How to Destroy the Appraisal Profession
Anytime the government gets involved in an issue, it tends to have more adverse effects than positive ones. It makes things worse when they only have their plan in mind and NOT the FACTS from the people they are about to hurt. This is especially true in the Real Estate Appraisal profession and the newly introduced H.R. Bill entitled: Fair Appraisal and Inequity Reform Act of 2022.
It’s essential to bring some information that not one person in the government or the people they are getting information from is talking about.
First let’s step into my time machine and go back to before the housing crisis and then soon after. Let’s start with pre-2007-2008.
Before the financial crisis in 2008, many appraisers had offices that employed multiple appraisers and trainees. The numbers don’t lie on how credentials went down, as seen below:
- 2007= 121,407
- 2008= 120,551
- 2009= 116,791
- 2010= 110,026
- 2011= 106,103
We had the highest number of credentials issued between 2007 and 2008 (121,407 and 120,551 certifications, respectively).
In 2009, the number of credentials went down directly due to government restrictions on the appraiser’s ability to practice, as well as the implementation of the now-defunct Home Valuation Code of Conduct (HVCC) that then Attorney General of NY Andrew Cuomo decided to put into place due to his bad housing deals to protect his banking friends.
Also in 2008, the Housing and Economic Recovery Act (HERA) was created. Before HERA passed, there were 30,286 licensed appraisers. Today, there are only 7,321 licensed appraisers because most lenders moved away from hiring Licensed Appraisers after HERA was passed. This is a significant issue that, once again, the people looking to make the changes have FAILED to mention. I discussed this in my prior blog.
Now let’s go into post 2007-2008. HVCC and now Dodd-Frank were nothing more than laws to protect the wealthy, and today, they make others, like appraisal management companies (AMCs), rich while ignoring the FACTS. It took an excellent profession and turned it into one that many lost respect for. More and more appraisers decided to leave for better pastures, which is what happened. More and more appraisers saw the writing on the wall. Appraisers saw the businesses they built through hard work, determination, sweat and tears, go away before their eyes on May 1st, 2009, the day HVCC was adopted. The Government told every hard-working appraiser that they did not matter. As time went on, more appraisers decided to retire, find better work, or just decided to NOT work for AMCs (myself included). See, there are many things about AMCs that most don’t know about such as how they up charge consumers while looking for the cheapest and fastest appraisers to do the job, so they can profit more.
Let’s now look into and discuss the proposed bill. But before I do that, I need to preface by saying that this article is in no way, shape, or form discrediting anyone that has felt they were a victim of bias or racism. I’m just trying to put the FACTS out that the Appraisal Subcommittee (ASC), government, the Pave Task Force, and others have failed the residential real estate appraiser and the public.
I have already written about and touched on the issues of trainees, AMCs, appraiser shortage, and more in the article titled “Dear ASC: Details… Why They Matter“. So here, I will discuss further issues that many may not know about. My position within my group and the President of the American Guild of Appraisers (AGA) allows me to access more information than most.
This new bill wants to create a new federal entity to oversee the appraisal profession, which we already have.. This bill states:
To establish an independent agency known as the Federal Valuation Agency and real estate valuation standards and appraiser criteria, including promoting a fair, unbiased, transparent, repeatable valuation process and other purposes.
So the government has decided that appraisers need more oversight and to be investigated based on discrimination claims when the consumer doesn’t agree with the appraised value.
Now since many here do not pay attention to the daily issues of the appraisal profession, I’ll spell it out very simply as it’s not that hard to figure out. The ASC is that ENTITY looking to become the Federal Agency. This is my speculation, but based on the years of issues between the ASC and the Appraisal Foundation (TAF) and others, it only makes sense. So the ASC did not tell the whole truth in front of senators to make them look better and because they want to gain more control. How can appraisers support an organization that can’t even tell the actual truths, give facts and give honest statements to senators? See my last article. Now I also suspect that other larger groups (no names will be said) are also involved with this new takeover, since they have had this same idea for years now. These groups only care about money, power, and being able to assert their authority over all of us hard-working appraisers. Let’s not forget how the ASC receives cash from all the AMCs that they are supposedly regulating! Or how the ASC gets a fee from every appraiser on their roster, yet no one has any idea where that money goes to or what it is used for. Where is the transparency?
But here is the ultimate question. Where are the actual Independent Appraisers in all of this? Why haven’t we been included in the talks. Why haven’t we been interviewed by the media? I am not talking about the Appraisal Institute or the American Society of Appraisers. I say that because I don’t belong to either as many other appraisers do not belong either. It’s our choice because many of their members own AMCS, have separate agendas, and have a conflict of interest with independent residential appraisers. Both of these groups do not represent all appraisers. However, the Government has bought into all the AMCs, lenders, and other groups’ narratives but hasn’t even attempted to include actual independent appraisers in the talks. Most likely because those appraisers would tear apart this false narrative, and well, that’s not what the government wants. Elected officials are not doing the right thing for the people they swore an oath to, to protect and gather information they need to make a decision. Appraisers use the data that everyone else (Realtors, assessors, builders, etc.) use in order to develop an opinion of value based on FACTS they research to protect the public trust, a public trust the government is looking to destroy using insufficient information.
Information. This is the keyword that everyone pushing this false narrative is overlooking. So here is some factual information:
- HUD investigations: we live in a country that states, “Innocent before proven guilty,” yet HUD has been researching appraisers for racism and bias. The FIRST thing presented is a settlement amount. For example, a NJ appraiser was asked to pay $100,000 before an investigation was done for alleged discrimination. When the appraiser refused to settle, HUD asserted their authority and asked for 1) one year’s worth of files along with a list of the following: RACE or Ethnicity of a person at the house; 2) lender’s name; 3) AMC’s name; 4) value of the report. Now I have been in a major lawsuit and know how this works. However, HUD asking for money before an investigation is done is absurd. Pay it, your guilty; don’t pay it, you’re guilty, and we will make your life hard. Is this the system the government is looking to implement going forward?
- AMCs: Why would anyone take the appraisal management companies’ information as a factual? They aren’t regulated as much as appraisers. They were given the Charlie and the Chocolate Factory golden ticket. They pretty much make their own rules even though the rules said they were to MANAGE, and not dictate the appraisal process. Example: AMC contracts with a lender. The lender is later not happy with the appraisers they chose. The appraiser is removed from the panel so that the AMC can keep said client to make money. Isn’t this pressure, the very thing the HVCC and DODD Frank wanted to eliminate?
- Creating an all-in-one federal oversight organization (ASC or others): Let’s be transparent here since we know where this is going. While I can see some good in this, I see more issues going forward. All complaints go to a federal entity (ASC or others), and we take away the responsibilities of the state? Who is deciding the fate of the appraiser? Will this federal entity employ 50 state representatives on their board that knows the entire state? Will this federal entity be able to remain impartial? Will they consult actual real estate appraisers or peers?
- Lastly Transparency: Where is the transparency in AMC fees vs. fees paid to the appraiser? Where is the appraisal management companies’ transparency to bid the order out and let the consumer know or lender know? Where is the transparency in the process? Where is the transparency in how this bill will help rather than harm? Where is the transparency in the appraisal reports HUD has been investigating so that peers and others can offer information? Where is transparency in the facts?
Senator Toomey said it best, and I may misquote but I’ll try to be as accurate as possible. “There are two studies, and the info is proprietary and hasn’t been released to the public. So if no information has been released, how can we rely on it if no one else has seen it?” EXACTLY!! Why is HUD holding out on these reports? 1) They aren’t an intended user; 2) They are keeping things secret, yet they still haven’t found any appraiser guilty.
I didn’t get into the bias or racism aspect of all of this for one reason alone. Nothing HUD or the government has stated or supplied has actually shown proof. That’s not to say it isn’t there. However, how can I comment on racism when I have not seen any appraisals, when I don’t know who the lenders, the AMCs, and the appraisers are, and I haven’t read the communication between them and the appraisers. Then again, that falls under transparency which the government is not interested in.
The Government is about to destroy a profession based on opinions, money, and what benefits them, instead of protecting the people they represent. Not one appraiser was represented in front of the senators and not one appraiser was able to tell their story.
This bill if passed will force more appraisers out of the profession as more will be leaving or simply retire. The ASC and others are creating a narrative for their own gain. It’s time the government speaks to actual appraisers before it’s too late in the game.