No Birthdays For The False Narrative Of The ‘Massive’ Appraiser Shortage
First of all, today is my birthday and there is nothing better than sitting down on this special day (for me) and writing these Housing Notes. To take it one step further, it’s a hop skip and a jump to say that every Friday morning is a birthday to me. Keep in mind that I’m a fan of stretching out birthdays and holidays for weeks on end for maximum accolades. My friend, top real estate broker and mayor of a Manhattan Dunkin’ Donuts on Foursquare Paul Zweben wins the award for providing my first birthday well wish. As an honorable mention, my oldest son called me from his honeymoon and claimed the top spot in the category “wishing me a happy birthday by making an international phone call.”
But I digress…
A Downward Arrow Isn’t Always A Good Thing
When your crosstown rival has the best record in baseball, you need to come up with a reason.
…the arrow flap has caused discussions between the Sox and the mortgage-lending company about the future of the pesky park arrow pointing south.
A new real estate category: curated luxury rentals with hospitality services
I’ve been consulting for a global hospitality brand known as one fine stay over the past year. What intrigued me from the start was how they created a new real estate category: curated luxury rentals with hospitality services. It seems like a perfect solution (of many) for the over supply of super luxury development and create new income streams for existing property owners, enabling additional value creation.
I wrote a white paper on a 30-year history of of new development in New York to help understand how we got to this point. I saw a blending of this new category with the recent slowdown in the super luxury real estate market.
“Tech” Companies’ ‘Race to the Generic’
Streeteasy Streeteasy is a real estate search engine that has become ubiquitous to the New York City real estate market. So much so that Zillow bought them for $50 million a few years ago. When Streeteasy burst on the scene it was a game changer because they understood our vertical housing market and presented sales and listings in an intuitive way. They provided quirky features which was what made it so cool. Streeteasy also taught the real estate brokerage community that they have been wasting millions in web site development trying to be all things to all consumers.
I naively assumed Zillow would take this awesome model and use it across all the urban markets they cover. Unfortunately they just wanted access to the massively loyal New York user base and removed all original staff in short order.
Don’t get me wrong. Streeteasy is still a terrific resource, but over the past year I have seen a removal of a number of features that made the site so useful. Streeteasy is slowly being Zillowized and I find that alarming.
Just because a category creating tech company bursts on the scene, doesn’t mean it can sustain the innovation and avoid drifting into the bland. When I have complained, it get a generic response like this:
I’ve posted articles and commented on the upstart real estate brokerage company known as Compass that has been expanding through a massive infusion of capital. They havn’t garnered much market share or shown any obvious technology or data advantages that are constantly touted by their senior executives as reason for their $1 billion+ valuation. It’s curious. When press releases and pronouncements don’t match my understanding of the industry it’s my nature to ask a lot of questions.
This week there was an anonymous youtube post that made the industry rounds. I have no idea who created it but I think it’s worth watching since it brings up many questions and observations I have made. It has no bearing on my life but I worry about the agents who were attracted by the marketing full court press. The Real Deal Magazine just published an article on this anonymous video.
The False Appraiser Shortage Narrative
There was a CNBC article this week by Diana Olick that caused an uproar in the appraisal industry: ‘Massive’ shortage of appraisers causing home sales delays. Besides the incorrect inference of the title, the article was centered around Brian Coester, CEO of the Maryland-based CoesterVMS, currently one of the most controversial personalities in the appraisal management industry. His AMC is in the middle of a big lawsuit that the entire appraisal industry is following. I’ve been chronicling the Coester lawsuit in Housing Notes. Please take time to read the previous link to understand how “TMZ” it is.
Yesterday I taped another interview with Phil Crawford on his Voice of Appraiser radio show. His weekly show is a required, mandatory listen for anyone in there appraisal industry or who interacts with it. My interview will go live a week from tomorrow and in it he told me I should reach out to Diana Olick about that article. I’ve learned from experience that you need to listen to Phil and do what he says.
So I spoke with Diana Olick about the article this morning. I’ve known her for a long time and read all her stuff. She clearly did not realize what CoesterVMS represents to the appraisal industry but learned this from the outpouring of negative comments on the article by outraged appraisers. She understands now. How great is it that appraisers are getting out there and speaking their mind!
I told her that Coester is a notorious AMC in the middle of a big lawsuit that the entire appraisal industry is following. The shortage of appraisers is a myth being perpetuated by AMCS like Coester since their model only works if they pay appraisers a third to half the market rate for appraisal services.
The appraisal industry essentially measures supply and demand for a living, and are also subject to supply and demand.
In other words there is no shortage of appraisers, there is only a shortage of appraisers willing to work for as little as half the market rate. Brexit help create a refi boom and good appraisers are working for other clients that will pay more for their services.
It’s surreal to watch this false narrative perpetuated when it simply exposes the flaw in the mortgage system created in the wake of Dodd-Frank. Appraisers operate in a free market and AMCs can’t assume that appraisers will not work for what the market will bear. As Phil Crawford said during out interview on next week’s episode of Voice of Appraisal, appraisers have applied their “highest and best use” to their profession. Good appraisers are going to work for clients that pay them a fare wage for their services. As it currently stands, the AMC industry has not embraced the free market concept and have called us greedy and selfish. Incredible.
Appraiser News had an excellent blog post a few weeks ago that conveyed a message from the Virginia Coalition of Appraiser Professionals. With the Appraisal Institute and other organizations dormant, mired in self-serving politics of self-preservation, it is incredible to see this grassroots coalition movement expand to serve the appraisal industry.
Here are some key talking points about the position that AMCs have in our industry:
The use of an AMC is not required by any federal or state law.
The use of an AMC does not provide any benefit to the appraiser.
The use of an AMC does not provide any benefit to the consumer.
The use of an AMC has not protected the consumer.
The use of an AMC has failed to protect public trust.
The use of an AMC has increased the cost of the appraisal to the consumer.
The use of an AMC has decreased the income of the appraiser, thereby harming local economies.
The use of an AMC has increased the turn time for the delivery of the appraisal.
AMCs operate on a fast and cheap model which has deteriorated the quality of appraisals.
AMCs have caused undue stress on the appraiser by demanding constant updates.
AMCs hire unqualified employees that lack comprehension of the appraisal process.
AMCs have caused a great number of experienced appraisers to discontinue completing appraisals for financial lending purposes.
AMCs have failed to provide any benefit to the appraisal profession, the financial industry, or to the consumer.
A Brilliant Idea
If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them. They’ll close their AMC, you’ll bounce off of gym equipment and I won’t drill a hole in my iPhone. Oh, and happy birthday to me.
See you next week.
Jonathan Miller, CRP, CRE
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Reads, Listens and Visuals I Enjoyed
- Anonymous Takedown of Compass [YouTube]
- Posting Political Signs in the Window Is Your Right — Isn’t It? [NY Times]
- Sneed: Guaranteed Rate logo may need arrow adjustment [Chicago Sun-Times]
- Amid questions, Greenwich real estate market holds steady [Stamford Advocate]
- Fannie Mae: Mortgage Serious Delinquency rate declined in August, Lowest since April 2008 [Calculated Risk]
- Chinese billionaire Wang Jianlin warns of ‘biggest bubble in history’ [CNNMoney]
- Giant smog-sucking tower creates ‘bubble of clean air’ in Beijing [Curbed]
- Banks Face a New Adversary [The Motley Fool]
- What Do Anna Wintour and Bob Dylan Have in Common? This Secret Garden [NY Times]
- Newly Impoverished Greenwich Residents May Soon Be Reduced To One Butler A Piece [Dealbreaker]
- 11 signs your neighborhood’s jumped the shark [Brick Underground]
- Jorge Pérez: Expect residential development in Miami to slow, not stop [The Real Deal Miami]
- Release the hounds: Attack email targets Compass, alleging number fudging and toxic work culture [The Real Deal NY]
- Mapping the Ways People Commute to New York [Citylab]
- Realtors defend strength of Greenwich market [Greenwich Time]
- Rent control’s unintended consequence of more expensive housing: Editorial [Oregon Live]
- A $195 million estate once owned by William Randolph Hearst is now tied for the title of America’s most expensive home [Business Insider]
- Delinquent Homeowners Could Get Respite After Obama Plan Expires [Bloomberg]
- Voyeur: Doors of Manhattan [NY Times]
My New Content, Research and Mentions
- The Most Unusual Homes Available Right Now, From A Luxury Cave To A Giant Turtle [Forbes]
- Pinching Pennies in the Hedge-Fund Capital of America [Bloomberg]
- Buy a Vermont private island for the price of one-bedroom New York apartment [Marketwatch]
- All-Cash Sales in the U.S. Hit Record Low [Mansion Global]
- Startup Offers Payment Insurance for Apartment Hunters [WSJ]
- Insurance providers are increasingly backing NYC renters who don’t meet landlord requirements [The Real Deal NY]
- Billionaire Capital Turns Into Ghost Town: “Home Contracts Down 80%”, Trophy-Cars Pile Up In Showrooms [Zero Hedge]
- This Bubble is SO Ready to Burst [Habitat Magazine]
- Scorecard: The best and worst neighborhoods for building violations [The Real Deal NY]
- Here’s How to Price the Value of Your Home’s Outdoor Space [Mansion Global]
- Landmark in limbo on Billionaires’ Row [NY Post]
- An inside look at Manhattan’s condo pipeline [The Real Deal NY]
Appraisal Related Reads
- ‘Massive’ shortage of appraisers causing home sales delays [CNBC]
- Appraiser Coalition to AMCs: your services are not needed! » Real Estate Appraiser News: Appraisal Industry Information [Appraiser News]
- Agents, are you preventing appraisers from doing their job? [Birmingham Appraisal Blog]
- How many appraisers are increasing their fees? [Appraisal Today]
- Appraisers Just Say No to Certain Assignments From Certain Clients [AppraiserBlogs]
Extra Curricular Reads
- Arnold Palmer, golf legend, dies at 87 [Yahoo Sports]
- Elon Musk Reveals His Plan to Send Humans to Mars—for the Price of a Lamborghini [Vanity Fair]
- Stop touting the crazy hours you work. It helps no one. [Washington Post]
- A Periodic Table of New York City Trash [The New Yorker]