AGA Open Letter Regarding Changes to the Criteria
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 firstname.lastname@example.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FIRREA also originally encouraged a significant volume of field review appraisals that have since been replaced by spurious BPOs and / or so called “reconciliations” of AVMS & BPOs by appraisers.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.
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.
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?
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.
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