Appraisers Are Sitting Ducks to Random Legislation
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Bill A5185 and AMC Bill A5146 introduced to the state legislature in New Jersey show just how much state legislators don’t understand the appraisal profession. Valuation Legal warned us about this back in December: Appraiser and AMC Laws to Include Prohibitions Against Discrimination.
From Bill A5185:
I can appreciate the idea of reducing potential discrimination by an appraiser, but in the short term, this uninformed view is not the way and will make matters worse:
- Appraisers rarely interact with the property seller
- The appraiser’s client for a mortgage assignment is NOT the seller
- It is in the buyer’s best interest for the appraiser to have no interaction with the seller
- The power given to the seller over the appraiser is breathtakingly random, to which all appraisers are left twisting in the wind.
- If the seller is given the ability to criticize the appraiser, like Uber and Lyft, the appraiser should be able to rate the seller for their own protection.
Do you see where this is going? This will not solve the problem the legislature is trying to resolve.
What will happen:
- Appraisers of sales will be unable to be neutral in a valuation because anytime the appraiser kills a sale they become widely exposed to punishment that potentially ends their career due to the unreasonable power of the seller – who isn’t even the appraisers client in the scenario described in the law.
- For sales where using mortgages (and presumably refinance mortgages eventually), mortgage lending may slow in areas where this type of seller activity is prolific.
- Because appraisers are being targeted and terrified to protect their livelihood, the wrong incentives are being used – appraisal fees will ramp up, already anemic appraiser entry into the profession will collapse, and banks may pull back or even redline.
Why appraisers are especially vulnerable:
- The Appraisal Foundation and Appraisal Institute are literally the opposite of being racially diverse and have no standing in this situation. They are an embedded bureaucratic problem that has limited entry by people of color and women into the profession. Years of ignoring their self-dealing has a price.
- Appraisers are sitting ducks to random legislation like this and eventually one of these state laws will pass. The Illinois legislature just defeated a similar poorly thought out bill.
Oh, The Irony…