AQB wants comments on possible changes to college degree, practicum, alternative experience, etc.
Comments deadline March 31, 2016
College degree – alternative for licensed upgrade to certified
My comments: I keep hearing from appraisers that college graduates have lots of high paying opportunities. But, these types of jobs are only for engineering, computer science, etc. jobs. Some with business degrees from highly rated schools can get “Wall Street” jobs. Not for the vast majority of graduates with degrees in English, psychology, etc. I don’t know how realistic it is to offer a route from Licensed to Certified with no 4 year degree required since few lender clients will accept licensed appraisers and their numbers have dropped significantly.
Practicum – alternative experience up to 50%
My comment: I studied science in college and spent many afternoons in labs. When I graduated I was ready to go to work and needed no training. This is a significant problem for appraisers.
The only appraisal class I ever had with practical experience was a junior college appraisal class taught by a real estate agent. We all appraised his home using Fannie forms. A practicum was offered awhile ago by the AQB but was too difficult to set up and none were ever offered. Hopefully, these new requirements will be easier and, more important, include hands-on appraisal experience.
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My comments: Lender appraising has been a boom and bust business since Fannie and Freddie started securitizing loans in the 1960s, requiring armies of new appraisers during the booms with most laid off during the busts. Everyone seems to forget this. The current licensing system does not consider it.
Of course, the biggest problem today is lenders not allowing trainees to sign on their own. Lenders can solve this problem now. The draft recognizes this problem. But, AMCs (low fees and Scope Creep) are the most significant reason for the “brain drain” of experienced residential appraisers leaving the profession since 2008. Retiring baby boomers is another factor.
Who is worried about an appraiser shortage? The Appraisal Foundation’s income will go down. AMCs will have fewer appraisers to broadcast cheap fees. Finding appraisers in rural areas will be more difficult, but this has always been a problem. Lenders are hoping maybe they can use AMCs or “alternative products” because of the shortage. Of course, not much of this applies to commercial appraising, only to residential AMC work.
There is definitely a shortage of appraisers when the market is on the up tick and the fees may have something to do with it but, the main reason is the older experienced appraisers are retiring and IT IS too challenging to get a BA degree and then 2000 hours of experience and plus appraise education requirements. Appraising Real Estate is not rocket science but, it does require a skill set and knowledge of the Real Estate market. I had 6 years of Real Estate Sales experience, an Associated degree in Business Admin. with a Certificate in Real Estate when I entered the appraisal profession as a trainee before licensing was required. Within 3 months I was a staff appraiser with a large appraisal firm. The appraiser who trained me taught me all the nuances of the market areas I would be appraising homes and how to make market adjustments and reconcile values. I propose that only an AA Degree with a Real Estate major and completion of 125 appraisals as a trainee under a Certified Supervisory Appraiser with a minimum of 1000 hours of appraisal experience. I also thing the hours of licensing and certification should be cut back to 70 for licensing and 105 for certification. And, appraisers who supervise trainees should be exempt from continued education requirements if he/she has trained one appraiser to becoming licensed in any one given licensing period. I and sick and tired of taking the same classes over and over again because there is really not that much new to learn every 2 to 3 year licensing cycle. It is just a waste of time and money. Appraisers with 15 or 20 years or more of experience should be exempt from continued education or at lease cut the requirements in half pr licensing cycle.
I do not believe there is a shortage of appraisers. There is a shortage of appraisers willing to work for nothing. Also, if they do get to do away with appraisers, who will they blame when the next bubble pops? The best thing we can do as citizens is to demand the idiot politicians privatize fannie and Freddie before they fail again.
There is a large segment of State licensed appraisers that have been appraising for more than 20 years. They are left behind and many have quit or have been absorbed by AMC’s.
This all due to regulation changes. Many of us do have a degree and are certified, and there are some that have a degree, are state licensed and decided not to become certified.
When you leave it to the government to run the appraisal field, this is what you get.
Ask yourself the question. Would you go to school for 4-5 years, get a business degree and work for nothing while you train for several years. Oh Ya! Then you make a minimum wage while AMC’s steal your profits. Don’t think new college grads are going to pick that poison. Even the Appraisal Schools are reporting a lack of interest in the field.
I am certain, that there will eventually be very few appraisers and the AVM Model will prevail. If desk reviewers, underwriters and other folks without licenses can review properties all over the USA, then they can easily do them from their desk. We have CU, DataMaster, Core Logic, many Real Estate Boards, Zillow. There are so many online services and Google Chrome Maps with their 3D imaging. Who needs an appraiser?
There are some difficult properties, but the Lender can send a building inspector out to video the property, inspect the house and do a small report. JOB done!
Only common sense, the Lenders will be doing their own appraisals once again.
Technology will prevail. Its almost there.
The appraisal industry has been under attack for many years. Every time there is a crisis, 1989, 2009, its the appraisers fault and then here comes more requirements and regulations. The licensing requirements on all levels is ridiculous when compared to any other jobs within the real estate field ie, agents, loans, escrow, management, etc. Now that the majority of certified general appraisers are over the age of 60, what is going to happen in the next say 20 years? The qualifications are to vast and take too long to attain to get to the next level of appraising. This will become a major problem in the future especially within the commercial side of appraising. Dodd-Frank did not help the appraisal industry at all and the so called cant talk to the appraiser anymore attitude has destroyed the face to face communication with lenders to a robot like email way of doing business. The more appraisals become just a number to the lending institutions, the more at risk of appraisers being completely done away with is inevitable. Appraisal management companies need to go for the security of appraisers as well as similar formats applied by the major banks and lenders. Its really wrong when the lender has its own appraisers doing the work whether they are separate entities or under a different name, whatever loophole the big boys can get away with legally to comply with the ridiculous laws and regulations government has bestowed upon appraisers. Also, the very fact that an appraiser can no longer go out and get, generate his or her own work because it has become a conflict of interest is the worst idea that anyone could have come up with. Corruption was never the problem with appraisers in general yet that was the consensus from the man and the stringent education requirements and time to become an appraiser has put such a stronghold on the industry that if it keeps on going the way it is, which is unsustainable, the appraisal profession is all but over.
I realize that some of the comments that follow may not appear to be relevant to the function of the Appraiser Qualification Criteria Committee however I do not believe that you can be successful without resolving the bigger problems of the appraiser and the appraisal industry.
The perceived shortage of appraisers may or may not come to be based on the mortgage industry changes in what type of evaluations are needed for a mortgage loan. Some of the alternative valuation products that are floating around the industry are mostly computer generated and many of these have little or no input from a licensed appraiser. In some cases they require that an appraiser sign the report in an effort to make it appear as an appraisal and they (AMC) state that it is USPAP compliant, I question that statement in many cases. Changes to the Real Estate Appraiser Qualification Criteria will not address this issue. The problems facing the appraisers can only be resolved by The Appraisal Foundation and Mortgage Industry.
The Real Estate Appraiser Qualification Criteria could make one change that I feel would improve the licensing process and that would be to separate the requirements for Residential Real Estate Appraisers from (Commercial) General Appraisers.
The residential appraiser that only evaluates single family residences and up to 4 unit multi-family residence does not need the same financial accounting background and/or business acumen that is required to evaluate a shopping center, commercial building or operating business or the potential value of a purposed project.
The Appraiser Qualification Criteria for these two areas should be separated. A certified residential appraiser does not need a degree in accounting or business to evaluate and complete an appraisal on single family residences. Many appraiser today have a General License which in theory allows them to complete Commercial Appraisals, however are not qualified to do a commercial appraisal report.
The bigger issue that threatens the appraisers and the appraisal industry is the AMCs intrusion into the appraisal process. Many competent and experienced appraisers have left the industry do to the AMCs involvement in the appraisal process. The AMC is the most influential party in the appraisal process and they control the money which comes from the borrower and goes to the appraiser which gives them the power to dictate to the appraiser. The intent of the AMC process was to put a firewall between the production department of the lender (Loan Officer) and the appraiser to reduce or eliminate influencing of the appraiser. What has happened is that the AMC is now the major influence on the appraisal process and they do not sign or take any responsibility for the completed appraisal report. They control the content of the appraisal report and what it must or must not contain, how much the appraiser is paid and when the appraiser is paid. They also require changes in the appraisal that the appraiser need to make to the appraisal report after it has been completed and sent to the AMC before they will send it to the lender which is listed on the report. I believe that this is or should be a violation of USPAP when a third party requires that the appraiser make changes to a completed appraiser report before it is forwarded to the lender.
Other ways the AMC influences the appraiser and appraisal report:
AMCs require that the appraiser sign an agreement prior to receiving appraisal assignment from them. These agreement often contain requirements that no prudent business person would agree to, however the appraiser has little choice since the AMCs control 75- 80% of all appraisal assignment. You may ask why the appraiser would sign such an agreement, the answer is simple, sign the agreement or close your doors. When you get an appraisal assignment typically it will come with instructions from the lender on what their requirements are for this appraisal report. This is usually one page or less. The AMC will include their instruction and requirements which can be 8, 12, 16 or maybe 20 pages. This is in addition to the requirements of the lender. Since the AMC collects the fee from the borrower and pay the appraiser this gives the AMC control over the appraiser and the content of the appraisal report.
The problem is compounded by the fact that over 80 % of all states have no policies or procedures for monitoring the AMCs. The federal regulations give the states the power to regulate AMCs however most state only require them to register and pay a fee however do not have a procedure in place to file a complaint or have any requirements on their operation. Most states do not enforce federal regulations on AMCs.
The industry has lost sight of the purpose of the appraisal report. The purpose of the appraisal is to assist the lender in evaluating the risk of a loan request. It is not to protect the lender from a loss or a foreclosure. In my over 20 years as a Banker in lending, much of it as a senior lender, I never saw one mortgage loan that went into foreclosure do to a faulty appraisal. Appraisals do not make loan payments, borrowers make loan payments.
There are solutions to these problem however most appraisers are independent business people and cannot afford to fight the AMCs which are large national companies. If we want to make the appraiser truly independent we need to level the playing field and remove the pressure which third parties such as AMCs are putting on them.
John M. Pratt
Certified Residential Appraiser
Your article references that reasonable and customary fees have been taken care of at the federal level. This is completely false. The Federal Reserve changed the wording of reasonable AND customary to reasonable OR customary when they took over implementation. This allowed the AMCs to continue paying way below the typical fee that was in place just before May 1, 2009 when HVCC took effect. No one has stepped up for the appraiser’s fees during the past seven to eight years. The federal government has not implemented or required any lender, bank or AMC to pay reasonable and customary fees (based on the typical fee excluding AMC fees, which is the wording that was in the regulating documents).
Requring a four year degree is not practical or even logical for the appraisal industry. A two year degree and/or even a set number of college courses would be hellpful, for general knowledge, and experience solving problems, but a four year degree is over kill and will just give the government and/or AMCs more ammunition to say “now we don’t have enough appraisers – let’s use statistical regression models instead”.
An associate’s degree would be sufficient,I think,with some practical work.The apprentice gets sufficient experience during his 2 year training under a certified supervisor appraiser.
I attended the Appraisal Practices Board meeting in Las Vegas last month (just happened to be in the neighborhood) and there is a real concern by the “powers that be” to lower the requirements for certification. I, in turn, respectfully submit that I agree with Mr. Flanagan’s comments above.
There was a reason the “powers that be” required a degree in order to become certified. No, I don’t know what it was, but surely there was a reason. I think that the individuals that did not have a degree had a substantial amount of time to take the certification test prior to the deadline of 12/31/2014 in order to become certified without the degree.
There is a individual in my area that does not have a degree and has been practicing the appraisal profession for about 10 years. They waited until the last second to take the test and failed it. Based on that knowledge, I don’t want them appraising my house. By the way, they still have a substantial amount of business, just not FHA.
Yes, I do have a degree and am certified. My trainee has a degree (in entomology) and is learning the appraisal profession. He is 25 yrs old and will probably be appraising for a long time in Texas and Oklahoma. He may not know how now to measure a house, but he is hell on termites.
We have been completing appraisals for 11 years, and have never had any disciplinary measures against us and complete an average of 5-6 appraisals per week. Yet, even with all of the experience, can not get certified due to lack of 4 year degree. We believe experience should be taken into consideration in place of a degree. Perhaps a 5-7 year requirement if there is no degree?
I agree with Kevin
I agree! I have been appraising for 32 years and WILL NOT spend more money on college to upgrade to certified. Tell me what the logic is when someone fresh out of college knows anything about markets when I have been studying it for over 30 years. There should be a grandfathering of appraisers with years of experience. SMDH!!
As a practicing residential appraiser for the last 30 years, I would respectfully submit that the reason for the shortage of appraisers is NOT that the licensing requirements are too onerous, but is rather that the rise of the Appraisal Management Companies (AMC’s) has reduced the level of appraiser’s compensation to the point where appraisers cannot earn a decent living doing mortgage appraisals.
Easing of licensing requirements will not attract competent professionals if they cannot earn a professional wage.
A simple, non-complex residential appraisal takes approximately 8 – 10 hours to complete. At a fee level of $300-$400 the appraiser is making less than $40/hr. (Typically less than $40) On top of this the appraiser has expenses, such as software, insurance, data subscriptions, continuing education, and automobile maintenance. This is all before taxes. By the time all of this comes out, the appraiser comes out with a net of approximately $20-$30/hr after taxes.
The bottom line is that a person with a college degree has much more lucrative job prospects in other segments of the economy. That is why there is a growing shortage of residential appraisers and a shortage of people with college degrees interested in becoming residential appraisers.
Like any other commodity, once there is a shortage, the laws of supply and demand will kick in, and appraiser’s fees will rise, and once they have risen to the point where appraising becomes sufficiently lucrative, new appraisers will be attracted to the profession.
I respectfully submit that easing of licensing requirements might serve the short term interests of appraisal management companies, but in the long term will only serve to dumb down the profession, and put the nations banking system at greater risk.