Tackling the TOUGH TOPICS: 2018 officers talk about AI's efforts to address the valuation profession's challenges--big and small.
Read what 2018 President James L. Murrett, MAI, SRA; President-Elect Stephen S. Wagner, MAI, SRA, AI-GRS; Vice President Jefferson L. Sherman, MAI, AI-GRS; and Immediate Past President and Acting CEO Jim Amorin, MAI, SRA, AI-GRS have to say about the organization, the profession, the industry, and their plans and programs slated for the coming year.
This year Freddie Mac and Fannie Mae announced expanded plans for appraisal alternatives in some situations, including first-purchase loans. How is AI addressing this issue?
Jim Murrett: The Appraisal Institute in September joined with nearly three dozen appraiser organizations in asking Congress to call on the Federal Housing Finance Agency to prevent Freddie Mac and Fannie Mae from issuing appraisal waivers. Given that Freddie and Fannie are still in conservatorship, we question whether waivers are consistent with safe and sound operational practices. We also are concerned that the resulting competition between Freddie Mac and Fannie Mae over which one can get by with the least collateral due diligence represents a "race to the bottom" from a risk management standpoint.
Stephen Wagner: The nation is still emerging from an economic crisis, so the need for appraisals and market analysis is critical. Given the fact that these government-sponsored enterprises are still in conservatorship, as Jim noted, it's surprising they can implement sweeping changes to risk-mitigation policy, and that their regulator, the FHFA, has had little to say about it.
Jim Amorin: AI is actively seeking to curb this dangerous practice. We have expressed our concerns to FHFA Director Mel Watt, and earlier this year we met with officials from Fannie Mae, Freddie Mac and the FHFA to better understand the proposed programs and to outline our concerns. More recently, as was noted, we combined forces with nearly three dozen organizations to seek to halt these programs until the GSEs can demonstrate that the programs follow safe and sound operation, do not harm consumers (especially in the affordable housing sector), are properly monitored by the FHFA and tested with independent appraisals, and there are proper safeguards to prevent fraud.
At the same time, it's clear that technology will continue to impact valuation, and AI sees many ways in which technology can improve efficiency of appraisals. While we may not agree with Freddie Mac or Fannie Mae on the direction of appraisal waivers, we continue to engage them on ways to improve information sharing regarding updated seller/servicer guidelines and appraisal forms. These are projects that are expected to materialize in the coming year.
How do AI's international efforts help shape the organization's future?
Murrett: AI is a global organization, and international membership is an untapped market with significant growth potential. There is substantial interest in our highly valued education curriculum in many countries.
Jeff Sherman: I agree that our international business is a growth opportunity. AI education and publications are in high demand around the world, and we continue to evaluate financially prudent opportunities abroad.
Amorin: That's right. We manage the expense side of the equation and look for opportunities that are revenue neutral or positive so that there is little to no negative impact on finances. AI has been active in the international arena for several decades, with activities involving education, public speaking that highlights common valuation issues across the globe, and membership growth. Today, our endeavors primarily focus on education delivery and maintaining relationships with partner organizations and members in the 60 countries where we currently operate. The finance community is global in scope, and whether they practice solely in the U.S. or across various country boundaries, expanding our influence in other areas builds brand awareness, which benefits all AI professionals.
Wagner: Brand awareness is a big part of our international efforts. This fall, I was in Munich with Jim Murrett and Jim Amorin to attend Expo Real, which is Europe's largest real estate trade show, and while there, five professionals received their SRA designations. There are segments oi the German valuation population with a keen interest in AI's residential curriculum and path to designation. When AI designations are awarded and valued internationally, it helps build a stronger AI brand around the world.
Murrett: During Expo Real, an individual came to our booth asking, "What is the Appraisal Institute?" I explained what we do, and he told me he oversaw valuation for an investment group that needed appraisers in the U.S. I showed him how to use our website to find Designated Members. That's how our international work can translate into work for AI professionals both in the U.S. and abroad.
How is AI continuing to fight overregulation of the valuation profession?
Murrett: The Appraisal Institute would like to see states collaborate to make the licensing process less onerous for appraisers seeking licensure in multiple states. AI has suggested creating a process similar to the National Mortgage Licensing System--a "one-stop shop" where appraisers applying for a license would undergo only one background and fingerprint check, rather than separate checks for each state in which they're applying for licensure. States could use this national database to verify backgrounds, view any disciplinary actions and grant (or not) the license for the appropriate fee.
Wagner: Appraisers are besieged with myriad layers of regulation, and as Jim noted, appraisers who work in multiple states face increased regulatory obligations when seeking license renewal, reciprocity licenses and temporary practice permits in many situations.
Amorin: The overregulation of appraisers has reached epic proportions, and there is a cry for change and relief. There is no other system in the United States that mirrors the valuation profession in terms of oversight, and AI recognizes that these burdens are discouraging new entrants into the profession.
Murrett: Another situation that has increased the difficulty of entry into the valuation profession is education requirements that have increased over the years without a change in experience requirements or a reduction in the minimum time requirements for completing requirements. AI believes experience requirements should be reevaluated, that there should be alternatives--greater allowance for experience to be earned in the classroom in a tested environment, as one example--related to field work, and adjustments to the minimum number of months required to complete these requirements.
Also worth noting is that many appraisers believe that they are not competing fairly with non-appraisers for some valuation services, such as evaluations. Most states require adherence to the Uniform Standards of Professional Appraisal Practice and do not allow appraisers to complete evaluations since evaluation guidelines do not require USPAP's minimum performance standards. The simple fix is to modify USPAP in a way that allows appraisers working on non-federally related transactions to meet the needs of their clients without reducing the credibility of the assignment results.
Wagner: Rigid appraisal standards restrain appraisers from providing competing services for which they are the most qualified to perform. Relieving some of the regulatory restraint on appraisers could allow appraisers to more freely provide alternative valuation products in a more competitive manner.
Amorin: Valuation standards should be more timeless, without minimal changes every other year. Of course, we believe in appropriate oversight, but the oversight should be meaningful and productive. AI will continue to work with Congress and our industry partners to explore changes that benefit the valuation profession overall. While the process may take some time, let there be no doubt that it's time to reconsider the current structure.
There is a lot of chatter about appraiser shortages. What is AI's position on this issue? What's being done to attract new appraisers to the profession?
Murrett: Any appraiser shortage primarily is a function of location, location, location, and is most noticeable in rural areas and for some property types.
Amorin: The Appraisal Institute's position is that markets for valuation services typically are very efficient. However, there are instances in certain markets--particularly rural markets, as Jim noted--where clients might have to wait an extended period to get an appraisal. Some of this is due to a lack of appraisers willing to work in those areas for the fees that clients are willing to pay, and some is due to fewer appraisers being available in those areas. Ideally, appraisers want clients to get the services they need within a reasonable time frame.
Wagner: As has frequently occurred over the past 20 years, spikes in loan volume caused spikes in appraisal volume, and appraisers had to answer the call. The spike in demand for appraisals late in 2016 was profound, and the number of appraisers available to answer the call was low compared to 10 years ago. I testified to Congress in April before the Subcommittee on Economic Opportunity of the House Committee on Veterans' Affairs on this very issue, emphasizing the temporary nature of the problem. The occasion of my testimony also spotlighted the very real challenge of the graying of the profession. Nearly half of licensed U.S. appraisers are 51 to 65 years old, and the number of entrants into the profession is on the decline. So we need to continue recruiting.
Murrett: Bringing younger individuals into the profession is a must to offset those retiring or leaving due to other circumstances. One way to attract new appraisers is to change the minimum qualifications for individuals to become licensed or certified. The process needs to be shortened because many younger individuals have student loan debt and cannot afford an extended process as a trainee on a trainee's wage.
Sherman: There must be a tangible profit incentive to attract individuals to the profession, and it can be very difficult for employers to afford to adequately compensate trainees. This is a hard stop in the "supply of services" side of the supply/demand equation. Changing requirements in this area could help.
Murrett: Many states and clients have requirements that put restrictions on the kind of work trainees can perform, which reduces the chances a supervisory appraiser will take on a trainee. Additionally, there are onerous record-keeping requirements for supervisors that limit their billable time and further deter them from having a trainee. There are some clients--the VA, for example--that allow trainees to perform certain aspects of an assignment based on competency determined by the supervisory appraiser, and this allowance needs to be expanded by other clients and states.
Wagner: For the better part of two years, the Appraiser Qualifications Board has been reexamining the requirements for licensure, and after three exposure drafts has found "consensus for no consensus." So the AQB is starting over. There is consideration of a practicum course that would serve as a proxy for some of the experience, ostensibly to diminish the time required to reach licensure.
Amorin: If there is a point in time when there are not enough trained professionals to handle the workload, clients will find alternatives to valuation professionals, which we want to avoid. That is why we are concerned.
What are some new and emerging opportunities for valuation services? How can appraisers diversify their business?
Murrett: Many entities now tout themselves as valuation and advisory services firms, which reflects an expanding view of the market. Appraisers should be providing consulting services and working on feasibility studies, market studies, litigation support, and valuation mediation and review. Advances in the collection and curation of big data allow appraisers to show their value-add by analyzing market information instead of simply presenting numbers. As for diversifying business, it's very important so appraisers can ride out market ups and downs. They also need to actively market themselves and their services--the days of cold calls are over--so I recommend attending local or national meetings for associations aligned with the industry.
Wagner: Go green--what more can I say? There's demand for appraisers with knowledge in the sustainability arena, and AI professionals regularly are sought for their green expertise on both the commercial and residential sides. AI's professional development program for green valuation is surging in popularity, and we published The Valuation of Green Commercial Real Estate this year, in addition to debuting a green commercial valuation course. AI's Green and Energy Efficient Addendums also are in demand, particularly on the residential side.
Sherman: I recommend appraisers work for their AI review designation. The review designation can open doors--it has for me. Attorneys need qualified appraisers for litigation review. Government entities that buy and sell property need help with appraisal review. The AI-GRS and AI-RRS designations can help you land that type of work. We work in a profession where every property and every valuation challenge is different--that's exciting--so find a specialized niche and make it yours. Do not sell short the value you have accumulated in experience, education and good business practice. The public needs appraisers, and we need to continue to be the go-to organization that protects the public trust.
Amorin: Diversification of practice will be as important as specialization. I encourage AI members to seek opportunities outside the traditional valuation work. Go where there are fewer practitioners to compete against. Whether that is specialization in a property type or an asset class, focusing on additional lines of business or expanding the current menu of services, these efforts can help appraisers weather the unavoidable cycles in the demand for their services.
Residential appraisers face unique challenges and opportunities. What is AI doing to support them?
Murrett: The Appraisal Institute's government relations office in Washington expends a significant amount of time and energy on residential issues, helping to enact changes that benefit all real estate appraisers, not just AI professionals.
Amorin: I want to add that most of AI's efforts at the various state levels also focus on residential issues. Whether it is appraisal waivers, property inspection waivers or fees passed on from AMCs to appraisers, we have been focused on these issues for many years. We regularly meet with government officials, agencies, members of Congress and elected leaders at all levels to educate them on nuances of the regulations they are imposing and the real impact that is felt in the small business and consumer markets as a result of their actions.
Murrett: Earlier this year, AI established the Residential Appraiser Project Team, known as RAPT, which is comprised of SRA-designated appraisers and tasked with critically and honestly reviewing the issues confronting residential appraisers and with making recommendations to the Executive Committee.
Wagner: RAPT was instrumental in initiating the residential topics webinar series Advocacy and the Residential Appraiser, and made other recommendations involving partnerships for education and training with other industries.
Sherman: Members of RAPT also are engaging in roundtables with chapters. AI knows its chapters are vital and integral to the organization, and the roundtables will work their way from chapter to chapter to help build success.
Murrett: AI offers specialized education to help residential appraisers increase their competency and scope of work capabilities, and to show their value-add to clients. Educational offerings include the valuation of residential green building series, litigation support series, use of Excel in residential assignments, condemnation, and conservation easement assignments. The AI-RRS review designation has helped increase awareness of an appraiser's expertise, and the SRA designation was prominently featured in our RAISE campaign to promote awareness among users of appraisal services of the higher level of expertise provided by an appraiser with the SRA designation.
Wagner: We understand that residential appraisers face unique challenges and there is no easy or quick solution, but we encourage diversification. Residential appraisers should explore work apart from the lending industry. Litigation support, right-of-way work and review are growth areas. Additionally, residential appraisers who work in the financial services sector need to embrace changes in technology, alternative appraisal products ("desktop work") and the notion of big data. Some appraisers may not want to do that, but that is where market demand is. With a concerted effort at diversification and increased awareness and education, highly skilled residential appraisers have a bright future.
Amorin: No category of valuation professionals is more affected day to day than those who primarily practice in the residential space. We are always on the lookout for issues that may impact them and work quickly to find meaningful solutions.
AI: Protect appraiser independence
2017 AI Vice President Stephen S. Wagner, MAI, SRA, AI-GRS, on April 4 testified on Capitol Hill before the Subcommittee on Economic Opportunity of the House Committee on Veterans' Affairs. He urged Congress to protect the independence of real estate appraisers in the federal program that provides housing loans to military veterans.
* Read more about his testimony at http://bit.ly/2n99ii9.
Jay W. Schneider is the Appraisal Institute's executive editor. He can be reached at firstname.lastname@example.org.
* Find all the Appraisal Institute's programs for green and sustainability at http://bit.ly/Algreenresources.
Caption: The 2018 Appraisal Institute Executive Committee consists of (from left) Vice President Jefferson L. Sherman, MAI, AI-GRS; President-Elect Stephen S.Wagner, MAI, SRA, AI-GRS; President James L. Murrett, MAI, SRA; and Immediate Past President and Acting CEO Jim Amorin, MAI, SRA, AI-GRS.
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|Title Annotation:||Leadership Outlook|
|Author:||Schneider, Jay W.|
|Date:||Sep 22, 2017|
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