Look in the Mirror

The phrase “take a look in the mirror” is a common idiom used to encourage self-reflection and introspection. It is a powerful statement that can evoke a range of emotions and reactions from individuals, from contemplation to defensiveness.

At its core, the phrase is a call to examine oneself honestly and objectively. It asks us to step back from our assumptions, biases, and preconceptions and consider our behavior, choices, and beliefs in a critical light. When we take a look in the mirror, we are forced to confront our flaws and shortcomings, but also to recognize our strengths and achievements.

One of the most challenging aspects of self-reflection is accepting our imperfections. We often have a difficult time admitting when we are wrong, or when we have made mistakes. However, self-awareness is a key component of personal growth and development, and taking a look in the mirror can help us to identify areas where we need to improve.

By looking at ourselves honestly, we can learn to recognize and address negative patterns of behavior. For example, if we have a tendency to be overly critical or defensive, we may find that by taking a step back and examining our behavior, we can learn to be more accepting and open-minded. Similarly, if we struggle with anxiety or depression, self-reflection can help us to identify triggers and develop coping strategies.

Ultimately, taking a look in the mirror is about being honest with ourselves, both about our shortcomings and our strengths. It is about recognizing our humanity and accepting ourselves for who we are. By embracing self-reflection, we can become more self-aware, more compassionate, and more resilient in the face of life’s challenges.

When it comes to the Appraisal profession, there are so many that need to take a deep, hard, long look into that mirror and do some self reflecting, before they do things that will ultimately destroy the public trust. In this blog, we are going to take a look at the narrative of bias in the appraisal profession and entities that need to step back, look in the mirror, and decide if they really are being honest.

This multi series blog is not going to go over the narrative that is being pushed, but rather the ones that need to look in the mirror and why they need to.

Lets start with the obvious one here for the first installment. Government.

In 2009, the Government, with the help from then Attorney General Andrew Cuomo, came up a new law solely based upon the poor practices of Cuomo. The Home Valuation Code of Conduct (HVCC) was a set of guidelines and standards. Its purpose was to improve the accuracy and transparency of home appraisals, which had been a major issue during the subprime mortgage crisis.

The HVCC set forth rules and procedures that appraisers and lenders were required to follow in order to ensure that home valuations were based on objective and reliable information.

In 2010, the HVCC was replaced by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which established new rules and standards for home appraisals. These rules included the establishment of the Appraisal Subcommittee, which oversees the appraisal process and enforces compliance with the new regulations.

Today, the appraisal process is governed by a number of federal and state regulations and guidelines, including those established by the Appraisal Subcommittee and other regulatory bodies. These rules and guidelines help to ensure that appraisals are accurate, objective, and reliable, and that borrowers have access to all the relevant information they need to make informed decisions about their home purchase or refinance.

So why would the government need to look in the mirror?

To start with, they created this mess. The laws and regulations they put into effect have had incredible negative effects on the appraisal profession. To start with, they truly believed that appraisers were responsible for the housing crash. To go even further, the government doesn’t listen to the actual people who they are now seeking to destroy, but rather other entities that are out there seeking financial and global gain. They then decided to put Appraisal Management companies in the mix which created even more issues.

Appraisal management companies (AMCs) have become an main part of the real estate industry since 2009. These companies are hired by lenders to oversee and manage the appraisal process for real estate transactions. While the primary goal of AMCs was to manage the ordering process, hire appraisers and provide quality control services, there are some negative effects associated with the use of these companies which we will discuss below. These issues are a direct result of the government protecting their own, rather than protecting the public trust.

1. Lower Quality Appraisals

One of the most significant negative effects of AMCs is the potential for lower quality appraisals. AMCs often contract with appraisers who are willing to work for lower fees, which can lead to a lower quality of work. In addition, because AMCs are focused on speed and efficiency, appraisers may feel pressure to complete appraisals quickly, which can result in a less thorough analysis of the property’s value. Many AMCs will bid out orders searching for the cheapest and fastest rather then the most qualified appraiser within the area.

2. Higher Costs

While AMCs are intended to reduce costs for lenders, they often result in higher costs for consumers. AMCs charge fees to lenders for their services, and these fees are often passed on to the borrower in the form of higher appraisal fees. In addition, because AMCs often seek out appraisers who are willing to work for lower fees, they may not attract the most experienced or qualified appraisers, which can lead to the issues of bias or actually incompetence.

3. Delayed Appraisals

AMCs often operate on tight schedules, which can lead to delays in the appraisal process. Appraisers may be assigned to properties outside of their normal service areas, which can result in longer travel times and delays in scheduling appointments. In addition, because AMCs are focused on speed and efficiency, they may not be getting once again the most experienced appraiser in the area. Another aspect is that many AMCs will bid these orders out and until they actually get an appraiser who will do the job for a fee that allows them the AMC to make money, the assignment of the job can be delayed.

4. Lack of Communication

Because AMCs are a middleman between lenders and appraisers, there can be a lack of communication between the two parties. This can lead to misunderstandings about the scope of the appraisal, the timeline for completion, and other important details. On top of this, many AMCs outsource their quality control overseas to others who review an appraisal via a checklist. These appraisal aren’t being reviewed by qualified licensed appraisers, but rather by someone who is being paid pennies to mark off items on a checklist.

5. Pressures.

I have talked about pressures before. HVCC and others who developed it made it clear that lenders were pressuring appraisers to make values and inflate them. While there may have been some bad apples that did this, it wasn’t as common as you may think. However, in establishing the AMCs as a middle man they created a new pressure. Pressure from AMCs to have appraisers do what they wanted and needed in order for them to keep their clients. AMCs need volume in order to survive. The more orders they get, the more money they make, by charging the borrower more, and paying the appraiser less. This gave the AMCs power to tell appraisers, “Do what we say or you won’t get orders.” AMCs made it so that appraisers HAD to accept less money, do the revisions they wanted to make their clients happy, or get a scorecard that showed they didn’t deserve more work. So you went from lenders pressuring appraisers, to AMCs doing it. Well done.

Now I could go deeper into all of this, and give more specific examples. However I will leave that for another time. As you can see here, the ones in charge are the ones that need to take a deep look in the mirror. While they will keep on with their narrative of “we truly care” they actually could care less. They only care about themselves, being re-elected and trying to make themselves look good. They continue to push the narratives, not listen to the ones that really matter, and make decisions based off poor data and emotions.

In the end, it’s the people who continue to speak inaccuracies, HUD (created redlining), The Appraisal Foundation, The ASC, The Appraisal Institute, National Association of Realtors (more redlining), the Brookings institute, and so many more large groups trying to save face, rather than look in the mirror and admit to past mistakes, that have them blaming real estate appraisers for the issues of today.

Part 2 is up next and will come out shortly.