If I Could Turn Back Time
Community Banks want to bypass appraisals in rural area… Evaluations are the answer, right?
There have been lots of discussions lately concerning property inspection waivers, waivers of appraisals in rural areas, and allowing appraisers to complete Evaluations outside of USPAP standards.
Doesn’t this all sound familiar? It should, we have already lived it 30 some years ago, prior to FIRREA.
Back then Savings and Loans had staff appraisers to complete appraisals. The appraisal was not completed by a licensed appraiser, because licensing to protect the public did not exist. Today Community Banks want to bypass appraisals in rural area. Their premise is to help local communities and businesses. History tells us just the opposite will occur. If the community banks are allowed to bypass safe and sound financial decisions for their customers, the consumer will be harmed. Not just with an over valuation of a property, but the destruction of entire communities. Nothing brings down a community faster than job loss, bankruptcies and foreclosures. The community banks will go under as well.
Evaluations are the answer, right? A properly trained licensed appraiser can complete these assignments. No need to follow USPAP standards as everyone is honest and there is absolutely no pressure in this world. NOT! Across the country, states are reducing safe and sound practices, by allowing licensed appraisers to provide an opinion of value and ignore UPSAP, all in the name of helping the consumer and local communities.
Pulling out my crystal ball, I foresee more evaluations being completed. No standard guidelines to follow, just the honesty and integrity of the person completing them. No appraiser independence requirements, so let the pressure for a higher value begin.
Now look down the road a few years, the loans go bad, the loan files are all opened up, analyzed, scrutinized and tossed aside for garbage. The community banks are insolvent and either close down or merge with larger financial institutions. Then some genius, or maybe a few geniuses, determines that Evaluations need some standard guidelines for all to follow. The Evaluation Foundation (TEF) is formed, and as such, The Evaluation Subcommittee (ESC). Finally, the Uniform Standards of Professional Evaluation Practice (USPEP) is written; First edition, to be updated every 2 years.
Cher said it best in her 1989 hit “If I Could Turn Back Time.” Ironically, the same year of FIRREA!
By Milton P, Certified Real Estate Appraiser