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Posts Tagged ‘AMC’

No Diversity: 96.5% Of U.S. Appraisers Are White

May 18, 2021 | 4:59 pm | Explainer |

Over the past year, beginning with this NY Times piece: Black Homeowners Face Discrimination in Appraisals that initiated a rising progression of news stories covering discrimination in the appraisal of houses. And most recently, this CNN piece: When a Black homeowner concealed her race, her home’s appraisal value doubled.

So I looked at U.S. labor force data from the U.S. Bureau of Labor Statistics [BLS], which ranked the top 400 occupations by sex, race, and Hispanic or Latino ethnicity. I’ve been an appraiser for 35 years and it’s been very clear that there is nominal diversity in my profession. For users of the industry’s services who have constantly complained about “appraisal shortages” (translated: a shortage of appraisers willing to work for 50% to 75% below the market rate) – here is your opportunity for action to expand our ranks.

The appraisal industry is aging out because it is hard to bring in youth. It is one of the only professions that require new entrants to have a mentor for their first two years and often without making a living, financially. One of the key reasons for this is because most financial institutions won’t accept a “trainee” until they are licensed or certified with two years of experience. A “trainee” is a derogatory term applied to an appraiser that is not licensed yet. While the GSEs like Fannie and Freddie are fine with “trainees” signing reports prior to their two-year experience threshold, most banks are not. Existing appraisers are all for the difficult entry because supply and demand are in their favor. Few other professions have this two-year mentorship period before an entrant can make a living.

Accountants don’t require a two year mentorship program before they can make a living. Free market conditions should let those with more experience make more money, but not zero.

As a result, entry into the appraiser profession via a mentor system essentially requires appraisers to have relatives that will hire and train them. Given the beginnings of the housing industry as explained next, you can see the problem with this approach.

The housing industry we know today was built on a foundation of racism by the federal government

…and racial covenants. No wonder why there is essentially no diversity in the appraisal profession.


[CNN: click on image]

These BLS numbers for 400 occupations show an incredible lack of diversity within the appraisal profession. In fact, U.S. appraisers were ranked dead last for diversity in the list of 400 occupations tracked by BLS with white appraisers comprising 96.5% of the industry. Here are some appraiser ratios from BLS.

And here are the 20 least diverse occupations. The appraisal industry is even less diverse than farmers & ranchers.


While The Appraisal Foundation [TAF] was created and enabled by Congress to maintain appraisal standards (ASB) and minimum qualifications (AQB) for entry into the appraisal profession, it was also created to protect the public trust. The Appraisal Foundation’s attempt to address diversity has largely been in the form of “checking a box” to be able to say they are working on it. Yet the only actions they have taken were the result of recent public pressure by people like myself and others to call them out. The most glaring tone-deaf situations at TAF demonstrate how inappropriate it would be to allow TAF to lead any diversity efforts in the profession:

  • An African-American had never held a board seat on the Appraiser Qualifications Board (AQB) until 2021. In other words, for more than thirty years, the organization has existed in a racial bubble.
  • There have only been three women who have served on the AQB in the past 30 years.
  • The head of the just-formed “diversity commission” is white and male.

Since TAF has not been able to see the problem for more than three decades until outsiders pointed it out and they have continued to make decisions that demonstrate their disconnect, TAF leadership is essentially the starting point to resolve the lack of industry diversity problem. Top-down is how this gets fixed if the stakeholders in the industry actually want it fixed. We have no leadership on this issue within the industry and solving this problem has to be top-down or it won’t ever be resolved.

And the news is getting worse for the appraisal industry as more and more stories like this are published yet TAF remains rudderless on diversity.

It’s time for Congress to step in.

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Some Financial Institutions Care About The Safety Of Appraisers, While Most Do Not

March 18, 2020 | 10:08 pm | Investigative |


[Johns Hopkins University]

As co-owner of an appraisal firm for 34 years, while based in Manhattan, we generally don’t drive to appraisal inspections. Our staff relies on public transportation to get around including buses, subways, and commuter rail. I’d been following the coronavirus in the news since early this year, and became quite alarmed by mid-February and soon suggested my staff work remotely. By the time the first Fed rate cut was made in response to the coronavirus on March 3, we adopted a screening process for appraisal inspections. When our team made an appointment for the inspection, we inquired about the health of the occupant, and then on the day of the inspection, the appraiser called again to confirm that conditions had not changed.

Soon after we learned that we could be carriers of the virus without knowing and infect someone vulnerable, we stop performing interior inspections.

My appraiser colleagues around the country have become very concerned, if not plain scared.

Here are two scenarios shared by appraiser colleagues in another part of the country. Imagine if the appraiser was a carrier?

Scenario 1 Conversation
Sounds good 10 am is better
Kids are home
With no school
If your sic with a cold or similar please reset appointment

Scenario 2 Recap
Borrower is elderly and on a respirator
Says the appraiser can walk through the house by himself
And reminds the appraiser to keep their distance

Appraisers should not be placed in harm’s way or be in a position to be forced to unintentionally harm another.

So let’s look at some industry actions of the past few days:

HEROES

These lenders have shown how much they respect the appraiser’s role in the mortgage process and their concern for the appraiser’s health and welfare as well as the borrower.

First Republic Bank
I submitted a temporary driveby appraisal solution to First Republic Bank, a large CA/NYC+ lender we have worked with since 1999. I feared for the safety of our appraisal staff and didn’t want to risk infecting others. Plus we were starting to get pushback from homeowners who are getting uncomfortable. They embedded this solution within days. I challenge any appraiser to name any other bank that is more professional, more appraiser-centric than they are. Here is the note they sent out to their panel.


Citibank
We’ve been working for Citibank since 1986 and have enjoyed a great relationship. This policy treats appraisers as human beings. I’m not sure how closely this policy will be observed by the AMCs they engage to manage their appraisals orders (read-on).


ZEROES (AMCS, etc.)


To combat the COVID-19 outbreak in the appraisal industry, Appraisal Management Companies (third-party institutional middlemen that account for as much as 90% of residential assignments) have essentially provided a lethal magnanimous gesture by simply telling appraisers to wash their hands often and stay away from people that are sick and that they must go inside the property. While I anticipate that many AMCs would defend their position of placing appraisers in harm’s way because their bank clients require it, I say that indicates selective morality or incredible ignorance. They could push back and make a strong case for public safety.

We are in the early stages of a global pandemic that may infect 100 million Americans (1 out of 3, conservatively) with a 3% death rate (that’s 1 million people if you do the math). The appraiser population has an average age in the high-50s, and we have been told that the older populous is the most vulnerable.

In reality, these AMC policies show disdain not only to appraisers but to their own (bank client’s) borrowers by letting a fee appraiser, who is paid only for the assignments they accept, determine whether or not the appraisers themselves are carriers of this pandemic and whether they can assess the safety of the property they inspect. Here’s a key point.

NO ONE CAN TELL IF SOMEONE IS A CARRIER IF THEY HAVE NO SYMPTOMS.

The following AMCs opted to treat appraisers as a widget instead of a human being requiring them to physically inspect a property when they now know that it is not safe to do so. Today I was told that one federal agency lost 20% of their appraisers because they have refused to continue doing interior inspections. Different cities and states have different rates of infection. Because we don’t have full testing in place as a country, the number of infections might be significantly higher than we might anticipate. My particular location in Manhattan is highly problematic because of the reliance on public transportation – buses, subways, commuter rail, and just walking down a crowded street – no social-distancing here. And based on the comments the NYC Mayor made yesterday, it is possible that tomorrow could see NYC restricted to “shelter in place” like San Francisco.

If you’ll note in this pattern of negligent behavior, great efforts were made to plan for the safety of order staff, but no regard for the safety of the appraiser, who is providing the service – telling appraisers to wash their hands and practice social-distancing when they know that it is not enough. When you get right down to it, these companies sent similar silly instructions so they can check off a box to be compliant. Yet they must know that appraisers could be carriers, and occupants in the property could be carriers. This is not business as usual.

When we pushed back the appointment on a few of our AMC clients for safety concerns, they simply took away the assignment and rescheduled with another appraiser. No human contact to assess the risk. In good conscience, even if the new appraiser doesn’t have symptoms or doesn;t think the occupant does, that AMC or lender is placing the public at risk, going directly against CDC guidelines. This is what robots would do.


Here is a sampling of AMCs that provided COVID-19 instructions in the past few days shared by my appraisal colleagues – this is clear evidence that they see appraisers as widgets instead of human beings. To save you the trouble of reading all of these INSTRUCTIONS, here’s the translation: WASH YOUR HANDS A LOT

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BREAKING The New York State AMC Law Is Now In Effect

April 27, 2019 | 10:38 pm | Milestones |

Back on April 19th, I wrote about the New York AMC law in my Housing Notes newsletter. After years of AMCs chipping away at the public trust, the New York AMC law was designed to protect the consumer.

The bill summary was:

Relates to the registration of real estate appraisal management companies or an individual or business entity that provides appraisal management services to creditors or to secondary mortgage market participants including affiliates by the department of state.

Yesterday Appraisersblogs ran it as a standalone post and I got a lot of feedback. To be clear, the bill was signed into law by Governor Andrew Cuomo at the end of last year and became effective 120 days later which is today.


Here is the NYS “AMC Law” as a PDF or in plain text on the landing page of the law.


The NY State Coalition of Appraisers (NYCAP), led by my friend and appraiser Becky Jones who along with other unnamed heroes worked hard to help make this possible, wants you to know that this law was not a last-second, fly by night effort as being characterized by The Real Estate Valuation Advocacy Association (REVAA) – the trade group that represents the bulk of the AMC industry in the U.S. – inferring this law was flimsy and easily overturnable.

No, it isn’t. Its been a long road and achieved unanimous consensus during the process.

When the draft of the bill was approved by the NYS Board of Real Estate Appraisal, Carol DiSanto who is the Vice Chair, walked it across the street to The New York State Association of REALTORS (NYSAR). In effect, REALTORS of New York State were made fully aware as the “draft” became part of NYSAR record at their next business meeting. Becky Jones sat on the Legislative steering committee at NYSAR and informed them about the bill. They had no objections to the bill before submission to the state legislature.

A similar proposal was introduced by the New York Department of State in 2015. Senate Bill S9080 was introduced two years ago during the 2017-2018 legislative session, signed into law on December 27, 2018 and became effective today. The voting was unanimous in favor by the rules committee of both houses and the body of both houses.

Here are the vote tallies (the same in both the NYS Senate and Assembly):

And here was the timeline:

A couple of AMCs we work with for some private banking groups sent emails to us yesterday:

Some thoughts

  • If you’re not an appraiser, then you want to read this. It is a 2011 take that still holds up on the AMC industry from American Banker’s Bankthink column (I’ve written a column there before on another subject): Appraisal Management Companies Create More Problems Than They Solve

  • When the realization sunk in that this was a new law, not a proposed bill, attendees began to text me from the joint committee meeting of The Appraisal Foundation. I got the play by play when the news was shared. It sent shockwaves through the AMC-types because, in my view, it effectively destroyed their ability to hide how much they are gouging the consumer and how little the appraiser gets from the actual “appraisal fee” (typically less than half). Seriously, the value-add provided by AMCs to the appraisal process in the delivery of actual appraisals might be 5%, but no chance in hell it is 75%. This is why we need consumer protection in the mortgage business.

  • I’ve been told by several colleagues that they’ve heard one of the main AMC concerns is whether New York interpreted the original law correctly to arrive at this form of law regarding AMCs. From my perspective, it’s like not buying a house because one of the gutters is missing a few screws to hold it in place. The criticism seems like a weird attempt at fogging since this law is protective of USPAP and the public trust, something that has been forgotten in the attempt to “modernize” the appraisal industry. But I’m no lawyer so I’ll look for clarification on their logic. But consider this:

  • REVAA’s biggest concern about the law was specifically the disclosure to the consumer as to what part of the fee goes to the appraiser. Not only does the appraiser get to state the fee, but the AMC fee must also be disclosed. This was upsetting to REVAA director Mark Shiffman presumably because the consumer would finally see that most appraisers get half or less than half of the appraisal fee the consumer thinks they are paying for the appraiser. REVAA has fought hard to hide this from the consumer, pushing back on prior attempts to disclose the breakdown, and finally, New York State has effectively brought to light this predatory practice. Transparency is good for the consumer and for the appraiser. Should a consumer be aware that the check they wrote at the time of mortgage application specifically for an “Appraisal Fee” be used to pay the appraiser less than half of it with the remainder to a wildly inefficient third-party institutional middleman they know nothing about?

  • The NYC AMC law will likely damage the evaluation platform that the Appraisal Institute has been advocating so intensely in state legislatures without disclosure to their own members yet diminishes the meaning of an appraisal certification to the consumer. It is interesting to see that AI National hasn’t taken a position on this new groundbreaking law, like yesterday. They’ve been progressive in their quick denouncement of other important issues, like appraisal waivers, so the lack of denouncement against AMCs is curious.

  • This new law only applies to appraisals ordered through AMCs (which control an estimated 80% of U.S. mortgage appraisal volume) for properties in New York State. (note: this why the law is described as “AN ACT to amend the executive law, in relation to registration of real estate appraisal management companies by the department of state”) New York is one of the few “voluntary” licensing states. There is no mandatory licensing so agents and brokers can perform appraisals and BPOs all day long. This was a key point that REVAA was trying to convey to NYSAR (I hold the CRE designation and all CREs in New York are automatically members of NYSAR) a few weeks ago when REVAA was on a mission to stop the law going into effect. REVAA reached out to NYSAR to claim how bad the law was for their agents and brokers but NYSAR wasn’t buying it because they could still perform BPOs and evaluations for local banks – just not for AMCs. Becky Jones shared a story about this situation from one of the CE classes she teaches: I had an agent work the whole thing in her head out loud during the class and at the end…the agent deduced on her own that she will contact local banks for the BPO work and she was especially thrilled because she realized that she will probably get the listing and therefore an opportunity to make more income. She was so thrilled she “high-fived me during class.”

  • A concern shared with me by a friend and appraiser colleague in Virginia was that most of the large AMC platforms, such as CoreLogic, Appraisal Port and Xome, use a portal that strips the report and the appraiser’s invoice is one of the forms that does not get uploaded (because they don’t want the consumer (i.e. mortgage applicant) to see how much the actual cost goes to the person providing a value opinion of their home. If AMCs continue this practice in New York State and are caught, they will lose their ability to do business in the state. They can risk it, but the stakes are high. There is always a concern that oversight of this will be lost in the shuffle so it is imperative that appraisers keep the pressure on.

  • Another appraiser colleague and friend I know in Illinois said: “So if you are curious what is happening in Illinois, here’s how we must report our fees. When discussing this issue 10 years ago, we were of the opinion that the invoice could get lost, but pages in the appraisal report don’t get lost. That’s why it must be in the body of the report.” Here’s the Illinois AMC law.

And finally…

It is ironic that the New York Governor, who was the creator of HVCC when he was NYS Attorney General and was a board member of a former Ohio-based AMC owned by a friend that eventually collapsed, leaving many appraisers unpaid for their work, was the signer of this law. Despite the irony, his concern for the consumer is incredibly appreciated by the appraisal community who have been beaten up by the AMC industry since 2009 under the false narrative that they are embedded in the process to protect the system. In reality, AMCs gave the mortgage system an empty promise that left the consumer and the taxpayer exposed to excessive costs, bureaucracy and a systematic deletion of quality. Even worse, they stole the economic livelihood of the actual market valuation experts and replaced them with form-fillers.

It is nice to see a state pay more than lip service to consumers within the mortgage business.

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Podcast: Guest hosting ‘Voice of Appraisal’ – Week of August 7, 2017

August 6, 2017 | 8:05 pm | Podcasts |

Phil Crawford of Voice of Appraisal asked me to cover for him while he took a well-earned vacation. While I don’t have his sweet, syrupy smooth radio voice, I can grow on you a little bit if you listen long enough. I talk appraisal war stories and appraisal business philosophy. Fun!

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[Housingwire] Hey 50-percenters, there is no “appraiser shortage” so knock it off

June 15, 2017 | 4:32 pm | Articles |

As a longtime reader of Housingwire, I always saw them as a great resource on the goings on in the mortgage industry. But lately, I grew concerned about the one-sided coverage as it related to my industry – residential appraisal.

HousingWire recently published an “appraiser shortage” blog screed that was tone-deaf to the problems facing appraisers. To their credit, Jacob Gaffney, the editor-in-chief, reached out to me for a rebuttal after reading all the negative appraiser feedback in the comments section. Rather than address specific failings of this piece, I opted to focus on current appraiser reality.

To start, the residential appraisal industry has a perception problem.

Read my full post on HousingWire.

Here is another thought on this appraisal shortage silliness. Not too long ago there was a webinar hosted by Housingwire that included some Powerpoint slides by one of the panelists, Matt Simmons. He is a Florida appraiser and former state regulator. He shared it with me and one of his slides is quite amazing. He matched mortgage origination volume with the federal registry of appraisers.

The finding?

The ratio of appraisers to mortgage volume has been higher since the housing bust than during the housing boom. While the chart only goes to 2015, both total origination and appraisers have changed little since then, so the ratio would remain stable, consistent with the post-financial crisis pattern. In other words, there are more appraisers now than there were during the Housing Bubble based on mortgage volume.


UPDATE Full Housingwire Blog Post with Comments [PDF]

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Doubling Down On Appraisers as ‘Lone Wolves’ – Valuation Review

March 23, 2017 | 7:29 am | Articles |

Note: I have been a subscriber of Valuation Review and it’s predecessor for years. It provides a wide perspective on the appraisal industry and I’ve always got something out of it. Over the past few years, I’ve noticed that the voices in the magazine seemed to be skewing more and more towards national level AMC executives. I suspect the PR departments of these firms make their top executives readily accessible washing out the voices of individual appraisers. So I sent the editor a note offering another perspective with links to my content. He was immediately interested in getting another voice so he interviewed me.

From the Wednesday, March 22, 2017, Valuation Review Article:  CEO suggests appraisal industry comprised of ‘lone wolves’.

CEO suggests appraisal industry comprised of ‘lone wolves’

Reasonable compensation, lender and AMC issues are constantly on the mind of the appraiser. When things aren’t falling into place, the process of assigning blame kicks into high gear with appraisers continuing to look for guidance.

“That’s the problem in that there really isn’t any leadership for appraisers to follow. The false narrative of an appraisal shortage continues to be pushed by AMCs, unfairly tarnishing the image of individual appraisers,” Miller Samuel Inc. President and CEO Jonathan Miller told Valuation Review. “When an industry takes a 50 percent pay cut overnight, good people leave or struggle to hang on and weaker players are attracted-which equals problems. But is it the fault of the remaining individual appraisers?

“AMCs are at a seminal moment,” Miller added. “In what other industry does the company managing the talent get about the same compensation as the talent them? An agent representing a Hollywood actor isn’t going to get $1 million if their client is receiving that same amount for a movie role. It is a broken model.”

Like many in the appraisal profession, Miller strongly believes that there is not a shortage of appraisers. In fact, he more than challenges one reason for such a shortage is that too many burdensome regulations are being placed upon appraisers.

“There is a shortage of appraisers willing to work for 50 cents on the dollar,” Miller said. “The AMC model has hit a wall. AMCs have run out of new people willing to work for 50 cents on the dollar. Sadly, consumers think appraisers are getting the appraisal fee stated in their mortgage documents. They aren’t and typically the appraiser receives as little as 50 percent of it.

“The Appraisal Institute says there is a shortage of appraisers and seem to be championing the AMC concept but appraisers don’t understand why,” Miller added. “I’m not against AMCs; rather, I’m against the execution of business by the AMCs. They treat appraisers as a commodity rather than a professional service.”

For the rest of the story, visit here.

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Voice of Appraisal Podcast: E123 “Solving Problems with Jonathan Miller!”

October 7, 2016 | 10:30 am |

Had a fun interview with Phil Crawford and his must listen weekly Voice of Appraisal talk show. I’ve set up a home button on my iPhone to grab each new interview. My only regret in life is not having Phil’s smooth silky radio voice. He provides a great service to the appraisal community.

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Multi-millionaire Motivational Speaker Dean Graziosi Shares His Appraisal Wisdom

October 4, 2015 | 4:40 pm | | Favorites |

Huffington_Post_Logo

Over the past few days I’ve been sent this blog post by a number of real estate appraisers who are upset with its derogatory reference to our profession. It was written by Dean Graziosi in the Huffington Post guest blogger section. I’ve never heard of him but perhaps that’s because I’m not a real estate agent. If you insert the word “scam” in your google search, there are a lot of additional insights that come up.

His Huffpost bio and web site indicates he is a NY Times Best Selling Author along with one of the top personal motivation and real estate trainers in the world. I also learned from his bio that he is a multi-millionaire, a guru in the personal motivation sector and cares deeply about his students. Translation: He basically teaches real estate agents how to sell.

watchgraz

Good. While it’s not my thing, I’m happy for Dean’s success (notice how his watch is strategically placed within his Facebook head shot as an indirect confirmation of his success) assuming no one was hurt. However as a public figure (as indicated on his Facebook page with 340K+ likes), Dean has a responsibility to convey information accurately to his students if he does indeed care.

While I doubt he wrote it it personally, his brand handlers managed to mischaracterize two key issues in a small blog post on HuffPost:

  1. Graziosi frames the current housing market as equal to the bubble’s peak but doesn’t accurately describe what that means.
  2. Graziosi frames the real estate appraiser as something other than a real estate professional while the real estate agent is a professional.

1. Housing Market

Graziosi cites the FHFA trend line as breaking even with the 2006 peak. Yes, based on FHFA methodology that’s certainly true and taken directly from the most recent FHFA report. I do feel the need to split hairs here since his “brushstroke style” of simplifying everything misaligns with reality. He says:

First, and most important, it requires repeat sales of homes, so if there aren’t huge numbers of sales, then we’re looking at a number derived from a small set of sales data. So, we’re not necessarily seeing an excited bunch of buyers flocking to the market. We are seeing a whole lot of homeowners who aren’t selling, waiting for rising values. So, we have a small inventory and competition for it.

The problem here is that there are a lot of sales outside of FHFA data – and FHFA only tracks mortgages that go through Fannie and Freddie. Roughly 30% of home sales are cash and another 5-10% of them are jumbo loans, too large to be purchased by the former GSEs – so they don’t get included. FHFA also excludes new construction.

fhfajuly2015

The Case Shiller index is also a repeat sales index like FHFA but shows a different price point for the current market because it includes transactions outside of the GSE world.

CSJuly2015CR

If we look at the number of sales, which is the key point he makes, sales activity is low because we’re not necessarily seeing an excited bunch of buyers flocking to the market. But in reality, home sales are not low and they have been rising for 4 years. Of course sales are not at pre-crash highs because those highs were created largely by fraudulent lending practices including the unethical behavior of consumers caught up in the systemic breakdown that included nearly all particpants in the mortgage process.

EHSAug2015CR

Graziosi is right that inventory is low, but not because buyers aren’t flocking to the market – many buyers are being held back credit access has over-corrected. Many homeowners can’t qualify for the next purchase so there is no point of listing their home for sale.

EHSInvAug2015CR

Conclusion – we are not at the pre-Lehman market peak unless you only look through the eyes off FHFA, a distorted subset of the overall housing market. I would think that real estate gurus understand this.

2. Appraisal Industry

Let’s move on to the real reason I am writing this post.

I can ignore Graziosi’s “lite” market commentary but I can’t ignore his misunderstanding of the appraiser’s role in the purchase mortgage process (buyers applying for a mortgage to purchase a home.)

Don’t call an appraiser, as their approach to market value is different than that of a real estate professional. The real estate agent is trying to get you a sold price near to the top of the market, and their CMA, Comparative Market Analysis, is going to give you a pretty good idea of its value.

There is so much to talk about within these two sentences I’m not sure where to begin. It’s mindbogglingly simplistic, misleading and uninformed. Perhaps this is how he makes his students motivated?

Lets go for the big point first:

“Don’t call an appraiser, as their approach to market value is different than that of a real estate professional.” He must be thinking along the lines of the IRS definition, which is

To meet the IRS requirements, you need two things: spend the majority of your working time spent performing qualified real estate activities (regardless of what you do), and rack up at least 750 hours. Qualified activities include “develop, redevelop, construct, reconstruct, acquire, convert, rent, operate, manage, lease or sell” real estate.

Nary an appraisal-related definition within that list.

The problem with Graziosi’s communication skills as a best selling author and nationally renowned real estate guru who gives seminars for a living to communicate to his students (agents) how to succeed is – if we (appraisers) are not “real estate professionals” then it is a hop, skip and a jump to suggest we are “unprofessional” as if appraisers are something less than a real estate agent. Ask any consumer if they hold real estate agents in higher regard than real estate appraisers? In my view both industries don’t have sterling legacies but one isn’t more professional than another. Remember that he is used to speaking to his students who are real estate agents, the kind that sign up for this type of course. Promote BPOs and help agents get more listings – has got to be his recurring mantra.

The second issue with his quote concerning an appraiser’s value opinions – “their approach to market value is different” than a real estate agent. Providing an opinion of market value is likely the intention of both. Most real estate agents are hoping to get the listing and the appraiser is not incentivized by the home’s future sale. The agent may be the most knowledgeable person in the local market but there is an inherent potential conflict. Graziosi suggests that the broker will give you a price you want to hear. However I do like his idea of getting three broker opinions – that’s a very common practice – nothing new there. Ironically both an agent and an appraiser are looking at closed sales, contracts and listings but the appraiser doesn’t have an inherent conflict. They aren’t going to get the listing no matter how accurate their value opinion proves to be.

One problem with today’s appraiser stereotype as this column brings out indirectly, is that bank appraisers now generally work for appraisal management companies (probably about 90%) and the best appraisers tend to avoid or perform minimal AMC work because they can’t work for half the market rate. As a result, good appraisers aren’t necessarily known as well by the brokerage community as in years passed unless they get in front of the brokerage community in other ways, like giving seminars, public speaking, etc. Competent brokers within a market will know who the competent appraisers are.

There are unprofessional professionals in every industry – doctors, lawyers, deepwater diving arc welders and farmers, so please don’t make sweeping pronouncements to the contrary – especially if you are in the business of communicating information to “real estate professionals”.

Conclusions

The real estate appraisal industry is not unprofessional
IRS definition aside, real estate appraisers are real estate professionals

As I’ve walked through this response, I realized that the silly advice blog post in the Huffington Post by an infomercial guy did what it intended, stir up conversations of any type to get his name out there when his actual content was devoid of useful information. There is a great post I stumbled on the industry of motivational speakers: Real Estate B.S. Artist Detection Checklist. Worth a read.

Looks like I’m never going to be a multi-millionaire wearing a huge watch strategically placed in my head shot. If you notice my own head shot in the righthand column, my watch is very small.

Sigh.


UPDATE From the I have no idea for whom the appraisal is being performed but I am a 20+ year real estate professional (see definition above) department: Here’s an article from the Santa Fe New Mexican “Be cautious of appraisals” that damns appraisers using a stunning lack of understanding of the appraiser’s role in the mortgage process given his experience. This piece was written by a mortgage broker who was also a former financial consultant and real estate agent. The author states:

Everyone in every business falls under some measure of accountability. Certainly appraisers must also be accountable to their customer. The customer is the homeowner, not the AMC.

No it isn’t.

The appraiser’s client in the mortgage appraisal situation you describe is not the homeowner. The AMC is acting as an agent for the lender in order to for the lender to make an informed decision on the collateral (of course that’s only a concept). The appraiser is working for the AMC (who works for the lender) and not for your homeowner. Your logic from the housing bubble still sits with you today.

Yes I agree that the quality of AMC appraisals for banks generally stinks, but blame the banks for that, not the appraisers. Quality issues don’t change who the appraiser is working for. AMCs do internal reviews and make ‘good’ appraiser’s lives a living hell for half the prevailing market rate loaded with silly review questions by 19 year olds chewing gum to justify their own institution’s reason for existence. No wonder you are frustrated with appraisers from AMCs. ‘Good’ appraisal firms like mine avoid working for AMCs whenever possible. Yes I would be frustrated as a mortgage broker today because your industry got used to using appraisers as “deal enablers” during the bubble and nothing more. I contend that the current mortgage process post-Dodd Frank is clearly terrible and AMCs are a big part of the problem.

ASIDE This new era of online journalism for print stalwarts like the “Santa Fe New Mexican” and new versions like the “HuffPost” rely on filler-like the above 2 articles discussed here. Very sad.

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Infographic: 25 Year Demise of the Bank Appraisal Industry and the Rise of AMCs

May 31, 2015 | 8:05 pm | Infographics |

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[click to expand]

I thought I’d build a visual representation of the decline of the appraisal industry – sort a flow chart, but really an excuse to use different colored shapes and sizes. This is a work in progress so please feel free to let me know what I’ve missed, which presumably is an infinite amount of detail.

Open the timeline as pdf.

UPDATE – Fixed a few typos and grammar weirdness in graphic.

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Getting excited about the “Top Appraiser” making $25K last year!

January 28, 2015 | 10:25 pm |

25kperyear

I’ve received a couple of these appraisal spam messages recently and I was struck by the audacity of the messaging.   Of course this firm could be inferring through the use of poor grammar that this is a good way to get additional work for your appraisal practice.

Still, the “top appraiser” made $25K last year!

In the email marketing piece and the web site  there is no mention of competence, experience or quality.  The messaging is all about how this firm automates the sign-up process with all the AMC’s that the lucky appraiser gets to work with as well as providing plenty of inspirational discussion about fees, turn times and how quickly the appraiser gets the check.

Still, the “top appraiser” made $25K last year!  Yay!

Good grief.

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Bloomberg View Column: Do Experts Value Your Home More Than You?

December 26, 2014 | 2:19 pm | | Charts |

BVlogo

Read my latest Bloomberg View column Do Experts Value Your Home More Than You?. Please join the conversation over at Bloomberg View. Here’s an excerpt…

Homeowners are almost naturally inclined to have a higher opinion of their properties than anyone else, including potential buyers, lenders, brokers or appraisers. But that wasn’t always the case during the bubble years, and inflated real-estate appraisals contributed to the excesses.,,

[read more]


My Bloomberg View Column Directory

My Bloomberg View RSS feed.

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Bad Actors: AMC Appraisal Perspective Through Rhetorical Misdirection

October 20, 2014 | 4:45 pm | Public |

I was invited to speak at the Great Lakes Chapter of the Appraisal Institute last week and met a lot of great appraisers who cover the state of Michigan.

Summit2014Brochure

I spoke about the housing market and the misinterpretation of residential housing metrics, inspired by this article and the following infographic from the Detroit Free Press.

Inkster +106.4% !!!!! a largely distressed market with what I was told only has a handful of rock bottom sales ie $10K in 2009 becomes to $30k in 2014 – a perfect example. Hot? Hardly.

dfp-real-estate-hot-spots-2014-MAP

As much as I think I held their attention for the entire hour allotted, my presentation fell short of getting audience adrenaline pumping like the Jordan Petkovsky, the Chief Appraiser of a TSI Appraisal, a large national AMC and affiliated with Quicken Loans. I still wonder how beneficial this public relations could be by talking to the industry like a politician – as if residential appraisers were clueless to the “incredible benefit” that AMCs provide our industry.

Here are a few of the questions (paraphrased) posed to an audience comprised of heavily experienced residential and commercial appraisers:

Q: “I realize there is friction between AMCs and appraisers. What has to happen to solve this problem?”
A: Someone in audience: “Someone has to die” followed by a burst of laughter from the entire room.

Q: “We spend millions on powerful analytics. Wouldn’t it be great for appraisers to get their hands on this technology?” (repeated 2 more times slowly for effect).”
A: Someone answered: “You have to spend millions on technology because the appraisal quality is so poor you need to analyze the markets yourself.”

Q: “How do we attract new appraisers into the business?”
A: My answer “Until appraisers are fairly compensated when banks are made to be financially incentivized to require credible reports, nothing will change.”

Q: “How do you think banks feel about the reliability of appraisals today? They don’t feel the values are reliable.”
A: My answer “Because AMCs pay ±half the market rate, they can only mostly attract form-fillers (aka “corner-cutters”). They don’t represent the good appraisers in the appraisal industry.”

Q: “We focus a tremendous amount of effort on regulatory compliance on behalf of banks and boy are they demanding! We even have a full time position that handles the compliance issues.”
A: My comment – that’s a recurring mantra from the AMC industry as a scare tactic to keep banks from returning to in-house appraisal departments. Prior to 2006 boom and bust cycle and the explosion of mortgage brokers with an inherent conflict of interest as orderers of appraisals, the profession was pretty good at providing reliable value estimates. The unusually large demands by regulators (if this is really true and I have serious doubts) is because the AMC appraisal quality is generally poor. If bank appraisal quality was excellent, I don’t believe there would be a lot of regulatory inquiries besides periodic audits.

What I found troubling with his presentation – and I have to give him credit for walking into the lion’s den – is how the conversation was framed in such an AMC-centric, self-absorbed way. I keep hearing this story pushed by the AMC industry: The destruction of the modern appraisal industry was the fault of a few “bad actors” during the boom that used appraisal trainees to crank out their reports. That’s incredibly out of context and a few “bad actors” isn’t the only reason HVCC was created – which was clearly inferred.

Back during the boom, banks closed their in-house appraisal centers because they came to view them as “cost centers” since risk was eliminated through financial engineering – plus mortgage brokers accounted for 2/3 of the mortgage volume. Mortgage brokers only got paid when the loan closed, so guess what kind of appraisers were selected? Those who were more likely to hit the number – they were usually not selected on the basis of quality unless the bank mandated their use. Banks were forced to expand their reliance on AMCs after the financial crisis because the majority of their relationships with appraisers had been removed during the bubble – the mortgage brokerage industry imploded and banks weren’t interested in re-opening appraisal departments because they don’t generate short term revenue.

The speaker spent a lot of time talking like a politician – “we all have to work together to solve this problem” “appraisers have to invest in technology.” When asked whether his firm had an “AVM”, he responded almost too quickly with “No” and then added “but you should see our analytics!”

The residential appraisers in the audience were largely seething after the presentation based on the conversations I heard or joined with afterwords.

It’s really sad that appraisers don’t have a real voice in our future. We’ve never had the money to sway policy creation and we can’t prevent the re-write of history.

But we’re clearly not the “bad actor.”

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