Reality of Today’s Appraisal Environment
The real scourge of what’s been happening to appraisers for the past 5 years (yes, it started prior to the last election) has been revealed by Mr. Isaac Peck, in this article. You really need to read it, perhaps again, if you saw it come through your email on Wednesday October 25. Isaac has allowed me to “re-broadcast” his article. Yes, it’s a ‘sales promotion’ but it contains critical information appraisers need to know about.
The first paragraph, contained within the two lines, is something I’ve been questioning for many years. “Who is DEFENDING appraisers?” I can categorically tell you it’s not the various appraiser organizations, of which I belong to two national ones, and one state one. I’ve never seen any of them actually communicate cohesively, collectively (or even singly) to CONSUMERS and other political people directly about what the appraisal process is, how appraisers do their work, and what we cannot do in the process of doing appraisal reports. It’s like they are afraid to tell the truth. Instead, they sit on their thumbs and do nothing publicly.
As a result, ‘we’ as a fragmented, unorganized and disjointed group, have become easy targets as the scapegoats for “bad values” being promoted as discriminatory and racist by certain people who believe they are victims. That mantra has been adopted by various people, from President Biden (as Isaac correctly identifies), down to and including the very agency who promoted racial discrimination and bias for DECADES,that being the Federal Government’s Department of Housing and Urban Development (HUD).
Meanwhile, the two GSE’s and various other individuals, who themselves are biased, are promoting the point that appraisers are discriminatory based on reported personal CENSUS demographic and racial details which appraisers are forbidden to consider when doing their work.
What’s conveniently overlooked is the fact that a multiplicity of factors go into property values, which result in the sales prices we see across various properties in our markets. Appraisers don’t control the sales prices. All we do is gather facts and report what is found. Yet the false narrative is being promoted that ‘we’ do influence property sales prices which result in the values we report.
Adverse news reports have resulted in state and local laws that denigrate appraisers by suggesting that, ‘we’ are biased and discriminatory if we dare to report a market value different from the “assumed” value of a particular property. California has such a law. Proposed legislation in Prince George’s County, Maryland (immediately adjacent to Washington DC) will be designed to: prohibit real estate appraisers from considering race, ethnicity, color, religion, sex, gender identity, age, disability, familial status or national origin in their real estate appraisal analysis. These legislative agendas have been allowed into law because many appraisers and the various organizations fail to communicate with the people making the rules that we are already required, by laws, USPAP and policies, to not consider any of the alleged activity when we do our reports.
The one positive aspect of this load of bovine substance is Discrimination and Racial Bias in appraisals is extremely difficult to prove definitively, especially if the appraiser concentrates on CHARACTERISTICS and FEATURES of the property, as compared to other properties nearby. So far, despite what you’ve heard about “settlement” actions and the attached gag orders, there has been none proven in a court. Proving discriminatory activity is hard, which is probably one reason HUD is dragging their collective feet in resolving the filed complaints. What has been done by HUD is extraction of settlement amounts from appraisers who don’t have financial resources to continue fighting the allegations. That amounts to tyrannical action by a government agency.
Protect yourself, if you continue to do mortgage lending work, by concentrating on the property features and characteristics, not on who lives there. Keep good records of research regarding properties in your workfile. Write reports with specific details and eliminate any subjective terms (appraisers are having real struggles with this!). And if your reported value is lower than the sale contract price, make sure you include details of why you made that decision. Do the same with any refi assignments, and unfortunately it might be appropriate due to the current environment, to casually inquire about the ‘expected’ value so that you can have a good basis to defend your market value decision.