AUTHOR: Micheal W. Armentrout, VP AM Appraisals, Inc. Mike has been involved in full time real estate valuation since early 1992 and has experience in numerous Central Ohio markets.
Talk about deja vu, nineteen years after the Savings and Loan bailout brought us Title XI of FIRREA, the appraisal profession finds itself in the sights of politicians again. The Home Valuation Code of Conduct proposed by the OFHEO that could bring sweeping changes to the entire industry begs the question; what will become of USPAP and State Licensing?
With all the discussions and questions posed about the proposed code of conduct, perhaps we should wonder what happened to the accountability that USPAP and Licensing was aimed at creating. With just about any issue, policies and laws are only as good as their enforcement. State licensing boards are typically overloaded with cases and can only do so much with the manpower and funding they have. Is more bureaucracy the answer and how would the proposed system be implemented, managed and enforced?
As any appraiser who does regular review work knows, the current licensing system does not guarantee quality appraisals but it should ultimately make them accountable with fines, suspension or even revocation when reported and properly investigated. This was intended to be the safety net to catch appraisers who do not have the professional and personal ethics to perform qualified valuations.
It seems as though our industry has convinced itself that lender pressure is the driving force for the need for change and that the only way to change is by a new definition of appraiser independence.
But can independence simply be defined by not receiving value estimates and targets or by cutting off communication between appraisers and their clients?
Every appraiser who has lost jobs and clients because they appropriately refused to “get value” should know that this is not the case.
Understanding that this is a sensitive issue, can or should we be concerned that under such a system, appraisers might be inclined to “play it safe” by valuing properties in the low range of adjusted value and if so what impact will that have on lending?
Will appraisers be relegated to a world of automated orders, fill-in-the-blank reporting and poor communication? This get‘em, do‘em and invoice’em mentality sounds more like a vocation than a profession.
Financial and legal liability coupled with lender approval, have always been driving motivators for keeping appraisers honest. Yes, many bad seeds have taken their chances but many have lost too. Our current system, though far from perfect, can and does work. Poor appraisals can be filtered by the lender approval, underwriting and review processes while governmental agencies offer accountability on the public end. Fraudulent valuations and illegal practices have always been subject to prosecution and subsequent jail time so how much tougher can the system be?
Does our industry believe that the checks and balances really have failed or is it merely being blamed for breakdowns in other areas like lending policy?
Finger pointing aside, lenders may not value our services if we cannot continue to communicate freely with them and the tide could change to use alternate less reliable services. Don’t forget that the very liability we have is also an attraction to lenders for recourse against us if a loan goes bad.
This is not to say that a “business as usual” approach should be adopted but change for change sake usually warrants caution. We need to enforce the laws we already have and not move so swiftly to create more laws. Politicians are always searching for ways to tell constituents they acted on an issue and got something done, just in time for the next election cycle of course.
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AUTHOR: Micheal W. Armentrout, VP AM Appraisals, Inc. Mike has been involved in full time real estate valuation since early 1992 and has experience in numerous Central Ohio markets. He served as a staff appraiser at several local firms before forming AM Appraisals, Inc. with business partner J.M. Massey. e-mail: marmentrout@amappraisals.com web address: www.amappraisals.com
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