Appraisal Articles 2019 Free Appraisal Articles for Appraisers and the Public
After the Savings and Loan crash in the late 1980's, appraiser licensing was put into place in 1991 by the federal government in an attempt to avert another banking disaster. Here we are, however, in 2009 with a much larger banking disaster to deal with. So clearly the original plan for appraiser licensing has ended in failure.
I have heard arguments recently that appraisers "did not make the transition from having a fiduciary relationship with their clients before licensing to acting in the public trust after licensing was introduced." Some argue that appraisers turned to the profitable operation of their appraisal businesses and away from the strict and technical rules that built the industry. Others say that appraisals completed during the 2004 to 2007 boom were "rigged" by appraisers and that appraisers just started to focus on "getting the deals done."
I am not going to defend all appraisers there is some truth in any argument, and there have been licensed appraisers who have had absolutely no regard for anything but money making, some have gone to prison for their criminal acts.
The fact of the matter is, however, that the explosion in property values caused by free flowing money via Fannie Mae and Freddie Mac policies to almost anyone who could sign their name provided a basis for continually increasing property values during the 2004 to 2007 boom. Most appraisers were in fact not dishonest in their report preparations the market was simply on a steep upward climb that multiplied home values. Most appraisals accurately reported higher prices based on actual sales.
Should appraisers have "rung the bell" when the market started to turn in late 2006 and early 2007? Yes, and many did. Groups of appraisers advised mortgage companies and banking clients that home inventories were increasing, that marketing times were increasing, that prices were declining and that the market was no longer in "balance." The information was received by mortgage companies and banks, the message was loud and clear, and thus began the campaigns to black list and terminate appraisers for their "warnings."
From an appraisers perspective it was clear that financial institutions did not want to end the party when the rally ran its course, and they were not going to let real estate appraisers stand in the way by blocking new loans. In the face-off that occurred between real estate appraisers and the banking system it was no contest. It's not an excuse for appraisers, but when all of the smoke clears and history is written regarding the current banking failures I believe that appraisers will not be looked upon as being the dam that broke. Appraisers never had much in the way of oversight or audit control, and most lived or died financially based on the daily approval of financial institutions, and for that reason the hope that licensing would succeed at thwarting a second banking failure was doomed to failure.
Update 2013: It will be interesting to see how many appraisers can forecast changes that will occur in the residential and commercial real property markets in the future given new requirement for them to provide statistics on market changes. I'm going to bet that relatively few appraisers will be able to interpret statistics and communicate to clients in time to protect them from financial ruin. When I did advise clients in 2008 that their pre-construction appraisals would fail to reach their imagined values I received negative feedback, so even if you know what's happening some simply don't want to hear it.
For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.
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