It is time for residential appraisers to group together and hold their professional ground.
Since the early 1990′s the residential appraisal community has fragmented and become less professional than it was. During the ramp up of the residential mortgage boom that created the big bubble that burst in 2007, more and more lenders manipulated more and more appraisers. The result was inflated appraisal reports that left homeowners and securities investors vulnerable. It even drove some of them out of existence.
We all know what happened.
Up until the beginning of the 1990′s lenders looked to the professional appraisal organizations to provided training and education for appraisers. Lenders commonly chose appraisers that were members of the American Institute of Real Estate Appraisers (now the Appraisal Institute), the Society of Real Estate Appraisers (now merged with the Appraisal Institute), and the National Association of Independent Fee Appraisers.
The Federal Financial Institutions Reform Recovery and Enforcement Act of 1989 caused a change. Preference for appraisers that had credentials from professional organizations was discouraged. (A big mistake, I say.) New appraisal education companies arose, that offered lower quality education than did the professional organizations. The standard of education and ethics diminished over the last twenty years.
The advent of appraisal management companies (AMC’s) was part of the problem. Many of them looked for the newest, least educated and least successful of appraisers to add to their approved lists. With these lesser skilled and trained appraisers the AMC’s (and mortgage brokers and mortgage bankers) had a better opportunity to manipulate the results of appraisal reports.
It became common place for the loan originator, or AMC to tell the appraiser that the appraiser would get lots of work to do if the appraiser just provided a report with a value conclusion that the lender wanted to see, no matter what it took. And, a very large percentage of the residential appraisal community did just that.
I called all the lenders listed under the heading “Mortgages” in the 2008 – 2009 Yellow Book of Clark County Washington. There were 131 entities listed. Fifty five of them were no longer in business.
I followed up by talking to some of those still in business. I asked them some questions about what it is like dealing with the new appraisal guidelines for ordering appraisals. The responses were varied.
The last question I asked was “Do you give preference to appraisers who have designations from professional appraisal organizations?” I got three answers. One was, “What’ that?” Another was, “No.” The last was, “No, but I think we ought to.”
I see the last answer as an open door for the Appraisal Institute (AI) and the National Association of Independent Fee Appraisers (NAIFA) to make known to the lenders what is required for an appraiser to become an SRA (Senior Residential Appraiser), awarded by the Appraisal Institute; or an IFA (Independent Fee Appraiser), awarded by the NAIFA.
These two credentials, SRA and IFA, are equivalent to a Masters Degree in residential real estate economics. I have both designations and can attest to their credibility.
Most residential appraisers do not even associate with a professional appraisal organization, let alone do what is required to get the professional designation, SRA or IFA. I say that this fact is caused by two things. One, the professional organizations have been very lax in promoting the value of appraisers so highly trained. And, that the loan originators and AMC’s, by and large, have been bottom fishers, looking for the least amongst us to do their bidding.
It is time for the TRULY PROFESSIONAL APPRAISER TO TAKE BACK SOME TERRITORY. We SRA’s and IFA’s are the best of the best. There are lots of statistics that support this claim.
If you are a loan originator or AMC reading this, please respond and tell us all if you agree or disagree with my assertions.
Ralph K. Olsen, MAI, SRA, IFA
Pacific West Appraisal Services, Inc.
pwas.net
