AUTHOR: Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. Click on Outside The Boxes for a collection of Patrick's articles on Appraisal Scoop!
What would make things better for housing, lenders and appraisers? I am not talking about "quick fixes" for long-standing issues, FIRREA (Financial Institutions Reform Recovery and Enforcement Act) and USPAP (Uniform Standards of Professional Appraisal Practice) have proved such idealistic wishes only address the symptoms and do not provide the cure for what ails the appraisal industry.
For the symptoms, we could save millions by prescribing aspirin instead of taxpayer dollars. "Appraisal pressure, take two of these and call me when the scamers have left the mortgage business". "HVCC too focused on appraisers and not focused on the underlying issues, take two of these and call me when the market corrects".
The past several years proved that FIRREA and USPAP failed to accomplish what they set out to do nearly 20 years ago. While well intended, they were misguided, as they applied to only "appraisers" and "regulated institutions" and as they left loopholes that allowed the players to "sidestep the intent".
Like the gems above from the "powers that be", the HVCC and IVPI are well intended, but pose more potential harm than good. It remains to be seen, what changes may take place before the details arrive, but from many perspectives, they are both more "aspirin" when we need a "miracle drug".
So, if we could get a "do over", starting today, what changes could be made to better protect "the public's trust"? What steps in a different direction might better assure John (and Jane) Q. Public that the "American Dream" is safeguarded by the appraisal industry, something envisioned by the authors of FIRREA and USPAP so many years ago?
Getting in the Game
During my 30+ years in the appraisal profession, I have witnessed more than my share of things that work well and things that do not work at all. For those that know me, you also know that with me, you will not run out of ideas, views, comments, suggestions or opinions.
My favorite way to pass time has always been "what if" ... what if we could do this or what if we tried that. Essentially, I am an idea man, generating thoughts, plans, solutions, etc. by the ream. Now, some of what I come up with is good, while other ideas, well, let's say they need some polish. Over this five-part series, you'll perhaps see a little of both as we examine some "what if's" that could provide us with "The Right Start".
The key to the game is simple and there are rules.
First, you must be open-minded and that means to advance in the game (and get any response from me) you cannot look for the reasons why a "what if" will not work. You must comment on ways it could work or provide suggestions to make it work.
Second, "The Right Start" is not about what others must do for us, but rather what appraisers should and could do for the appraisal industry, hence your answers must consider what we can do working with what we have, perhaps with a little help from "a la mode, inc." With that said, let's take a look at step one of The Right Start.
The Right Start - Step One - Standards
Now I know what you are thinking, we have USPAP and that is true we do, however, USPAP does not cut it when it comes to details and everyday issues. Take the age-old question of "urban, suburban and rural". Debated for years, in many appraiser's minds, the definitions of US&R remain as elusive as Fannie Mae's "declining market". Where in USPAP is either defined or referenced?
Where can I look up "the actions of my peers" to see what they are doing? Is there a list or a website where I can search and find the "step by step" of how they resolved an issue that I am faced with? What about this supply and demand stuff? How many months of "inventory" does it take to have under or over supply?
Should all units count as "supply" or should supply be segmented to reflect units competitive to the subject property? Which makes more sense? If there is demand for smaller homes, but most of the inventory is larger homes, and it is excessive, is the market over-supplied (by sheer unit count) or under-supplied since there is no low priced inventory?
This is a simple problem. USPAP needs to have definitions within it and or reference a "single definitive source" for answers that are not buried in theory or subject to wide interpretation. They must be "clearly defined", so that the appraiser can comprehend and reference them and so that the client can measure what the appraiser did, to the "standard".
Guidelines refer to "the actions of our peers" as a standard. That being the case, if we work together, adopt a list of definitions or definitive source, and include a reference to that source in each report, does that "action by my peers" become the "de facto standard"? If so, can we set other standards to resolve issues?
We can define or clarify "urban, suburban and rural", "declining market", supply and demand measures" (along with a host of other issues) better than others and we should. As a profession, why do we wait for others to tell us what we should do and how it should be done?
Since we cannot seem to get the answers we need, should we take "de facto steps" to define what the measurements are and how they should be applied. Several years ago, Brian Davis and I developed a "Clarification of the Scope of Work" addendum for the URAR. Many have adapted and include it or something very similar with each appraisal report. Is it now a "de factor standard" of sorts?
You can download a copy here and modify it to suit your particular needs or point of view. Download ClarifAssump_scoop.doc
This can be done. All it would take is the same 30,000+ appraisers (that signed the HVCC memo) to work with a la mode, inc. to define what "the actions of our peers" should be. Would a la mode, inc. help by including a new form for us to use or by hosting the "definitive reference" on a website, accessible to all?
I bet they would. They spent hundreds of thousands of dollars getting the word out on the HVCC. Doing something like this would be "chump change" in comparison.
Up next, Part 2 of The Right Start - Tariffs
AUTHOR: Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at email@example.com Look for the new Outside The Boxes category for a collection of Patrick's articles on Appraisal Scoop!