Hello Charles:

1. Thank you and Jason Fischman for the recent invitation to speak before the SoCal Chapter of AI in September, and thank you for keeping us informed on the above issues and actions. You said you would do so, and have.

2. Utah has decided appraisers may do ‘evaluations.’ Can’t see how that is a good thing since FIRREA specifically states that an evaluation may not be called an appraisal. Since federal law prohibits evaluations being called appraisals I think there is a strong need to differentiate between what evaluation is and what an appraisal is to avoid confusing consumers and corporate users of both services.

Proof: your statement that “Some lenders do, and some appraisal companies (I’m aware of Valbridge and BBG), have developed “Evaluation Restricted Appraisal Reports.” If they aren’t sure what product they are offering, then they shouldn’t create forms for it. The name itself indicates they don’t understand current USPAP or the difference between the two services. I sincerely hope the attendees of the AI Government Affairs Committee / GSE meeting in DC take the time to differentiate the completely different services covered by the terms “evaluations” and “appraisals”.

3. States laws as to who can perform what services have become extremely confused. Originally in most states, if the term value or ANY of its euphemisms were used, an appraisers license had to be obtained. The only exceptions were: (1) Assessors; Probate Referees and brokers offering opinions strictly for the intended purpose of attempting to obtain a listing. California’s language has become extremely confusing and unclear. It is once again argumentative rather than clearly stated in State Law.

4. It’s unfortunate that TAF considered removing the”restricted report at all. Then again TAF’s actions and motivations have for decades now, become self-serving accommodations to their sponsor’s whims. TAF has long outlived any meaningful usefulness it once had. It has simply lost focus of the responsibility that Congress charged it with.

5. Respectfully disagree about there being a ‘probability’ that California will adopt a split roll taxation program in the future; though I don’t doubt there will be a public effort to (once again) attack Prop 13 (Ca Constitution Article XIII); but frankly by any analysis, it is Prop 13 itself that allowed property values in California to rise so high; and frankly have provided far more tax dollars to the state than the free for all property tax alternatives in most other high tax rate states. The war front will be whether it is SFRs or commercial users that additional tax revenue will be sought from. It will be an interesting ‘fight’.

5. Employment misclassification claims are the low hanging fruit for attorneys. State and federal regulators are actually pretty clear (and favorable) to such suits. They are easier to pursue than any other type of claim against lenders and AMCS engaged in FRTs for the following reasons: (A) Complainant attorneys don’t have to be certified for federal cases-only their own state bars (B) Each state has different interpretations of how they are supposed to enforce or implement FIRREA and Dodd-Frank at the state level. 50 States and 7 territories; each with its own interpretation. (C) Is going to be the big determinant of our future right now.

Charles, we remain far apart on certain issues related to lowered actual standards while there is a public pretense (TAF not necessarily AI per se) that greater requirements are being promoted.

It still appears that AI is supportive of the business models developed by Accurity; William Fall, PCV Murcor and a few others where MAI and in limited cases SRA designations are promoted to attract customers for national appraisal mills, even though those same designated members of AI have little or no expertise in the states their companies operate in; and they certainly are not personally reviewing any appraisal reports. It’s a national system of downline delegation of responsibilities. I know from first-hand experience that at least one of those I mentioned had the supervising managers signature rubber stamp signed by a secretary. (I will concede the desk reviews by non designated staff were pretty good in that one vendor’s case).

All of your thoughts above were worth writing a separate article to AB, so they don’t get buried way down in old threads.

AI reached out and was supportive of past national groups opposition to increasing the de minimis. We don’t and likely won’t see eye to eye on all issues, but that effort raises one’s hopes.

Charles, respectfully, Johnathon was not wrong in his post about AB70. It remains bad legislation that undermines appraisal integrity and the public perception of our professionalism.

Just ran across your post, Advocate. So, ten members of the Government Relations Committee for AI from across the country are meeting in DC in May. I’m one of the ten. It’s a full-day sit down with reps from the GSE’s to discuss waivers, bifurcated appraisals, the use of “inspectors”, revisions to the 1004, etc.

We’re also discussing the deminimis threshold increase, SBA, recent legislation at the state level (Utah for example, allowing licensed appraisers to perform evaluations, SB140), a petition by Accurate Title in Florida asking for a declaratory statement that evaluations prepared by non-appraisers are not evaluations, etc.

Regarding evals – lending institutions always have the option to obtain an appraisal even if they are permitted to utilize an evaluation for a specific transaction. Some lenders do, and some appraisal companies (I’m aware of Valbridge and BBG), have developed “Evaluation Restricted Appraisal Reports” that they offer to lending institutions as evaluations. They’re really appraisals, but they meet the institution’s need for an evaluation.

In most states, certified appraisers cannot produce “true” evaluations – a non-USPAP compliant product. Florida is one of the exceptions as a result of an AI advanced bill in 2017. Appraisers can produce RAR (or other reports) that meet the requirements for an evaluation. But they are appraisals and institutions don’t always need or want an appraisal. If a transaction qualifies for an eval. in most cases that is the service/product they want. If the law requires an appraisal, or they want a USPAP compliant appraisal for whatever reason, then that is what they will get. \

Last year, CA Governor Brown signed into law SB70, the bill promoted by the Appraisal Institute’s California Government Relations Committee, which gave rise to TAF’s 4th exposure draft floating the idea of eliminating the restricted report option entirely. After much flack, they came essentially embraced the core issue in SB70 – allowing restricted use reports for more than one intended user.

Outside of the appraisal niche 2018 bills AB 375 and its amendment SB110 were passed and enrolled. This is commonly known as the California Consumer Privacy Act (CCPA).

Important to appraisers is “The CCPA defines “business” that the Act applies to as a for-profit entity that collects consumer personal data that meets at least one of the following thresholds:
• Annual gross revenue over $25 million;
• Annually buys, receives, sells or shares the personal information of 50,000 or more consumers, households or devices for commercial purposes; and
• Derives 50% or more of its annual revenue from selling consumer personal information.

It is unlikely that most local or even regional appraisal firms would be regulated by the California Consumer Privacy Act but likely the large national appraisal firms will be regulated by CCPA. CCPA, its future modifications, and it actual enforcement practices warrants our future monitoring.

There is a probability that a split property tax role initiative will be on the 2020 ballot. A split role does not necessarily directly impact our businesses. However, it is a factor to consider in our professional practices. While nothing is certain, the split role initiative likely will call for regularly scheduled, but not likely annual, property tax reassement of all non residential properties. At this point the political process has not worked its processes in defining the spit line of the split tax role. In the mean time the potential of a split tax role may be a disincentive for investors to choose California investments. It may create incentive to choose investments in
more stable operating expense marketplaces.

On the Judicial front, the big news for appraisers is on April 30, 2018 the Supreme Court of California ruled on the case of Dynamex Operations West, Inc., petitioner, V. Superior Court. S222732 v. Ct.App. This Supreme Court decision will in California forever change the business structure of the appraisal, and many other industries. This case has to do with defining when thought to be independent contractors are actually legally employees. In this massive 82 page Judicial decision, the California the Supreme Court has defined all employment as an employee relationship.

The California Supreme Court created a unique to California “ABC test” which presumes that workers are employees and places the onus on employers to prove otherwise. The decision creates an ABC test. The ABC test presumptively considers all workers to be employees, and permits workers to be classified as independent contractors only if the hiring business demonstrates that the worker in question satisfies each of three A, B, and C conditions:

(a) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact;
and (b) that the worker performs work that is outside the usual course of the hiring entity’s business;
and (c) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

It appears likely that the California Department of Industrial Relations (DIR) will first focus on the so called gig economy such as Uber and Lyft. There will be interesting litigation over such matters as is Uber’s “business” ride sharing, or is its business technology to connect ride sharers.

How, about the legal question of is providing an appraisal to loan investors in a loan part of the Bank or Brokers inside not outside the usual course of the hiring entity’s business. The, DIR will certainly get into the professions, including appraisers, accountants, engineers, and such.

An element of the Judicial decision is the vesting of rights of individuals or class action group suits against employers for back wages, benefits, and penalties for alleged missclassification as an independent contractor rather than being classified as an employee.

We are aware of at least one appraisal company being sued for independent contractor misclassification. Test B is a tough test for the appraisal industry.

On a just interesting front is the New Jersey US District Court case McNamara v Grewal filed January 7, 2019. I don’t have the space to lay out the entire case. However, this is a case in which two appraisers are suing the New Jersey State Board of Real Estate Appraisers pursuing many claims. The interesting part of the case is plaintiffs’ claims the Appraisal Foundations has constitutional authority to set appraisal standards solely for appraisals in support of Federally Related Transaction, (FRTs) (Federally insured loans). Plaintiffs contend it unconstitutional for the New Jersey State Board of Real Estate Appraisers to enforce USPAP in enforcing State Licencing law relative to non FRT appraisals

The AI residential appraisal project team (RAPT) will be releasing three webinars this year put together by members. I’m chair of the team and will be authoring one of them.

Most of AI’s government relations lobbying budget is directed towards residential-related issues.

I’m sure your local AI chapter would welcome your attendance at any offering, mixer, seminar, etc, where you’d be able to express your thoughts and engage with designated members. All the best.

Some days a glass of wine soothes the cracks in the spaghetti, Sometimes the tequila makes the cracks in the lime appear more damning. Our Appraisal organizations are all well intention-ed and for the most part have done well for the independent appraiser.

Independent appraisers need to keep their freedom to contract ANY kind of value study, collect their monies and continue to run their business. Appraisers have the ability, and knowledge to take a contract class from the Local JR. College, write an engagement letter and a receipt for a COD. The form report is designed for the standard tract house loan, not for difficult situations. Appraisers can practice other disciples, just as physicians become attorneys to protect themselves

I can’t (won’t try to) speak for Charles, but AI joined with ASA, AGA and a host of other recognized national appraisal groups, along with several state coalitions to oppose the proposed deminimis increase. Credit where credit is due; their participation was helpful (imho).

The AFL-CIO and Americans for Financial Reform D.C. Lobbyists also wrote their own letters opposing the deminimis increase. They represented well over 12 million people and about three dozen national consumer/taxpayer rights groups & organizations like the NAACP (many others as well).

It has now been 5 months since you stated you would share what AI is doing. We have heard nothing from you.. crickets, crickets, and more crickets. Do you have any intentions of following through with what AI is doing to help appraisers?

The A.I.R.E.A trained a lot of us in the basics. The banks and S&L training helped, many of the old appraisals shops taught samples.

Hi Charles,

SB 70 is nothing more than a rehash of the failed AB624. The TAF opposed it; ASA opposed it, AGA opposed it (624) and anyone else that reviewed it objectively opposed it.

It’s not really about AI. It’s about bad legislation; and possible ulterior motives (of a few). When the predecessor bill (AB624) was first foisted off on us, the argument (By AI’s attorney in Redondo Beach -TAF 2015 meeting) had nothing to do with allegations of unlicensed competitors. The argument was that a very small market segment demanded an abbreviated product that was fast and cheap, and appraisers should not be kept from competing for that business. It was a recorded meeting. I’m certain TAF still has a video of it.

For example; an entire portfolio of property (maybe hundreds of addresses) bundled as a single entity interest for tax purposes, or sale of securities. AI’s attorney testified that the number of appraisers that would even be affected by this was so small as to be a non-issue.

The counter arguments were that if the number is so small, then why is a change in state law necessary to accommodate the few? That was never adequately answered to anyone’s satisfaction.

Your argument that it is needed because non-licensed appraisers are taking this work away from other licensed appraisers is flawed. There’s an easy solution to that.

IF that is the concern, then the solution is simply to return to the early post FIRREA days when California mandated that ALL appraisals performed by licensed appraisers had to comply with USPAP; AND more importantly, that any opinion/estimate of value or any other euphemism for an appraisal (except a CMA/BPO specifically performed with the realistic expectation of obtaining a listing; probate referees, and valuations prepared under franchise tax board regulations) could ONLY be performed by licensed appraisers. The loophole was very small.

The big money at the time, doing abbreviated appraisal reports was in tax consulting and in support of estate & gift tax returns (Discounting for Lack of Marketability / fractional interests). Large accounting & appraisal corporations such as FMV Opinions (Orange County, CA) and a few others were routinely writing up largely boilerplate ‘appraisals’ with VERY thin support, communicated in just a few cover pages. Probate referees were producing two and three-page opinions of FMV for as little as $1,500 to $3,000+- at the low end of the spectrum; completing their ‘analysis’ in a day. The workaround being used by a couple MAIs at the time was simply to NOT sign the report, but only the certification!

At the high end of the spectrum, tax accounting professionals were dealing with huge sums of money. Big enough to fly multiple $500 an hour 5th Avenue accountants and tax attorneys out from NY to Laguna Niguel, CA for full eight-hour, multi-day in-person debates with senior IRS managers. We aren’t talking about small returns here.

We are talking about (minimum) estate issues of $25,000,000 to literally hundreds of millions of dollars. The highest tax issue I ever was peripherally aware of was 3/4 of a billion dollars.

We aren’t talking about $1,500 fees anymore. We are talking about consulting assignments where the fee CAN legally be based in part upon the successful outcome of the case. How much would YOU pay the appraiser that just saved your firm $77,000,000 AND established a beneficial precedent for future returns?

Traditionally entity interest (business valuation) was in the wheelhouse of tax consultants CPAs and attorneys. Even when significant real property ownership interests comprised the estate or entity holdings, R.E. Appraisers rarely got involved in these because our standards (USPAP) prevented us from writing the kind of abbreviated opinion reports associated with them; AND California used to have a requirement that ALL real estate appraisals must comply with USPAP. Stock ownership in real estate wasn’t real estate. No license required to value the stock interest/value of the real estate.

IN the 2009-2011 USPAP revisions the term “valuator” was adopted for ALL appraisers. Traditionally it had been limited to use by business valuation trained accounting experts and analysts.

Most particularly those that were NACVA trained down in Texas, and that had ASA, AVA or AVS after their names. AI leadership (presumably) saw an opportunity here. With the American Institute of Certified Public Accountants (AICPA) ‘almost’ on board with adopting USPAP, (I was told by my old boss that it was about 50% in favor and 50% opposed at the time), that blurring the traditional distinctions allowed real estate appraisers to compete with accountants in their field of expertise.

Most appraisers didn’t want it. Most CPAs didn’t want us calling ourselves by their distinctive term either. So WHO in the 2008+- run up to USPAP 2009-2011 did want it?

The ONE big hurdle to allowing “a small handful” of appraisers to cross-compete was that while we share the terms market approach, cost approach and income approach with accounting our implementation standards and accepted practices are day and night differences apart from the CPAs. The biggest difference was that our standards did not permit us to make the giant time-saving leaps and bounds CPAs could make under their standards (GAAP).

A real estate appraiser might spend days or even weeks seeking relevant, recent sales comparables. The BV Analyst merely had to grab their copy of Price Waterhouse Cooper (Now just PWC) or Merger Stats and look up Wall Street Cap rates & returns of ten to twenty-year-old REITS for their ‘comps’ (adjusting them to a selected CPI or other finance indexes). Here’s the great part…they develop market rents based on Wall Street expected return rates! Not what lessors ask or get for rent, but what they need to get or demand in order to achieve the expected or predicted market rate of return (as evidenced in the ten-year-old ‘comps’ I referenced above.

1. For an appraiser, that would be VERY improper procedure.

2. For a BV Analysts, it was perfectly acceptable.

My old IRS buddies (an MAI, and a former state investigator from The South) & I used to joke about “blue smoke and chicken bones approach”, but the truth is, its simply a fundamentally different metric that is meaningful on Walls Street & international finance, but isn’t when applied to individual Main St. real estate.

IF AI is/was concerned about unlicensed ‘appraisers in California (and there are many), then they should have lobbied to pass laws prohibiting calling oneself an appraiser without a license. Of course, requiring across the board licensing would have conflicted with their third person inspector hybrid and evaluation goals.

I’m not trying to rekindle anti-AI sentiment Charles. AI is simply AI. Y’all have behind the scenes internal issues to deal with.

I am trying to clear the air on the WHY-part of SB 70, and it’s failed predecessor AB 624. While touching on why we all need to insist on USPAP for real estate appraisers only, instead of trying to pretend a one size fits all USPAP makes any sense at all. We are the only ones regulated by law!

Accounting and real estate appraisal is NOT the same thing, though we may touch periodically on each other’s disciplines. Charles, the solution is not in beating up on AI.

The solution is for all of us to better understand WHY bad legislation like this gets passed. Those much bigger issues get lost in finger-pointing.

I respect Johnathon a lot. He simply focused on one symptom of a much bigger problem.

Thank you, Charles Baker

NOSSAMAN ONLY IRES MAI, APPRAISERS.

2. Why would any care or consider David Graeler of Nossaman to be a credible representation of appraiser opinion or appraiser interests? Nossaman is a law firm.

NOSSAMAN ONLY HIRES MAI, APPRAISERS.

I STRONGLY SUGGEST THAT NON-AFFILIATED APPRAISERS NOT ATTEND AI MEETINGS OR SEMINARS, CLASSES. THEY STAY IN VERY CLOSE CONTACT WITH THE OREA/BREA AND REPORT EVERYTHING THAT THEY HEAR REGARDING NON-AFFILIATED APPRAISERS. ONE APPRAISER HAS REPORTED THAT HE LOST HIS LICENCE AS A RESULT OF A CONVERSATION HE HAD AT AN AI, MAI, APPRAISAL INSTITUTE SEMINAR AFTER THE INSTRUCTOR REPORTED HIM TO OREA/ BREA. IF YOU MUST ATTEND, KEEP YOUR MOUTH SHUT! AND OPEN YOUR EARS OPEN. 

https://activerain.com/blogsview/5302007/orea–brea–ai–mai–appraisal-institute-secretly-conspire-to-destroy-appraisal-profession

Dick (or is it Brian?),

 
You DID highlight one big deficiency though. One we are aware of. That’s a need to a newsletter, that up until now has taken a distant back seat to spending what time we have in helping our members.

Neither AGA, or CCAP had any part in organizing Appraiserfest though one of our members did (independently). I don’t know anyone in REAA so you’d have to contact them direct for any information.

Dick, I’ve never needed to hide who I am either here or elsewhere. I understand some appraisers stay anonymous due to very real concerns about retaliation from those I suspect you represent. Still others do it because they lack the integrity and courage of their convictions to tie unsupported allegations to their own names.

What I DO know is our members; along with ALL state coalitions; and independent help from responsible peer associations (such as ASA) have had enough impact to make positive legislative impact in some states; and apparently have made some larger AMCs nervous.

What have YOU done recently to help OR unite appraisers?

Thanks for the response Charles, I get it, however if AI’s primary mission is education and advocacy, then I think you’ve earned a C6 condition rating. “The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components”.

Please provide a cost to cure where AI can be bumped up to a C4 condition rating (due in 24 hours).

The AI’s message is unfortunately falling short when it comes to reaching those in a position of power.

Seek the truth.

This thread has deviated somewhat from the original post, but be that as it may, I’m happy to share. Along with serving as SoCal AI Chapter president I run my own shop and work most waking hours, so forgive me for not responding right away. I’ve got three speaking engagements over then next three weeks, a chapter conference call and some travel. Allow me to reach out to some of my residential colleagues and a few folks in Chicago so we can cull together a comprehensive list. The aim is not to convince or change minds here, merely to offer another point-of-view. I appreciate your openness.

Hi Charles,

The reason for the intensity of your respondents here comes from decades of AI stonewalling appraisers, mainly residential members by never explaining policy positions, especial for those that damage residential appraisers. If you are part of the leadership ladder than you can’t see it. Many first class tickets for friends and family to valuation conferences around the world or the long denied FNC deal that flew in the face of residential membership needs or a $400K CEO salary by a two-time president who was at the helm during the downfall is tone-deaf at best.

I have no personal animus towards AI itself. But I have a personal animus towards any organization that stopped serving its members years ago, but instead, exclusively serves senior leadership or else their designation is in jeopardy.  We never get straight answers. If you are in the inner circle as you seem or aspire to be then you can’t see it. AI Leadership lives in a bubble because they don’t interact with mere membership mortals.

I quit AI National when they quit TAF because of the dishonest video that Leslie Sellers made about the reasons for it which did not match the actual reasons I was told by the same people in the room. It was all about his ego.

You’ve claimed here that AI has done a lot for residential, yet your current CEO formed a residential committee 18 months ago to explore why they have ignored residential appraisers yet has never reported anything back. That’s your answer. My criticism has been said in the public domain frequently for the past 2 years hasn’t had any impact on AI National’s behavior. I’m sure active leadership are nice people – I’ve met some. But collectively, their actions been largely self-serving and they feel is above reproach. I believe the SRA brand has been damaged beyond repair by the actions of AI National (think Scott DiBiasio’s clandestine state ops to push for evaluations and only gets a handful of support from a few locals that aspire to rise up the ladder but will never be asked). I think the MAI is about 5-7 years from near irrelevance directly from AI National’s behavior.

I’m sure you’re a nice guy too, but your understanding of your own organization is subject to a strong helping of cognitive bias, giving AI National way more credit than it deserves by its legacy of relevant inaction and irrelevant action during the Grubbe reign. This is why your membership has fallen by a third since 2006, more than licensing trends have slid.

In other words, while Rome is burning, your organization is working hard to tear down the value of our profession without an explanation. We deserve an answer but it is also impacts those outside of your organization and that’s why we are all so angry. We’re not morons. We are hard-working people that trust this organization to lead the way and didn’t expect it to have a different set of values.

I’ll elaborate why SB-70 will damage our profession in my Friday Housing Notes. In the meantime I have a lot of work to wrap up before then.

Bill – Residential AMC fees are lamentable, no disagreement there. Non-residential appraisers are impacted as well. It’s a real problem and will only get worse as data analytics, hybrids and bifurcated appraisals improve and gain wider acceptance. Big data and automation is a problem in our profession as it is in most others. No one is immune. AI’s primary mission is education and advocacy but we’re a relatively small player compared to the agencies, bankers, regulators and Realtors. One way to up your game is to become the expert in your market; write and blog; specialize; speak at local Realtor offices; get into litigation and expert witness work; join one of a number of organizations; take any class by George Dell / Valumetrics. I get a lot of referrals from MAI’s for high-end complex residential assignments, litigation, trust & estate work, etc., some of which require a designated appraiser. Is a designation a cure-all? No. But I’m a better appraiser as a result and its helped my bottom-line.

Please be respectful of the opinions of others and do not attack someone for having an opinion that differs from your own; if you disagree with someone, please express yourself respectfully. Snide or rude comments are not constructive and certainly not helpful. Anyone coming on here to spread misinformation, disrupt threads to further a personal agenda, attack others, start flame wars, or get their jollies by sockpuppeting, et cetera, will be banned! Comments judged not to be in keeping with the spirit of civil discourse will be removed and repeat violators will be banned. We count on your cooperation and appreciate your support! 

Hi Charles, this is the AB admin. Jonathan is the author of this article and does not moderate or manage this blog.

We spoke to the author of the comments in question (cracks in the concrete).  He apologized for his crude comments and asked that we remove his “edited” comments. And we did.

We ask posters to be civil and we do not make a habit of censoring language and/or passionate disagreements. Rude comments may deter greater participation among our readers and that’s why we ask our readers to strive for more civil, respectful discourse. Undeniably, discourteous comments are not a new phenomenon and many news organizations and websites struggling with the same issue have eliminated online comments altogether. Yet we still value in providing this platform for our readers to discuss issues we face in our industry. In fact, an essential part of AB is to give a voice to appraisers, alternative viewpoints, solutions and ideas by promoting thoughtful dialogue.

It’s a balancing act, to be sure, since we as appraisers often express strong opinions on topics affecting our livelihood and the appraisal industry.

We hope that you continue the discussion here. We will monitor the comments closely to ensure a constructive interchange is maintained. Thank you for being part of this effort to promote respectful discussion.