Most of us remember The Wizard of OZ, the characters, their plights and the journey that served as a lesson to be learned. The Scarecrow wanted a brain so he could think of great things, the Tin Man desired to be more human with a heart, the Cowardly Lion needed courage to face his challenges and Dorothy was looking for a way back to Kansas.
In the end, each realized that what they wanted, they had all along. The journey merely served the purpose of letting them discover what they hadn’t to that point, similar to what appraisers haven’t discovered to this point. Like the characters in the Wizard of OZ, we have the power to effect the changes desired, we simply need to band together on a journey to discover it.
In the series "The Right Start", I wrote of things we could accomplish by working together. The theme was simple, "what if", something I borrowed from an old TV commercial. "What if" represents the possibilities when we abandon preformed conclusions, no longer seeing the glass as "half-full or half-empty" by opening our minds to possibilities.
Objectivity allows us see the glass differently, neither "half-full nor half-empty", but rather twice as big as it needs to be to hold the same amount of water, which leads to new thoughts and possibilities. We have lived with a foregone conclusion that Fannie Mae or Freddie Mac must take action or that USPAP must apply to all to resolve the issues, overlooking the possibilities of our own action to "fix that which is broken", at least to some degree.
What can or should be done?
A good place to start would be to consider appraisal fundamentals and the types of issues taken for granted by many professionals, but confusing or points of debate with others we deal with. The mortgage industry lacks consistency in application, definitions and comprehension of what we do and how it should be done.
Much is subject to opinion as opposed to a defined standard, with no way of determining what "the actions of our peers are" nor what "generally accepted appraisal practices" should be, even though they are referenced by USPAP and secondary guidelines, there are few measurable and verifiable standards.
Each of us is doing (and defending) what we have been taught (right or wrong) by our mentors, various classes we have taken and or as a result of local custom. We deal with the consequences of those actions when clients or reviewers have different or opposing viewpoints. We don’t have a "de facto standard" to reference in our defense, so we are left with opinions, theirs and ours, along with the conflicts they created.
With that in mind, what should be a "de facto standard" so that appraisers and clients have the same comprehension of the term, technique or application?
Here are a few to consider:
- ANSI – Standards for measuring and determining the living area of a home or condominium.
- A Uniform Clarification of the Scope of Work, to explain and define that which the appraiser did and didn’t do in the course of the assignment.
- Definitions of terms that USPAP, Fannie Mae, Freddie Mac, HUD and others have left undefined or vague, such as "market area vs. neighborhood; declining market; urban suburban rural, etc.".
- If or if not, listing to sale price percentage adjustments should be made when including listings in the report as supporting comparables?
- What constitutes supply, excessive supply and effective supply?
- How should demand be measured?
- What is the correct method to determine the absorption rate?
Essentially, we need to provide what USPAP and secondary market appraisal guidelines have not. We need to specify what "the actions of our peers are" and what "generally accepted appraisal practice" should be, making appraisals more "measurable and verifiable", by providing the users of appraisal services with Uniform Residential Appraisal Reporting Standards or the URARS.
There are many issues to consider when forming a group (especially at the national level) to address issues that have local, regional and national implications. Some key concerns would be:
- Transparency – Whatever we do "collectively" must be transparent industry wide, so we need a common website for all to access, ask questions, get answers, collect and evaluate feedback.
- Widespread Communication – We need to get the word out quickly. We can’t draft a document and say "here it is, vote yes or no". We need to solicit ideas, get as many appraisers involved in the process as we can, so that the initial draft has support. This is where the forums, The Appraisal Scoop and The Appraisal Press can help.
- Moving ahead slowly – We need to float the concept of the URARS so that it isn’t something foreign to appraisers, but rather something they have heard of, read about, thought about, etc.
- Peer representation – Real estate is local and despite how many of us may think we have "the answers", there are "local or regional situations", that require consideration and effective solutions in whatever we draft.
Unlike Dorothy in the Wizard of OZ, simply closing our eyes, clicking our heals and thinking there’s no place like home won’t make it happen, after all that was Hollywood and we live in the real world. That’s not to say it can’t be done, only to point out that today, the yellow brick road requires a GPS and wizards are in short supply.
On the upside, we already have the "Clarification of Scope of Work Addendum" that could serve as a template; we have email, blogs, the various forums, The Appraisal Scoop and The Appraisal Press. How quick we travel and how far we go (if we go anywhere at all) will depend on our commitment to the process, how we see the glass of water and how we get others to see it with us. "Half-full, half empty or twice as big as it needs to be".
For those that read The Right Start or use the Clarification of Scope of Work Addendum, developed by Brian Davis and myself, it wouldn’t be a long journey to improve and transform the COSOW into a basic URARS addendum and proceed from there. The challenge is not the document, but rather the participation by a large group of appraisers and their commitment to raise the bar.
Next up Part Two: The URARS - What steps to take and which direction to go .
Click here to join in on the "URARS" discusson on the Appraiser's Water Cooler.
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!