Underlined time and again
is the importance of licensed and competent real estate appraisers to the
soundness of the real estate and banking sectors of our economy.
Real Estate Agents say appraisers are killing deals with low-ball
appraisals. Meanwhile, the profession is undergoing considerable reform.
Here's the latest.
Appraisers Talk, Congress Listens by David Brauner and Isaac Peck
After last month’s Congressional hearing, rest assured that Capitol Hill is well
aware of appraisal industry issues, including customary and reasonable fees,
unreasonable turn-time demands, geographic competency, the lack of transparency
with respect to AMC fee splits, continued appraiser independence pressures, the
efficacy (or lack thereof) of the Universal Appraisal Dataset, and a peek behind
the curtain at internal disagreements among the industry’s power players over
how best to regulate you and your business.
Also underlined time and again is the importance of licensed and competent real
estate appraisers to the soundness of the real estate and banking sectors of our
The June 28 hearing was an opportunity for the appraisal industry to provide
input on appraisal regulations and their impact on the still lagging
single-family real estate market. Members of the Congressional Committee
(Insurance, Housing and Community Opportunity Subcommittee of the U.S. House
Committee on Financial Services) included: Rep. Judy Biggert, (R-IL),Chairman;Rep.Gary G. Miller, (R-CA); Rep.
Luis V. Gutierrez, (D-IL),Ranking
Rep. Al Green, (D-TX).
(story continues below)
The hearing, Appraisal Oversight: The Regulatory Impact on Consumers and
Businesses, was addressed by two panels. The first panel included government
officials from federal regulatory agencies. The second represented independent
professional organizations and associations, including the National Association
of Realtors (NAR), the Appraisal Foundation (TAF), the Appraisal Institute (AI),
the American Society of Appraisers (ASA), and the Real Estate Valuation Advocacy
William B. Shear, Director, Financial Markets and
Community Investment, Government Accountability Office Don
Rodgers, President, Association of Appraiser
Regulatory Officials James R.
Park, Executive Director, Appraisal Subcommittee,
Federal Financial Institutions Examination Council
Panel II David
Berenbaum, Chief Program Officer, National Community
Reinvestment Coalition David
Bunton, President, Appraisal Foundation Francois
K. Gregoire, 2011 Chair, National Association of
Realtors, Appraisal Committee Don Kelly,
Executive Director, Real Estate Valuation Advocacy Association (REVAA), on
behalf of REVAA and the Coalition to Facilitate Appraisal Integrity Reform Karen J. Mann, President, Mann & Associates
Appraisers, on behalf of the American Society of Appraisers Sara
Stephens, President, Appraisal Institute
Astonishingly, Rep. Gary Miller (R-CA) characterized the Home Valuation Code of
Conduct (HVCC) as a “disaster” and said he is equally disappointed with attempts
by Congress and other government agencies to fix the problems. He noted that the
disastrous effects of HVCC were immediate, but unfortunately, attempts to
redress them by government have not been as quick. He went on to say that much
of the worst of HVCC is institutionalized now by Fannie Mae and Freddie Mac, and
its successor Federal Finance Housing Agency (FHFA), and Federal Housing
His negative assessment of HVCC is a far cry from FHFA leadership, and others in
high places, who insisted over the years that the Code was/is effective at
improving the quality of appraisals and the independence of appraisers. The fact
that appraiser reality is now commonly accepted in Washington, D.C., despite the
years of misdirection, is a clear vindication and positive development for rank
and file appraisers.
“Low” Appraisals In his comments, Rep. Miller seemed to blame HVCC for “low appraisals,”
killed deals and a stifled housing recovery- all due to the inability of parties
involved in the real estate transaction to communicate freely with each other.
He said that if the lender and buyer agree, they should “be able to move forward
in the marketplace.” This led to a discussion on how low fees paid to appraisers
by AMCs is leading to lower quality appraisals. Regarding HVCC and its
aftermath, Rep. Miller said, “We messed up. We’re not happy with what we did but
we’re equally not happy with you (regulators and others) not listening to us
wanting to correct what we did. We have got to fix it.”
All sides were ably defended, including AMCs, by their representative Don Kelly.
He made the argument that AMCs provide value to appraisers in many areas,
including marketing and quality control, and characterized the assertion that
AMCs select appraisers based on low fees and quick turn-around times as being
“based on anomalies and hearsay.” In contrast, the appraiser panelists, while
disagreeing over some issues, were united in testifying that the AMC model, in
its current form, is driving good appraisers out of the business and hurting
The Congressional Panel seemed to have the Appraisal Subcommittee (ASC) in its
crosshairs, with direct questions to the panels about how well the agency is
doing its job- especially as it pertains to its unfinished business of
implementing appraisal provisions in Dodd-Frank. Most agree that there is a
“pressing need” for speedy implementation of Dodd-Frank. Chairwoman Judy Biggert
(R-IL) asked a “yes or no” question whether the Subcommittee is effective.
Answers from the panel ranged from a resounding “yes,” from Bunton of TAF, to
Stephens from AI, who answered, “A good look should be taken at the way the
whole entire system is set up.”
The rift between TAF and AI also was apparent with respect to the Appraisal
Practices Board (APB), now part of TAF. Bunton defended the newly created Board.
Stephens said about APB, “Appraisal practice is not aided by more rules.”
Stephens charged the Board with attempting to limit the ability of the
independent appraiser to exercise their own judgment in the appraisal process by
strictly dictating appraisal methodology. The friction between the AI and TAF
came to a head in Sept. 2010 when AI resigned from TAF.
Transparency There were clear calls on behalf of consumers for transparency on closing
documents with respect to separating AMC and appraiser fees. Gregoire said that
consumers are entitled to an appraisal report that is commensurate with the fee
they pay. “Consumers should get what they’re paying for. If the lender wants to
use an AMC to broker appraisals, then let the lender pay for that service. Don’t
make the appraiser pay for it and don’t make the consumer pay for it, the lender
is the one who benefits from that service, let the lender pay for it,” Gregoire
Regarding customary and reasonable fees, Kelly said appraiser fees today are
market driven- a function of supply and demand and that, after all, appraisers
agree to whatever fee they are paid. Berenbaum and others argued that low fees
are hurting consumers because they lead to lower appraisal quality. Both
Stephens and Gregoire pointed out that most AMCs prioritize low fees and
turn-around time, which leads to appraisers traveling great distances, many
times out of their area of geographic competence, when there are more qualified
and experienced people in the area who will not accept the low fee.
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