By Barry Bates
Appraisal is not rocket science, but it’s been around for about 300 years and it worked pretty well when the principles were kept simple and the consequences for ignoring them were disastrous. It would also have been nice if individual lending institutions still had to hold their own loans into perpetuity.
The “Just Pap” is more unpopularly known as the Uniform Standards of Professional Appraisal Practice, which came into being after the last big residential mortgage greeding frenzy (the failure of S&Ls in a 17%-mortgage-rate environment during the late 1980s).
Before your friendly author proceeds violently to eviscerate this not-even-very-well-meaning document, let’s get a minor but nonetheless irritating question off the table. Now you have to pay $75 for a copy of USPAP when, as a matter of public law, it should have been free to read. The solution? The Appraisa; Foundation put it out on the web where it’s free to read (uspap.org), but you can’t download it or search it effectively. So you still have to pony up the bucks.
My central thesis today, children, is still that a bunch of crusty old MAIs and soulless bank appraisers saw an opportunity in 1986 to create a bureaucracy that funds free trips to meetings where crusty old MAIs and soulless bank appraisers can assemble to get pleasantly drunk. This entity became The Appraisal Foundation, an organization designed to foster high appraisal standards that are written in weasel words even Donald Trump could circumvent.
It’s hard to know where to start; there are so many things wrong with USPAP. As an overview, suffice it to say that its structure appears to be designed so that over the long haul, most responsibility for bad loans can be offloaded to appraisers making less than $100K per year.
UsPaP – A Few More Obvious False Appraisal Assumptions
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About Barry Bates
I have known him personally for over 30 years. He has a wide variety of appraisal “experiences” over the years, which he writes about. In his 42 years of appraising he has had different jobs, from a staff appraiser to senior management. He is lots of fun to chat with!
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The only thing that would change this environment would be backing up to a reasonable amount of government involvement in the mortgage guarantee business. they are still writing mortgages with 3% DOWN AND 3% SELLER CONCESSIONS BACKED BY THE TAX PAYER.
No question that the guaranty side needs cleaning up, but the core problem is greed, so I support returning to an environment in which you have to live with the loan you made. Securitization can still be cowboy’s ride, but buy-back provisions would have to be guarantees in and of themselves. Appraising was a dream job when originators had to keep loans in portfolio. At my first job, the originating loan officer had to handle his own mess on default or foreclosure…
Correct. Selling off the junk in packages is what got us into the Housing crash. A similar comment could be made about some borrowers. IF they have NO or little, Skin in the game, they won’t work hard to keep the property, but just walk away.
Well Barry, being in the appraisal field for 44 years since I was 20, I can tell you where to start..LOL Remember that old bible verse, “You can’t serve two masters?” USPAP is totally unnecessary for residential lending/mortgage appraisals. Fannie, Freddie, FHA, VA and USDA were all created by Congress for the benefit of the American people. We don’t need another master in USPAP. All of the aforementioned have their own appraisal guidelines and sanctioning powers. All of their guidelines are approved by the Interagency Appraisal Guidelines, which no one ever reads. All of their guidelines are USPAP assignment conditions. So why the duplicity? “USPAP” for residential appraisers could be written in one sentence. Doubt my words? FHA filed a case in my state many years ago against an appraiser and sent the appraisal to the state board for review. The state board found no USPAP violations in the report. FHA’s response. We’ll reduce the appraiser’s roster suspension from 6 months to 3 months. Yep, they can all take care of themselves without USPAP and the state boards.
We certainly don’t need USPAP in terms of how its presently written; but waiving standards for neurosurgeons and bank robbers isn’t the answer, either. The commercial folk complain that USPAP is too “procedural”; are they kidding me? As you noted, one–or a few–simple rules might suffice. Later in that article, I proposed Ten Commandments (e.g., “Thou shalt use only comparable sales that are the most recent, proximate and similar”). But when players write their own rulebook, stuff gets left out. Like a prohibition against contingent fees in the Institute Standards…
PS: It wouldn’t be fair to Ann to send you a copy of the whole article, but I know you won’t be sorry if you buy a subscription. There’s a huge amount of historical and downloadable information that comes with the subscription, including all my grumpy past articles. Also, I’ve also found the Appraisal Today paid newsletter to be the quickest/easiest way to catch up on whatever crimes Fannie and Freddie are presently committing…
Good work Barry!
Stir up the animals.
We want more satire and critique of our appraisal ruling class….
I want a full copy of your article……
I love reading your comments. I am a Certified Appraiser that has only been in the Mass Appraisal world. Can you point me in the right direction to break out into the fee appraisal world?
I started appraising at a California assessor’s office in the 1970s. Most Excellent experience. Was assigned a geographic area and had to appraise everything in it. Had no problems going to fee appraising in 1986, but lender appraisals were much simpler then plus a license was not required. First, you need to get a residential or general certified appraiser license. Can you get one based on your assessment experience? Will also need to get classes. Some assessors allow their appraisers to do fee appraisals in another county. Great way to get started. Go For It!!
Great, fun comments. Can’t wait to read more!!