AGA Opposes Appraisal Waivers
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Letter outlining the American Guild of Appraisers position in the national precedent setting matter of granting appraisal waivers for TriStar Bank in Dickson County TN.
…this type of waiver is an outright invitation for fraud…
December 8, 2017
RE: Tristar Bank, Dickson, Tennessee-Appraiser Waivers Request 11/20/2017
Dear R. Park
The American Guild of Appraisers opposes the above referenced appraisal waiver request on behalf of our appraisal members and our more than 13 million taxpayers, consumer members of our parent unions.
Tristar bank cites an absence of certified general real estate appraisers in their home office county (Dickson) as the basis for asking for a waiver for all commercial appraisals performed in the Nashville TN Metropolitan Statistical Area (MSA); which would also include residential.
First, their claim of there only being one certified General appraiser in Dickson County is false. According to the ASC website, there are currently five Certified General appraisers inside Dickson County itself, plus and additional 64 Tennessee Certified General Appraisers in Nashville. There are another couple dozen CG appraisers listed in Nashville with out of state (assumed reciprocal) licenses. Clearly the claim of appraisal shortage is unsupported hyperbole.
There are many factors other than appraisal shortage that may also account for loan processing delays. The banks own internal inefficiencies may well be the primary reason. It took about five minutes to find over 69 Certified General Appraisers in the area TriStar alleges to have a shortage in. Perhaps their inability could be solved by simply giving them the online links to the ASC websites Appraiser Registry.
Tristar cites rising costs for commercial appraisals from 2013-2017. A 23% increase over a five (5) year period is only an average of 4.6% per year increase. It is not unreasonably above inflation and other typical increased costs of doing business. It hardly arises to the level of an unreasonable burden.
The Tristar CEO’s letter goes on to opine as to reasons the alleged shortage exists, even though he has no identified expertise in real estate appraisal to base that on. His assumptions are unfounded and unsupportable.
It is very likely that TriStar could find an adequate number of General Certified Appraisers in their MSA market area reasonable and customary. Our experience across America is that the only identifiable shortage has been a shortage of appraisers willing to provide USPAP compliant professional appraisals for the same fees that were being charged in 1990-2010.
It is inappropriate to use a manufactured illusory shortage as a reason for waiving the minimal accepted standards (USPAP) applied by trained (certified in fact) professionals to gain a business advantage over their competitors that still comply fully with FIRREA without such waivers.
Requiring appraisers to meet the highest professional standards in an increasingly costly and litigious profession, while granting their traditional, regulated clients waivers in which lower priced, unqualified individuals lacking all appraisal competency can prepare evaluations (a typical euphemism for substandard appraisals) is a threat to the continued ability of the appraisal profession to overcome the very issues Mr. Williams cited. It is a process that is directly attributable to driving appraisers into other professions or retirement.
Such waivers, if granted for such spurious reasons are more of a cause of the concerns Mr. Williams expressed. Driving appraisers out of business will not lower costs, nor accelerate turnaround times. Certainly, reinforcing public perceptions that real estate appraisal is a dying profession is a more credible explanation for not attracting new talent than the fabricated fears that we purportedly have, which discourage training. Low fees and increasingly unreasonable regulatory restrictions on appraisers are why few reputable firms train new appraisers.
The quote “We have a senior banking officer who has taken all the necessary schooling but has not had the opportunity to work with an appraiser to get the large number of appraisal samples completed.” Lacks credibility. If this executive has completed “all the necessary schooling…” then let him take and pass the Tennessee State Examination for Certified General R.E. Appraisers as evidence. Certainly, there are appraisers that would train a bank executive, so he can acquire necessary experience and ‘samples’ in return for bank appraisal work.
The alternatives proposed to “…arrive at a better independent fair value on properties“ is telling. This bank CEO is stating outright that untrained appraiser “realtors” (as opposed to Realtors®) can produce ‘better fair values’ than professional appraisers. It’s doubtful he understands what he is talking about if he doesn’t understand the difference between a real estate agent, broker and a Realtor®. Frankly, ASC can’t tell what type of real estate talent they propose to base their ‘fair values’ on.
Validation of value by a senior officer that is not an appraiser is no meaningful validation at all. Will the officer also be ‘validating’ structural conditions, adequacy and code compliance?
Conditioning a waiver based on use of one specific vendor has the appearance of potential impropriety. This is not a negative view of the identified vendor, but more of an interrogatory. Why is this specific vendor being suggested to provide a 100% unregulated, national precedent setting evaluation service in the State of Tennessee?
The Tennessee Real Estate Appraiser’s Commission in their 11/21/2017 meeting addressed this issue 1 hour and 56 minutes into their meeting. That’s 01:56:00 into the recorded hearing, for research reference.
The Tennessee Commissions grasp of the impact and discussion of possible detrimental effects if such a waiver was granted is impressive. Among several other salient points, they also noted that no state professional peer associations appeared to have been contacted for input on the matter.
During the discussion, it was pointed out that Tennessee has 835 Certified General Appraisers and 933 Certified Residential appraisers statewide.
The Commission (acting) Chairman correctly pointed out that rural areas are the very kind of area where greater expertise, rather than limited experience is called for. Data availability is less, and the complexity of assignments calls for greater skill and experience, rather than less.
The Commission summed up the discussion stating that they do not see such waivers as being consistent with their obligations to protect the public trust. They noted that the waiver was not only for small commercial loans, but was a waiver for all real estate appraisals.
A comment is noted where one Commission Member metaphorically pointed out that if an appraiser stubs his toe during an appraisal he can be fined $4,000; yet completely untrained non-appraisers can be allowed to perform evaluations in lieu of an appraisal and the Commission has no regulatory authority over them!
The Chair was even more plainspoken indicating this type of waiver is an outright invitation for fraud.
We agree, and applaud the Commission for their candor, analysis and concerns about protecting the public trust.
Michael F. Ford
American Guild of Appraisers
Chairman NAPRC /V.P. Special Projects
AGA Office 301-377-0099
Mike, that is an excellent letter. What they are proposing is the most asanine thing I’ve heard in my 45 years as an appraiser, and unfortunately if it happens other lenders will follow suit. You did a great job of refuting all their claims.
BAM ! Drop the microphone ! I will be renewing my membership with this organization !!!
Thank you Diana and Ace. Sincerest apologies to Mr. James R. Park. I cant believe I let that typo go through (R. Park).
Another excellent letter, thank you.
PS – lets not forget the language allowing waivers was written into FIRREA. It’s just that when it was originally written no one expected it to be used as a tool to circumvent the intent of FIRREA. It was only intended to be an emergency provision in extreme or dire circumstance. Not merely a work around to inconvenient turn around times or to bypass reasonable or customary fees. More evidence that FIRREA no longer works as originally intended.
Thank you for your advocacy.
Now can anyone tell me what the recourse is if Fannie or Freddie decide your real estate is worth $X and you disagree? Or is there no recourse, and the owners will live with what a government managed enterprise tells them their property is worth?
How are we leveling playing fields by constantly creating a second set of rules for “special” people?
Perhaps a re-reading of Animal Farm should be mandatory today.
Shades of 1984, and Big Brother, the book I mean. Wow was Orwell on the mark with a lot of things in this novel.
I’m not sure if you mean GSEs policies that result in a non market value indication or something else.
The appraiser (whoever that may be) opine as to market value. At the present time I don’t know of any cases where FNMA or Freddie cut value on their own, though they used to force buy backs if post purchase audits showed appraisal problems that could not be resolved. Alternatively they could force renegotiation of loan pricing.
I suspect that with CU, they will more pro actively second guess value opinions… just as they now rate appraisers behind the scenes using CU. Being off the mark from their phony CU program COULD result in appraisers being placed on do not use, or limited use watch lists. Lists that FNMA ONLY makes available to lenders and their AMC agents.
Makes me wonder how that conforms to Dodd Frank. Are we supposed to ‘trust’ that FNMA notifies appraisers and gives them an opportunity to refute adverse ratings based on specific scoring issues?
Congressman Hensarling is right. The GSEs need to be cut loose from federal backstopping… and even then, they need to be required to make negative data about appraisers known to the appraiser in such a way that a fair rebuttal may be made. Even collection agencies have to give an opportunity for consumers to respond or dispute debt. Why should FNMA be permitted to libel appraisers?
With the PIW, there is no valuation to cut, as the valuation is made via the GSEs AVM.
Almost makes you wonder how many AVMs don’t make the number that works for the “deal”.
Remember the days when Zillow was commonly known for being high on the estimates? They were just ahead of the curve, as interest rates dropped, zillow became more accurate. Not surprisingly, they’re having a tough time with value accuracy now that prices are leveling out. It’s clickbait, you don’t get to the top of the ultra competitive AVM world if you don’t keep the audiences attention and interest. Without subscription fees, they need clicks to fund, and if you don’t click, there is no advertisement revenue. Welcome to the age of technology, relevance is driven by interest, not the reliability of the data. I’m like, all about new technology. It’s changing the world. Housing value is a cryptocurrency these days.