The Real Estate appraiser profession is under attack. It’s being put under the microscope as we speak to be analyzed to its core. From alleged Racism in the job to Artificial Intelligence to develop new concepts of hybrid appraisals, the appraisal profession hasn’t been examined this much since the housing crash of 2008. However, I have noticed that all the authorities, the appraiser organizations, and more continue to put a Band-Aid on an open wound. A Band-Aid a temporary fix to try and make things better.
Band-aids have been used in the appraisal profession for years. Instead of sitting down, examining the issues, and developing a well thought out strategy to fix any issues, organizations (who don’t represent all appraisers), Government (to which most have no actual understanding of the appraisal process), and other outside entities continue to put band-aids on wounds that have now become infected and have penetrated so deep that the only way to fix them is to amputate.
Let me give some examples as to what I mean here. First, we will start with the Housing crash of 2008. When the market crashed, the people that were 100% responsible for it were let off the hook. No one went to jail; no one was held accountable for their actions, but something needed to be done. Someone or a professional needed to be held accountable and since the banks and lenders were let off the hook, that left the Real Estate Appraiser Profession to be held accountable. In 2009, a man who had vested interest in real estate, etc., now Governor Cuomo of NY, took others’ word and instituted a new law called HVCC or the Home Valuation Code of Conduct. This law would put a middle man in place between the lenders and appraisers to keep them from Inflating values to make loans work. This is the Ultimate Band-Aid. When it was put into effect, all those bad actors were off the hook, and it created a new segment, a new barrier, and put hardworking, honest appraisers out of business. See HVAC allowed for the mass creation of AMCS (Appraisal Management Companies), which have been around before the crash; however, this new law allowed bad actors, Lenders, and more to create their own new companies to keep doing what they were doing before. It took away all the relationships appraisers worked hard for over the years to build reputable companies and compete in a free market system. With this new system, a new party to the real estate transaction was born and continues today.
So how is this a band-aid… think about it. There was no need for this to happen. All it did was put a protective covering over the top of the open wound, these bankers, lenders and more created. It didn’t stop the bleeding. It didn’t prevent the infection as the infection began other issues. Issues like: appraisers leaving the space, appraisers losing all business overnight and starting over, appraisers getting paid pennies on the dollar because well, while the law was somewhat thought out, no one thought about how these new entities into the space would be paid. You can see an article I wrote a couple of years ago that still applies today called “What’s Not In Your Wallet” or click here: https://skaptheappraiser.net/2018/03/28/whats-not-in-your-wallet/
So as time went on, HVCC Became Dodd-Frank. While some things were altered , the HVCC premise remained as a core. AMCS are still here, and they continue to create issues for appraisers and lenders. Many, if not all, of these AMCS made their own rules that they put into their engagement letters. One such direction is that Only a Certified or Licensed appraiser can inspect a home. Trainees??? Sorry, you cant do them even if you have the knowledge to do so. This once again became part of the open wound that we still have a band-aid on. This wound was going deeper; it was now creating issues where many appraisers stopped considering taking on trainees to train. Why? If you followed read my blog post above, you would see that AMCs are now taking a cut of the appraisers’ fee, thus offering them less compensation to complete an assignment. Taking on a trainee is not easy. It’s also time-consuming and thus taking away from your income. When AMCs offer less compensation to you, would you still want to pay someone to learn and take part in that compensation that is already very low? My answer is most likely a NO. The original Band-aid is already failing..
Some out there started to see that this band-aid wasn’t holding on well enough and thought some changes needed to be made. Their Idea… Let’s get other people NOT trained or not having any idea what an appraiser looks for upon an inspection to come aboard and complete inspections. They didn’t sit back and say, “well, maybe we should offer more compensation to get qualified people, or hey, let’s allow trainees trained properly by an appraiser to go inspect homes”, NO they thought it would be better to pay someone $25-50 who has ZERO ideas, not background-checked, and zero knowledge of appraisals, to go to a home and take pictures, take notes and then send that info to a qualified appraiser to complete a report. Humor me a minute: We will send anyone else out there to a unlicensed home who has zero knowledge and has no experience before we will allow an actual appraiser trainee that has been trained by a licensed appraiser to conduct an appraisal inspection. It makes sense, right? I always take my car to an unqualified mechanic, allow unlicensed contractors to repair my roof, and well I go to a doctor or dentist that is unlicensed, and I’m sure they will diagnose me correctly.
WELCOME to the Hybrid appraisal process, where your inspector can be an Uber driver who took an online class to gather information to send to a qualified appraiser. Can you say “BAND-AID”. Now I will say that qualified individuals such as home inspectors who conduct a much more in-depth inspection than appraisers Could give the appraiser the right info, but here is my question?? Why aren’t actual appraiser trainees allowed to inspect and provide this info? The answer is simple. AMCS and others believe it’s cheaper and easier, thus allowing them to make more money. Pay $500 for a licensed individual to do it or pay $50.00 to an inspector with no experience but has guidelines and then pay the appraiser less since they do not have to go to the home. If this isn’t a Band-Aid, I don’t know what one is.
Now we get to the last issue: AI or artificial intelligence. You know them well, Zillow, Redfin, Realtor.com, etc. Those sites that take all the info from public records and MLS then develop some magical value. Here is a small secret. Public records and MLS are not 100% accurate, thus feeding their algorithms lousy information. Does the algorithm know if you recently remodeled your home? Does it see the house next door was a foreclosure? Do they even stay within the same school districts? Do they compare ranch homes to ranch homes, or do they use colonials? DO they know that your basement was finished using Home Depot base products vs. high-end products? Do they know that your addition isn’t legal, or your home has damages to it? 99% don’t. I give 1% because the A in Zillow stands for Accuracy. These algorithms have become more prevalent due to technology and the failures of leadership and organizations to provide factual evidence that AMCS, Dodd-Frank, and more have failed you, the consumer. Instead of stepping up and making a difference, they decided it was best to put another band-aid on top of the wound that has now infected a profession. Many of these organizations have a member who owns AMCS, who continues to try to put themselves in a better position instead of standing up for the profession.
Organizations for appraisers have done a poor job fighting for the profession. They keep putting band-aids on this open wound. A wound that is now faced with claims of Racism, and yet all they want to do is cover it up again instead of standing up and making a difference—demanding that claims of Racism be investigated in-depth and not just accepted and factual. These organizations and more have done nothing but take what Dodd Frank , HVCC, and other laws state instead of stepping up and demanding that significant changes be made. They don’t stand by the profession unless it benefits them or their members. Even then they stand by their AMC owner members before they stand by the rest of their members. Sad that this is how it works.
Real Estate appraisers like myself are proud people. We worked hard to become an appraiser. We abide by the laws and continue to get hammered by states and federal governments just because we are doing what we are supposed to do. Be unbiased, be analytical and be factual in our analysis with our professional opinion of value. We don’t have a national organization that will stand by us, and that needs to change. NAR (national association of realtors) will do what’s best for them. The AMCS have their own in REVAA (Real Estate Valuation Advocacy Association), who will continue their path to making sure AMCS get their due and get paid by skimming off appraisal fees. Appraisers don’t have this luxury. However, we do have our pride and our ethics. Most of us are individuals being subjected to larger organizations who THINK they have our best interests at heart. I’ll be honest here, and this is my own opinion… You, as the consumer, are being falsely led down a bad path.
In the real estate realm, Real estate appraisers lost more than anyone else. Lenders still lend; they make commissions based on that value. Agents always buy and sell and earn commissions based on that value. Appraisers.. We are making fees that are comparable to the year 2005. We get hammered by lenders and realtors for not making the value they need. We get pressure from everyone. The forces are sometimes insane enough that we walk away. Yes. This still happens today even with the AMC barrier but hey no one told the AMCS they couldn’t pressure us. I mean they have contracts and more at stake with their lenders thus making them biased. Real estate appraisers are to remain unbiased. We are to develop an opinion of value based on information valuable to us. We get to see it all. We are making sure you understand the importance of the home in the market. We have no other job than to be unbiased and develop a report that explains it all.
Band-Aids. They do an excellent job for the time being or the right reasons; however, there needs to be better attention paid when the wound is much larger. I’ve placed band-aid upon band-aid only to realize I need stitches. It was only then the wound stopped bleeding. So why are all the organizations and more putting band aids on wounds? Why are they not stepping up to defend the profession rather than conforming to the outside noise? Why are we trying to create new products instead of revisiting the ones we have to make them better. I will answer this question. Money, fraternity and influence. That’s the reason why. The reason AI an others won’t do the right thing is because many of their member s own AMCS and have a stake In Profits and more. Go figure. Don’t believe me. Look up all the amcs. See who owns them and if they are affiliated with the appraisal institute. Smh. Collusion at its finest. I’m an appraiser but I own an amc and won’t pay you a real fee cause I need to make money. Give me a break. Either you are for the appraiser or against them. AI goes to the money not the ethics.
Note: I am an independent appraiser. I will not join either the ASA or the AI due to their inabilities to be unbiased themselves. One claims to be the biggest appraiser organization yet their numbers decrease, they hold special elections and they could care less about the residential appraiser. The other just hasn’t done enough for me to want to join. I may have more independent appraisers in my group than either of these groups. 3.2K members and growing. Maybe one day we will have a voice.
My questions are these. What can we all do together to make things better for all involved? When are amcs going to start working with appraisers and not against them? When are the powers to be see that the system is not right? How do we all coexist? instead of band aids when are we going to get real ideas that help us all? When, where and how?