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.

Tags: The Appraisal Foundation, Appraisal Management Companies, AMC, TAF, trainee, diversity, BLS, U.S. Bureau of Labor Statistics, discrimination, race

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This is my fourth appearance with my friend Barry Ritholtz, a prolific columnist/blogger, radio show host/podcaster, and wealth management firm head on his Masters In Business show for Bloomberg Radio. He previously interviewed me in 2014, 2016 and 2020.

Barry also posted the interview on his essential Big Picture blog: MiB: Jonathan Miller, Appraiser Extraordinaire in addition to the Bloomberg Masters In Business landing page.

To say we talk a lot about housing and valuation in a crazy market wouldn’t do this fun conversation any justice. I am always thrilled to be in the company of his never-ending incredible lineup of guests.

To listen to the entire one hour and 49 minute show (sorry about that), you can go here:

Tags: The Appraisal Foundation, Bloomberg Radio, Barry Ritholtz, Appraisal Institute, Masters in Business

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This post previously appeared in the August 14, 2020 edition of Housing Notes. I’ve been writing these weekly summaries on housing topics for more than five years. To subscribe for free, you can sign up here. Then you can look forward to each issue every Friday at 2pm New York Time.

The TAF decline in credibility keeps on coming…

After the recent letter debacle where the Appraisal Foundation (TAF) opined falsely that Title XI did not permit the Appraisal Subcommittee (ASC) to provide oversight on TAF, we now have a letter from TAF essentially saying they are making so much money that they don’t need a grant this year from ASC. Who is writing all these letters? It can’t be Dave.

[click for full pdf]

In other words, because TAF saved so much money from not being able to fly around the country during the pandemic, they don’t need ASC Grant money this year. From this point, it’s only a hop skip and a jump to saying they don’t need the grant money so therefore they don’t need oversight. And grant money comes with “strings attached” – that the money used from a grant had to be accounted for to the ASC. And if TAF doesn’t need oversight this year, what is to stop them from raising USPAP related fees and stop collecting grant money forever? The conspiracy theorist in me is starting to worry about that aspect of this new more forceful tone out of TAF these days against any oversight.

No Grants = TAF + PPP

Why would the TAF turn down the annual grant process but still have the need to request PPP? What is the hardship they are declaring when they are saving hundreds of thousands in travel costs that are already questionable in their scale?

My appraisal firm in Manhattan applied for PPP because our business collapsed more than 90% almost immediately for two months. It enabled us to survive. I would think it would be obvious to TAF that their $626,000 annual travel expense would collapse. What other revenues would be sharply curtailed in the new online world?

That’s why Jeremy Bagott, MAI, AI-GRS, the Cosmic Cobra guy, issued this press release on July 6th:

* * * FOR IMMEDIATE RELEASE * * *

# #

Here is another email from appraiser Jeremy Bagott (The Cosmic Cobra guy). Bold my emphasis.

Dear Colleague,

Jeremy Bagott, MAI, AI-GRS
jbagott@gmail.com

Tags: The Appraisal Foundation, TAF, ASC, Appraisal Subcommittee, Jeremy Bagott, Cosmic Cobra, Title XI, grants, oversight, PPP

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I hope all my readers (and everyone else) are staying safe and healthy during this crisis – now let’s get to business.

With New York State on lockdown, real estate brokers/agents can’t sell real estate right now because they are not considered an essential business (yet they are in nearby Connecticut!) This declaration determines whether you can or cannot remain in business during a crisis like this.

Are real estate appraisers considered an essential business in New York? Yes. They are in New York State and they are stated as such in the federal Gramm-Leach-Bliley Act of 1999. But the fact that real estate appraisers are an “essential business” is not consistent in the federal language, especially now when many states are, or will be going on lockdown.

My good friend and appraiser/regulator Pete Fontana and I wrote a letter nicknamed: Fontana/Miller Essential Letter of March 24, 2020. This letter combines the scattered references to address this issue in very specific terms using key language in the public record that illustrates the fact that appraisers are an “essential business” now and going forward.

This letter is the first to address this important issue. It was just sent to Congress, state officials, trade groups, agencies, and other groups related to our industry today and went viral industrywide. The feedback from these groups has been immediate and overwhelmingly encouraging and positive.

Please share the Fontana/Miller Essential Letter of March 24, 2020 with your colleagues in the industry, trade groups, state governments, on forums, and with anyone or in any place you think is relevant to our industry.

Real estate appraisers are an essential business in our country, always have been.

Stay safe!

Tags: The Appraisal Foundation, TAF, Andrew Cuomo, Coronavirus, Maxine Waters, Sherrod Brown, Gramm-Leach-Bliley Act, Secretary Mnuchin, Peter J. Fontana, Essential Business, Public Trust, Fontana/Miller Essential Letter of March 24, 2020

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The Appraisal Foundation published an appraisal infographic that attempts to clarify common misconceptions by the borrowers about the appraiser’s role in the home buying process. The content is amazingly simplistic, but that’s the point.

I continue to be amazed at how so few people don’t understand what the appraiser’s role is in the home buying process. Perhaps this is why the appraisal industry continues to be marginalized in the lending process (ie appraisal management companies, Appraiser Independence Requirements) and the exodus of competent appraisers into other disciplines outside of residential mortgages continues.

Tags: The Appraisal Foundation, TAF, Appraiser Independence Requirements (AIR)

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Every so often, a Matrix reader submits something they feel very strongly about it and bravely enter the Vortex where I post it.

Guest Columnist: Cecil Simon

Cecil has been a New York general state certified appraiser since 1992. He takes a look at the intersection of professional education and licensing. He’s weighed in here before. Like me, Cecil was an appraiser before the licensing law in 1989 and in fact wrote Congress about this matter as early as 1986.

Admittedly this is super appraiser wonkiness, but it’s worth the read.

-Jonathan Miller

May 12, 2012

Did we get there? the promise of Licensing Appraisers.

How technically prepared are Certified General Appraisers? A recent editorial by Henry H. Harrison in his Real Estate Valuation Magazine, suggested the answer is not very well. In fact, Mr. Harrison even challenged readers to provide evidence that Certified General Appraisers did not make at least 80% of their living writing residential work.

I believe he is correct on the preparation issue, and incorrect on what Certified General Appraisers do in the industry. Most Certified General Appraisers have now become the workhorses for fee shops run by designated appraisers, working as independent contractors at low rates and without benefits. This was by design, and the education and experience requirements set by the Appraisal Qualifications Board in the early 1990s, later amended in 2008, bears me out.

It is now generally accepted that the requirements for General Certification set in 1991 were deplorable, although Harrison and other in his group did not think so when I first wrote to him in 1993. The 2008 fix with the addition of a course in Highest and Best Use and Market Analysis, and one in Report Writing was a plus, but the remaining content was just a split of two former lower level courses into some 120-140 hours. The final product was three hundred classroom hours, more than were required for the MAI in 1990, yet these were junior courses.

FIRREA had a specific mandate. That mandate required that the education and experience required for General Certification be such, that a person with those qualifications would be able to appraise any property without regard to value in a Federal related transaction. That is a high standard, which was well known to the Chairman and members of the Board from 1991 to 2004, yet they did otherwise. The reasons often given in support of the lower standards were the use of the term minimal education required, that States could add to the basic core, and that Certification requirements were intended as a beginning. But the mandate certainly does not imply that.

Basic appraisal education requires only six courses, seven if you add the new Quantitative Analysis course, which is a plus. The seven courses are Appraisal Principles and Procedures, Highest and Best Use and Market Analysis, Land Valuation and the Cost Approach, Direct Sales Comparison Approach, Income Approach, Quantitative Analysis, and Case Study and Report Writing. These names can be applied to Residential and General [Vortex] Did we get there? the promise of Licensing Appraisers.

Certification courses with different content, and all that is currently listed by the Appraisal Institute as Level 1 and 2 and required for their MAI designation can be covered in those seven courses. Hours can be assigned based on the content to be covered.

The seven basic courses plus four years of experience, and the State Exam, is more than adequate to lay the groundwork for Certification as well as any designation. It should be noted that the six courses used prior to 1990 for the MAI, and the four used for the SREA (101, 102, 201, 202), were all taught in less than three hundred hours. These courses produced some of the best educators and practitioners currently working in the industry, including Mr. Harrison. Even Universities that grant Undergraduate and Graduate Degrees in Real Estate offer only one or two courses in Valuation.

I took the trouble to review the education requirements for all of the original members of the Foundation that deal specifically with Real Property interest. The Appraisal Institute of Canada arguably has the best program, and the Appraisal Institute is the only one with Advanced Courses. Some startling facts also come to mind. The education requirements for the MAI designation have increased from 267 hours in 1990 to 482 in 2008, an increase of 215 hours, all without any change in the theory and methodology of valuing real property. The only industry change during that period was the use of software that makes database searches and data analysis easier. In fact, one group, The American Society of Appraisers could not even remember when they last hosted a basic course.

I believe that The Appraisal Institute is the best professional association representing appraisers and the leader in the industry, but its continued creation of advanced courses in order to create the illusion that its members and candidates are better prepared than Certified Appraisers is a farce. The same seven courses could easily serve as the core education requirements for candidates as well as General Certification. Additional requirements for designations can be added. The MAI designation is a highly recognized brand, and could be granted based on work experience and peer review. Downgrading the education requirements for Certification is a dumb idea, and it is clear that The Appraisal Subcommittee fell down on its mandate to monitor and review the practices and activities of the Foundation.

There are a few good textbooks out there on Appraising Real Property, and I place The Appraisal of Real Estate, published by the Appraisal Institute at the top of that heap. Now I would hope that any State that puts its imprimatur on the qualifications of any individual to call that person a Certified General Appraiser, expects that they have covered the content of that text from cover to cover. That was the intent of FIRREA. But it appears that by separating the content into General and Advanced sections, both the Appraisal Institute and the Appraisal Qualifications Board that it has controlled since 1989 seems not to think so. This difference in education is the centerpiece of Harrison’s thesis.

The Qualifications Board should simply set the education requirement as successful completion of a course in the seven areas and forget hours, and if a rigorous State exam is made part of the process, then The Appraisal Institute will be sure to include much of what it now calls advanced content in those seven courses.

On the issue of college education, professional associations may find this a plus, and hopefully the appraiser has written enough college papers to be able to write properly, but degrees in most disciplines will not make you a better market analyst.

The answer to my original question is yes and no. We now have a mechanism to punish bad apples, although better enforcement is needed, but the standards for education, experience and testing did not.

C M. Simon.

Tags: Appraisal Insititute, The Appraisal Foundation, Cecil Simon, Articles, Appraisal Institute, Canadian Housing Market

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Tags: The Appraisal Foundation, Appraisal Institute, David C. Wilkes

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