Doom and Gloom for Appraisers?

Well it used to be the case that a reliable appraisal was considered to be “essential to loan underwriting and to the public’s perception of confidence in the nation’s real estate, finance, and mortgage insurance and investment industries.”  (U.S. Representative Douglas Barnard (D-GA), but the comment was made after the S & L Loan Crisis)  Of course comments like those are always made after there is a financial industry failure.

The entire purpose of real property appraiser licensing was to protect the public from what the government perceived as a lack of financial institution oversight.  Now we have the S & L industry basically excluding itself from having to appraisal most of its commercial loans.  You have to ask yourself, “How does that happen?”

I’m an appraiser so I can’t say that I have no bias, but I’m also a real estate broker so I understand how much pressure there is to close a transaction.  It’s just easier not to have to deal with an appraisal that 1) you have to wait for, 2) you have to pay for and most importantly, 3) its an appraisal that may offer a value opinion that may destroy your transaction.  Yes, appraisal opinions are pesky things that get in the way of lending.

This National Credit Union Administration’s (NCUA) move away from appraisals of most commercial property appraisals appears to be in line with the overall financial institution trend away from appraisals of residential properties.  Clearly it’s a move toward self-regulation.  They must have the opinion that they can control themselves - it’s their money, right?  No, it’s the public’s money that they are holding in trust and lending to their members. 

With a new $ 1 million dollar NCUA appraisal threshold Credit Unions won’t have to worry about making small $ 100,000 or $ 200,000 valuation errors.  The problem is that you don’t have to make a lot of those and all of a sudden we have another financial crisis.  I’m still remembering all of the banks that were around in 2006 but failed in 2008 because they made bad real estate lending decisions. 

So far we have had an S & L crisis in the 1980’s that closed ± 700 institutions.  In point of fact we have had several other financial nightmares over the past 40 years.  The global financial crisis / US housing market crash in 2008 was one that’s must now be out of the public’s memory.   So now we need to be led by financial institutions again into the lion’s mouth?

Maybe appraisers should reposition themsleves in the market?  Many of us are really close to being real estate counselors or advisors.  It's the ground between brokerage and appraisal that not many want to tred but I think there is a need for those of us who understand the market and are not trying to sell something or lend you money.

I really doubt that congress in its present configuration has the will to provide any financial institution oversight.  So I anticipate that the appraisal industry will continue down its dark road.  I have heard many appraisers say they think the industry is headed for the cliff, maybe they are right, this latest move makes me think that it’s just a matter of time.   

For more appraisal information contact Glenn J. Rigdon MA, MRICS, IFAS, ASA who is a Las Vegas / Henderson Nevada based broker and appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas  (http://www.appraiserlasvegas.com), or http://www.horizonvillageappraisal.com, or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/

Article source: http://www.appraisalarticles.com/General-Appraisal-Articles/Appraisal-Industry/4744-Doom-and-Gloom-for-Appraisers.html