Appraisers slogged through the long and messy housing collapse: we were told what to do after being told we didn't do it right before, during, or after. We tried to keep our heads above water all the while resisting being pulled under. And we complained in between gulps of air. Our larger scale contributions to the crisis were not very imaginative.
Now, as the downturn nears its desultory conclusion, appraisers are now getting pointed (after the fact) advice on how to avoid future "errors" such as those made during the depression. To understand the developing issues, an overview follows of some recent issuances regarding those "mistakes."
The National Association of Homebuilders (NAHB) recently produced "A Comprehensive Blueprint For Appraisal Reform (www.nahb.org/fileUpload_details.aspx?contentID=195703). Makes for interesting reading. Here are some high points.
Enterprises/USPAP. The NAHB white paper provocatively (and correctly) recommends eliminating "current impediments by removing the Enterprises' de facto appraisal authority." This would allow USPAP to guide the appraisal process appropriately, as it was intended to be. However, the document believes USPAP is too confusing and changes too often.
Approaches/Value Definition/Values. The white paper also states: "all three approaches to value should be considered based on the scope and type of project." And, "there also should be a re-examination of the definition of market value." This is a laudable idea but that doesn't invalidate what we are doing under the current definition.
The report further notes that appraisals should "produce a range of value with a most probable spot value and a confidence score. Appraisers should be asked to report a range of value. A single point of value could be estimated with a confidence score."
Comparables. In February 2013, The Bipartisan Policy Center issued "Housing: America's Future: New Directions for National Policy." In here, appraisers come in for their fair share of blame. This report focuses in comparable selection. "The sales price of distressed or foreclosed homes...tends to be substantially lower than traditional (non-distressed) sales...(Entities) could refuse to accept distressed sales as valid comps, forcing a reassessment of non-distressed properties. In markets that do not have sufficient sales volume to allow comps to be calculated without the inclusion of distressed sales, an alternative approach might be to require an addition to the value of a distressed sale based on the difference between the local market index of distressed sales versus retail sales." Great idea, but aren't we supposed to look at markets at specific points? Realtors and the homebuilders have been all over this issue for quite some time now.
Competency. Appraiser competency is an issue that is a theme in these documents. More appraisers are leaving than coming in. This creates a shortage. We need more appraisers and, in particular, we need more well-trained and competent appraisers. Some have recommended lowering entry requirements. Wrong idea.
Qualifications/Oversight. The Appraisal Subcommittee has come under scrutiny with several reports citing inconsistent oversight of state boards and boards not providing effective enforcement or direction to licensees. Wouldn't it be a step in the right direction if qualifications, education, and enforcement were much more uniform?
Summary. Nice to see these outside entities take an interest in appraisers. The documents on their face show thoughtfulness and knowledge about appraisal. However, considering the source and the history, I don't believe these changes are proposed to benefit residential appraisers.
If only appraisers took more interest in the current and future shape of their profession. These provocative ideas bear discussion with appraisers in the room. Appraisers can take back some lost ground if they would only stop grumbling about today's fees and worry about what there may be out there to sustain them going forward because the future may not be pretty if we don't exercise some influence on events.
William Pastuszek, MAI, SRA, MRA heads Shepherd Associates, Newton, Mass.