Woke ‘Bounty’ Bill Will Chill Speech of New York Appraisers
A bill being crafted by the New York state Senate’s Finance Committee would, in effect, place a $2,000 bounty on the head of any heretical real estate appraiser in the Empire State who dares conclude a value that fails to satisfy a seller, serial refinancer or commissioned broker in a deal. Vulnerable buyers, who could be paying off inflated loans based on coerced values, would simply have to live with it.
If enacted, the bill would authorize fines to be levied on appraisers for a new category of thoughtcrime – something called “appraisal discrimination.” Half the proceeds from the fines would be pumped back into a fund to be used to bankroll deputized citizens to conduct further inquests and parley the pot into a program of self-perpetuating harassment of appraisers. It would dangle a new Sword of Damocles over the heads of these financial truth-tellers. The bill is sponsored by Cordell Cleare of New York’s 30th state Senate District.
The funding mechanism is nothing new. It’s called a “bounty hunter” provision. It allows an agency to eat whatever it can kill. Agencies funded this way quickly cease serving the public interest. The budget structure incentivizes regulatory feeding frenzies and unconstitutional privateering.
The practical definition of “appraiser discrimination”? Any act that results in a blasphemous value opinion – read “insufficient value” – that torpedoes someone’s transaction, thus drawing the ire and formal complaints of sellers and brokers, but not necessarily buyers. Under the bill, the hapless buyer can kindly disintegrate. The program will also keep serial refinancers in debt traps until a courageous appraiser finally risks the fine and the taint of being branded a “discriminator.” More problematic, the chilled speech will have the effect of inflating the comparables appraisers use to support values, causing what “Voice of Appraisal” podcaster Phil Crawford calls “data cancer.”
Another angle to the racket that may come to New York will delight the powerful lobbies of the Realtors, fintechs, banks, nonbank lenders and homebuilders. Some jurisdictions, like California, have radically expanded their menu of protected classes. Thus, more disgruntled sellers, brokers and serial refinancers can file, or threaten to file, discrimination complaints when falling values no longer make deals work.
In California, all that’s required for a discrimination complaint against an appraiser is a disgruntled party who possesses a “race, color, religion (including religious dress, grooming practices, or both), gender (including, but not limited to, pregnancy, childbirth, breastfeeding, and related conditions, and gender identity and gender expression), sexual orientation, marital status, medical condition, military or veteran status, national origin (including language use and possession of a driver’s license issued to persons unable to provide their presence in the United States is authorized under federal law), source of income, ancestry, disability (mental and physical, including, but not limited to, HIV/AIDS status, cancer diagnosis, and genetic characteristics), genetic information, or age.”
This is everyone on the planet.
The racket, if the New York bill is signed into law in its current form, would all but guarantee that real estate prices perpetually rise in the Empire State, and never correct – until they violently collapse, along with confidence in the institutions that promoted the scheme.
The wording of the bill, known as Senate Bill S2919, envisions licensed real estate appraisers in New York having their credentials revoked or suspended or simply being fined based on their perceived mental state at the time of the appraisal. So as not to alarm, the fine is capped at $2,000 per offense. Fifty percent of any money received in fines by the Department of State would be allocated to a recently created fund known as the Anti-Discrimination in Housing Fund. The cash is presided over by New York’s attorney general, sidestepping the state budget appropriations process.
If history is any guide, the pot will be used to promote social and political causes, line the pockets of cronies in Albany, settle scores among competing appraisal firms and beget other mischief.
A macro example of this tendency is a fund maintained by a group called the National Association of Attorneys General. Iowa Attorney General Tom Miller appears to run the private organization as a side hustle. A recent consumer-advocacy campaign focused on the more than $250 million the group has siphoned from state consumer protection settlements and how, on Miller’s watch, this money has been stashed in foreign investments and used for things like overseas trips for attorneys general and their families.
But back to the New York State bill. As its justification, it cites now-discredited findings by the Brookings Institution. The Brookings research falsely claimed homes in majority-black neighborhoods were undervalued by appraisers. The study relied on flawed data, missing coefficients in a regression model – such as income – and unexplained methodology that made the Brookings findings impossible to replicate, wrote Edward Pinto and Tobias Peter of the AEI Housing Center.
In an August 2021 report, the U.S. Federal Reserve looked for signs of racial discrimination in mortgage approvals using new data. It found no signs of discrimination. To the contrary, it found black borrowers tended to hold more debt proportionate to their income than Hispanic borrowers, that Hispanic borrowers held proportionately more debt than white borrowers and that all three groups tended to be more leveraged proportionate to income than Asian borrowers. If anything, this finding suggests African-Americans are again being ensnared by lenders in debt traps, not that they’re being denied credit.
In another report from 2021, mortgage giant Freddie Mac scoured 12 million appraisals between 2015 and 2020 and published a study that found what appeared to be an indictment of the nation’s 80,000 state-licensed appraisers: the sales of homes in black- and Latino-majority census tracts were found more likely to appraise below the negotiated sale price than sales of homes in white-majority tracts. But the report failed to control for concessions and closing costs, which have a greater tendency to be shoehorned into negotiated contract prices in tracts that contain more first-time and cash-poor buyers. Freddie Mac’s own underwriting rules require appraisers to deduct for this, but Freddie did not in its own study.
“The appraiser’s opinion of value must reflect the value of the [appraised] property without concessions,” wrote Washington State appraiser and compliance expert Richard Hagar. “So, is it possible that sale [prices] in poorer neighborhoods were more likely to contain concessions? Yes.” The Freddie Mac report dishonestly ignores this reality. Buried in the report was the begrudging acknowledgment that the comparables selected by appraisers to value homes owned by people of various racial groups tended to be reconciled within ranges that differed little from one another statistically.
Hit the number or pay $2000. This bill would make all appraisers in violation of USPAP the second it passes. The results of the appraisal would be influenced by a financial incentive. The incentive of not having to pay $2,000 for hitting the contract price.
If I was in New York, I would never do an appraisal for a lender again. I used to do 95% lender/5% private, now I do 5% lender/95% private. That decision is looking better everyday. Honestly, I’m considering dropping the 5% of lender work that I do. Once you’re tagged as a “racist appraiser” there’s a good chance you’ll be ruined.
I know it’s easy to say, but all appraisers in New York should stand together and refuse to do lender work after the bill is signed.
One can still navigate these systems. After all, not much has changed. Just a little extra added on top of what was already a very difficult to navigate system which is inherently biased against the independent appraiser. Simply comp search everything, and refuse to accept assignments if terms of the arrangement are either too close or simply not working. Yet another reason why the amc model of bidding fee and turn time simply does not work. Direct assignment or bust. When I accept a sale, it takes me one to two hours just to make that happen. Conveniently when data lines up with expectations, that workfile is ready to go. Send it.
This special bounty is a little more difficult to manage than the below proposal, but I’m sure there could still be positive opportunity there. When enough appraisers get wise, nobody will dare to accept orders without comp searching them ahead of time. The amc’s pushing fee and turn time quotes will be collateral damage whom will either change their evil ways and move to direct assignment with more fee consistency, or help appraisers interests in getting these bounty provisions rescinded with their well funded lobbyist mechanisms. Keep looking on the bright side. The laws of unintended consequences apply to everyone.
I’m going to counter the idea that there would be unchecked acceleration of values with the idea that when appraisers en mass refused to accept bad deals, because the appraisers did comp search ahead of time, that when lenders could not place the assignments, things would stall out. It will be lenders doing the hard part, informing agents to go back to the table because they can’t find a single appraiser to accept their deal. ‘Put a damned valuation gap cash payment promise provision in there of at least fifty thousand dollars or take the price down. We’ve had three dozen appraisers tell us this does not comp out, that this sales figure appears to be that much over market value.’ Something like that. I’m not so pessimistic about these events. For the first time ever, I’ll be on slightly more even footing against the appraisers whom just snatch and grab these orders without looking, appealing to fee and turn time focused clients, dumping the liability on the group umbrella policies. You know, the amc appraisers whom make the rest of us look bad.
This article is like an ongoing series, related to this initial article, make sure to read this.
Don’t miss this important spread sheet for inquisitor funding.
And you know what I was thinking? Get this, the people whom will be reaching for this grant money don’t have a clue what appraisers do or how to identify the bias and such. Consider all these groups as easy access organizations which could be persuaded to provide top pay for independent appraisal review. Let them all go fishing, and collect your fees. If appraisers perform their jobs ethically, the vast majority of reviews requested will come back negative. Appraisers can skate off with the fee or something. Develop a ready made consultation explanation form about the industry and mass sell it to each one of these groups individually for an easy buck. But you’d better be ready for litigation and to defend your work product against the best players in the industry if you actually do run across bias. Be ready to constantly disappoint your client if you find nothing. The only satisfaction in that line of work of independent review for a biased client, would be accelerated compensation.
Two can play this game. These groups whom received this money are often primarily focused on influencing local development boards, navigating grant and subsidy systems from within government, compelling lenders to offer special deals and terms and such. Fair housing service groups do not order appraisals, not usually. They are more likely well versed in consultation and regulatory rules which lenders abide. Many of them are chalked full of hopeless advocates whom seek to use the mechanism of government to dole out special favors to their preferred groups.
None of these types of groups had compelling need or reason to engage and pay for independent appraisal services, until now. Now they do have that motivation. Don’t be an activist. Be a salesmen. Take advantage of some of this so irresponsibly distributed grant money. Help these groups understand, by way of competent appraisal review service, their idea of perceived bias is nothing more than properly implemented valuation practice, to focus on similarity, local location, area amenity, restraints imposed by jurisdictions where real property lies, all the basics of valuation service.
If one stuck to the basics of ethical competent valuation development, there is a very high probability that offered review services would never uncover anything. So perhaps instead of thinking of this as a bounty, perhaps get ahead of the governments own incompetency and consider it easy working opportunities. These groups whom received this money are basically spending other peoples money which they did nothing more than fill out a grant form from a long list of available grants, to receive. They are going to need competent experienced appraisers to help advise them. Go forth, and market.
‘Serial refinancers.’ Good one. Refried refi’s. You plant the seed to those type of borrowers with a simple question; What was your cash equivalent savings by resetting your time at a lower rate? They will not be able to answer, and then explain to them the difference between a low rate, and resetting the term, the concept of amortized cash equivalency. One time I ran across brand new first timers whom were borrowing like a hundred and a half on a sweetheart pickup of their parents property. They were like, oh we’re getting a 30 year, but will have this paid off in 5 years. (As payment with simple addition math, chalked up to about 5 years. They simply took the total payment estimate, times 12 months, x 5 years, observed that was their sale price, and thought they’d pay it off ahead of schedule.) I had to explain to them the xy interest up front thing. They were sad. I then talked to them about shorter terms, doubled up payments and they could actually make that happen. They remained sad but thankful that I was the first person in the entire mortgage lending pipeline to actually take the time to be honest and explain these things to them. I’m going to apply for a bounty grant to catch mortgage lender people not fairly representing the product. Now that would be easy money.
“The racket, if the New York bill is signed into law in its current form, would all but guarantee that real estate prices perpetually rise in the Empire State, and never correct – until they violently collapse, along with confidence in the institutions that promoted the scheme”
It’s almost as all of this is being done by design. They want the economy to crash and the country to fail.
This is Coersion legitimized in the name of the ‘Anti-discrimination Fund’ for the dissolution of the appraisal profession who refuse to over value property & to pad the pockets of NY state officials & Appraiser POLICE. Insurers and appraisers will be bankrupt if they arent already with Willy Nilly lawsuits & fines. Follow the money!! Corruption keeps rearing its ugly head. They cant get money out of Realtors claiming marketing ignorance with no responsibility for ANYTHING so go to the next easiest target.
Un F Real !!
This job ain’t for everyone. If you’re uncomfortable being the target in the first place, this is not the right line of work for you. Appraisers are the only outsider, the constant protagonist whom receives the least compensation, the fall guy when things go south.
There are very few traditional working rewards in this appraisal industry, not for most people. Appraisers do not get positive response recognition, we do not get lasting raises or increased compensation. We are never thanked, but constantly berated. We enjoy nominal oversight during working hours, coupled with crushing criticism and excess scrutiny when expectations are not met. They’ll yank your clients, lie through their teeth, make up stories about you, dig and claw to find anything you’ve ever said or done to use against you if that’s what it takes and you stand between someone and their commissions. They’ll badmouth you down the line, hang up the phone on you, withhold your payment, play every dirty trick in the book. There are no rules when dealing with appraisers, our ethics apply only to us, and nobody else.
The bright side is freedom of time, freedom of virtual employment, substantial open ended working opportunities depending on what you are comfortable doing, going to obscure or even popular areas which one may otherwise never have opportunity or social standing to observe. I’ve been everywhere from the ghetto basements to the country club, remote cabins by the private lake in between. I’ve even gone to bigfoot country and seen one in person, true story. Better learn to do taxes like a champ, our effective taxation rate last year was less than 2% according to that automatic turbo tax summary.
Make the most of it but have no illusions, you’re on your own. Nobody is going to be there if you make a mistake. If you sign the report, you own it. No take backs. As illustrated in the next thread by Mr Ford, mistakes which result in complaint and claims could very easily cost a full years wages if not far more. People seeking the idea of maximizing income with minimal effort, outsourcing and such should turn to realty because those methods will eventually catch up to bite you in the valuation services industry. I’m twenty years strong without a single complaint or claim. The very first one which comes my way will likely be my last day as an appraiser, I’ll bounce to sales or lawn mowing or something much easier and less stressful.
It’s not for everyone but if you truly believe in independence, the appraisal career offers a broad range of unique benefits difficult to substitute. Remember; The further you make it and the more successful you are, the more you have to lose. Start fast if you need, but remember at some point, you’ll have to slow it down. Review the ‘uspap penalty matrix’, and observe how penalties and leniency are also based on experience. Once you’ve made it a decade or longer, you lose a substantial amount of leniency. There is a cyclical nature to appraisal firmly tied to the greater economy. The days of plenty are over and we’re just now getting back into the period of lasting accountability. This will be interesting to watch the appraisers fall left and right, especially the ones whom bought into this notion you could outsource and automate away all your working duties to maximize income and still maintain adequate liability exposure protection. That is straight fiction, a literal impossibility. The state complaint is the easy part, it’s civil liability exposure after the fact that wipes them out.
And I present to you, the appraisers forum, long running; ‘suspensions and revocations’ thread. Bounce around for a while and just stay on that thread and read. Pick a random page there are at least 200 pages. There may not be quite as many appraisers these days, and the market may not be unraveling at quite the same pace, not yet at least. But you never know… We used to track them down individually too and read their complaints online.
The only appraisers getting chills about anything are the new guys. If you don’t know, now you know.
Anyone in VA, MD, DC OR DRIVING DISTANCE that can attend an ASC / FHFA bias conference May 19th should sign up and go. If you cannot go in person they please at least sign up for virtual mtg.