of self-serving mercenary interests was created almost overnight to replace the old proven (bank/S&L and appraiser) business models where individual appraiser integrity & competency was verified systematically and monitored over long periods of time. By mercenaries, I’m referring to appraisal management companies (AMCs), and their lobbyists. Some, if not many of these are simply dishonest players creating more harm to consumers and the profession than they protect from. While writing this letter I discovered one that is even using a member of the AQBs photo and experience summary on their own copyrighted website (presumably without the knowledge OR consent of that Board Member)! THIS is the seedy world of the modern day appraisal parasites where degrees are no guarantee of integrity, or even competence.

The point of this history is to put the AQB’s actions leading to requiring degrees in a historical context. Just this afternoon a longtime friend and periodic client told me that senior executives at both FNMA and FREDDIEMAC told him that ‘if his appraiser is an MAI, they’d accept any appraisals done with no further questions or review. If not an MAI, then they ‘are subject to independent third party review.’

I think we still have systemic problems that go far beyond degrees. No GSE should be accepting a largely unrelated designation (MAI) for residential transactions over those Residential Certifications by states under AQB guidance! That GSE executives would say anything remotely sounding like this is proof of institutional appraisal incompetency. For a peer group to market their commercial designation even over their own residential designation (SRA) demonstrates their own contempt for the professional competency of all residential appraisers.

College Degree Requirement:

AQB understandably sought to enhance appraisers “professional Image” and believed requiring a degree was the appropriate vehicle to do this. While an adequate and ongoing relevant education is a cornerstone of any profession, it is naïve and somewhat elitist to think this comes only from a college degree. The real issue is relevant appraisal related education. Equally important are experience based competency and integrity, as enumerated in Standards of Professional Conduct.

Respectfully a degree in either Basket Weaving, Animal Husbandry, Environmental Sciences or even Business Management have no direct or reasonably indirect relationship to a person’s appraisal abilities, or their ability to comprehend and learn either basic or advanced appraisal concepts. While this held true in the past with respect to commercial appraisal, modern technology has eliminated the old educational (typically advanced math) barriers to professional performance.

Certainly all but extremely rare instances of residential appraisal do not require a generic non-real estate degree.

THIS is the REAL barrier to new applicants coming into the appraisal profession. Rather than deal with this, respectfully, it appears the mindset is to LOWER the meaningful experience standards so that degreed individuals can start commanding higher fees associated with certifications sooner.

The single most important standard that should NOT be lowered is the very one that is being considered for lowering! Whether you retain the requirement for a college degree for basic or certified license levels or not, we strongly urge that experience requirements NOT be lowered simply because an individual has a degree.

Relevant Experience:

I have hired (and in some cases fired) appraiser students (licensed and trainees) that were professional engineers, nuclear scientists, CPAs and real estate agents. In each case other than the real estate agents, their professional educational backgrounds hindered rather than helped them to become good REAL ESTATE appraisers.

One would think the CPA would be a natural for analyzing income property…until you realize business valuators (usually CPAs) perceptions of how our common “approaches” are applied are worlds apart from those of the real estate appraiser. Where Wall Street market rate return ‘demands’ dictate “market rents” rather than actual rents being paid in the marketplace. This is a fundamental and insurmountable difference by the way. It is related to the nature of our most immediate clients and traditional intended uses of an appraisal. Efforts to merge R.E. Appraisal techniques with those of BV are misguided.

Just as apples and oranges are both fruits, R.E. Appraisal and BV Appraisal are both “Valuations”…though neither produces the same kind of juice.

An engineer tends to think in terms of absolutes, rather than abstract concepts such as an imperfect real estate market comprised of imperfect buyers and sellers. Some can make the transition, some cannot.

Any proposal that considers lowering the required number of actual experience hours to go from a licensee to a certified appraiser should be resisted. Frankly the total time from novice (no hours) to certified should not be less than five calendar years; so that licensees are exposed to actual market cyclical changes instead of learning to appraise in only one type of market that may be encompassed by only two or three years.

A 3,000 hour threshold is not an unduly burdensome requirement for someone that holds themselves out to be a ‘professional’. If special experience ‘carve outs’ are presumed now, it is only a matter of time before ALL professions will be considered ‘equivalent experience’. Much like being an attorney is considered equivalent education ANDExperience in Lieu of a Degree:
Existing fee appraisers with five or more years’ experience SHOULD be given credit for equivalent education (degreed) at a rate of 2:1 to match the federal civil service credits. A four year degree would be equaled by EIGHT (8) years full time experience as a licensed appraiser (which should include trainee time if licensed as a trainee). A two year degree (Associates) plus four years’ experience could equal the four year degree requirement though we still hold that total cumulative actual experience must remain five or more years before going from entry level novice to certified.

IF appraisal testing is valid at all, then the above requirements or experience coupled with proper testing will assure both adequate education and experience has been acquired.

Practicum Curriculum:

Excellent idea for future would be appraisers however, until truly reasonable fees are achieved across the country, and an effective method (specific new legislation) is adopted in ALL states to assure they stay that way into the future, why would anyone choose real estate appraiser as a degree Major over more versatile Business or Accounting degrees?

Alternative Ideas:

The cost of quality educational appraisal offerings is too high according to many we’ve spoken with. IF AQB is contemplating developing entire degree course curricula why not also develop or contract for affordable advanced appraisal courses and topics online, that would also qualify for CE credits on our state renewals?

We respectfully urge the Board to pursue and adopt policies that will at a minimum provide a viable path for existing licensees to upgrade their licenses to both certification levels based on their experience and appropriate certification level testing.

Similarly, we discourage granting significant experience credit for classroom education beyond ½ time for directly related real estate or real estate appraisal coursework.

Respectfully submitted,

Michael F. Ford, AG002512, AGA, GAA, RAA, Realtor®
VP/Chairman, National Appraisal Peer Review Committee
American Guild of Appraisers, #44OPEIU/AFL-CIO
(714) 366 9404 or (301) 220-4100
www.appraisersguild.org
email: m…@mfford.com

Image credit flickr - Andy Rennie
Michael Ford

Michael Ford

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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18 Responses

  1. KenQ says:

    Great letter Mike. I told AQB I agreed with it.

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  2. Chris says:

    Great letter ! I will send my own.

    They shattered the business model of the appraisers with HVCC, stole BILLIONS of dollars form the appraisers to line their own pockets, took our money and acted like they were saving us time. When in fact we can not afford assistance or office managers to be productive. Then they doubled the time to produce a credible report to 5-10 hrs, so we only produce 1 appraisal a day, IF that.

    What professional in this country charges a FLAT rate no matter how many hours of work they are REQUIRED to preform or lose their license. Name one, I dare you.

    Now they say there is a shortage of appraisers….Ya, that’s for sure! All part of THE plan to replace us with realtors and computers ALL in the name of Turn Time, Really its just so the Borrower does NOT have time to talk to another lender or to settle while the Borrower is in desperation mode.

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    • Mike Ford Mike Ford says:

      Thank you Ken. If you agree, then please copy and forward to the link included in the letter then. Or just refer to it and send an email to the link. Saying “I agree with Ford’s letter from AGA dated 02/29/2016.”

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  3. Diana N. says:

    Mike, excellent letter, and after 46 years as an appraiser, recognized expert witness, etc,etc I am tired of being insulted by AMCs, the AQB and the Foundation.  Years ago I had the same response from many lenders “we only use MAIs” well, maybe everyone forgot that the debacle in the 80’s  was based on appraisals done by MAIs. I know of two who left the State of CT in a hurry when the s–t hit the fan.

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    • Tom D says:

      good memory Diana.  i valued my sra designation until it became worthless with certification.  but you are right, it was commercial financing that caused that crash.  the mai’s couldn’t count the amount of future developments that they were appraising, i guess they thought there always was only 1 near them to compete.  keep marching mike.

      the 2006 market crash was caused by the adjustable loans that were given to people who could just afford the phony “A” rate they were baited with. when the rate went up, surprise surprise, these people could not afford the new monthly payment.  just like the hot market these baited loans created, their end reality caused the flood of foreclosures & the almost destruction of the economy.  funny thing is that the fed knew a year earlier that there was too much speculating going on because of their continuing low rates.  yea, a lot of people should have gone to prison. guess not.

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      • Mike Ford Mike Ford says:

        TomD I can STILL remember Maxine Waters tearing the guy a new one, that went before her committee to warn of the impending crisis from those types of loans! She, and all the rest of the elected hypocrites back then, on BOTH sides of the aisle.

        Recipe for disaster: 2% ARM with pick a payment option (to be skipped each year) and negative amortization for the THIRD refinance in under five years! What could go wrong!

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    • Mike Ford Mike Ford says:

      MAI’s have good and bad. IF they adhere to all they have been taught, then they are capable of some of the best work I have ever seen. Unfortunately it also seems like they invented boilerplate and report stuffers and other appraisal fluff.

      When they go bad, they are VERY bad because they will bury the fact that they left out two entire approaches; never analyzed highest and best use (merely defined what H&BU means) , and then misapplied the only approach that they DID use!

      TomD your SRA is not worthless. Those that know how hard you had to work to earn it, still respect it. Its not the letters, its the skill and knowledge represented by those letters. Same with Diane’s 46 years experience. NO ONE appraises that long without picking up a few things along the way!

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  4. Retired Appraiser Retired Appraiser says:

    Great letter Mike but getting the AQB and AF to back down on their decision is like asking for a reversal of the 1964 Civil Rights Act. They couldn’t reverse their decision on the new educational requirements if they wanted to.  Their decision certainly hastened the destruction of the profession but only by a few years.  It’s simply a matter of waiting and watching now.

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    • Mike Ford Mike Ford says:

      RA, I know, but they ARE seriously considering an experience level exception that  I described (or something like it).

      OK, I wasn’t very clear. I am asking ALL of you that post here and anywhere else to merely click on the link and say “I agree with Ford’s AGA letter of 02/29/2016.” OR, to write and let them know your own beliefs. RA you’d be perfect since you could tell them first hand WHY you chose to retire rather than stay in this business.

      Right now they are merely speculating that people leave mainly because we get old. They are ASKING us to comment. This is your shot my friend. Please take it.

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      • Retired Appraiser Retired Appraiser says:

        I did as you asked.  If you can take the time to write a letter or article a day I am certainly willing to send them an email agreeing with you.

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      • Retired Appraiser Retired Appraiser says:

        I hope you don’t mind that I started my long letter to the Appraisal Foundation with the salutation:

        “Dear AF Holes”

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        • mike ford mike ford says:

          RA; Seriously? Lol! As long as they get your honest cogent thoughts I don’t care HOW your salutation reads. Sometimes anger being communicated can also be a good thing.

          Thank you.

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  5. Desiree Mehbod Desiree Mehbod says:

    Excellent letter Mike. Thanks for all you are doing!

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  6. Mike Ford Mike Ford says:

    Desiree, thank you and likewise. we couldn’t do it without you. Please click the link and send them your views. Copy and paste of the one liners I suggested in replies above is fine.

    ALSO Since article was written the AQB Member referenced sent me an email letting me know the bio and picture is from when he spoke before that group years ago; so it is NOT an unauthorized use…though no one has explained why it is still up or why there is no disclosure that it is not an endorsement of that group.

    In las Vegas, APB and TAF (Dave Bunton) both said the boards and TAF do NOT HEAR ENOUGH from individual appraisers, and that they WANT OUR INPUT!

    Otherwise, others will be speaking ‘for us’, with or without our permission.

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  7. stephanie russo says:

    I agree with Mike ford and very well said . Most people who get a degree in college, usually for a career they are going for. I have yet to see a colleges having classes for just appraisals courses other than real estate schools. Why would someone go to school for 4 year’s graduate with a bachelor’s and want to become an appraiser, which has no health benefits, guaranteed pay, 401K etc. Us appraisers get paid by the job and that’s if we have enough clients where it’s consistent work. I could understand adding more hours to our continuing education or instead of 2 year’s experience make it 3-4.

    Today no one wants to hire a trainee and AMC company’s do not accept trainee’s work. Having a bachelor degree doesn’t make someone more qualified to be an appraiser. Not only is a bachelor’s degree required you add 200 hours of just the appraisal courses on top of that. All that schooling and money I might as well become an attorney with a set career. College isn’t cheap either and jobs are not easy to come by in today’s generation. I know plenty of people still paying back school loans and still haven’t gotten the job they went to school for.

    Most of all how can you tell existing appraisers like myself who have been in this business that in order for us to upgrade this criteria applies to us too. I was told in 2009 I was grandfathered in and now you tell me I’m not. How can you take that back? This was not a well thought out idea and neither was Andrew Cuomo’s idea for the AMC’S. A man who never tried a case and took him 5 times to pass his bar exam and doesn’t have knowledge in real estate gets to come up with a plan to make changes in the appraisers field having no appraiser license or experience. I would like to know how many people on the qualifications board have a college background or appraisal experience?

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  8. Don cox says:

    The future for independent appraisers is tenuous. Recourse lending was the greatest insurance against poor valuations (appraisals) Too many professionals are involved in a loan, Too many people tend to compromise each other because of the need for commissions.

    We’d be better off if a majority of loans were made by automatic valuation algorithims, with appraisers charging enough for the unusual property.  Rather than a $250 appraisal which verified a sales price, see a $1,000 fee which studied a neighborhood and the individual property.  Appraisals shops would not grow as they had during the recent past and individual appraisers could and would defend their work

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