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| real estate appraiser, regulation, firrea, mary cummins, los angeles, california, real estate appraisal, hud, fha, appraisal foundation |
Some people seem to be under the misconception that real estate appraisers govern themselves via the Appraisal Institute. The Appraisal Institute is a private nonprofit organization for a few real estate appraisers. It's very expensive so there aren't that many members compared to total number of appraisers in the US. (There are 78,000 real estate appraisers with licenses as of 2018 in the US. Allegedly AI has 25,000 members in the world. They include retired and life time members. Because it's expensive to join I find it hard to believe they have 25,000 members). It has nothing to do with the government, licenses or regulations though they do sometimes publicly comment on issues which affect appraisers. The Appraisal Institute is NOT The Appraisal Foundation (TAF).
Real estate appraisers are regulated by federal and state governments. In 1989 the FIRREA Act (aka Savings & Loan bailout) established The Appraisal Foundation (TAF) and the Appraisal Subcommittee (ASC). The Appraisal Foundation is authorized by Congress as the source of appraisal standards and appraiser qualifications. The Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council monitors and reviews the work of The Foundation. The Committee also maintains oversight authority over the states to ensure the minimum qualifying criteria to license and certify real estate appraisers are implemented and that appraisers are held to a professional set of ethical standards.
The Appraisal Foundation’s Appraiser Qualifications Board (AQB) sets the minimum Real Property Appraiser Qualification Criteria and the Appraisal Standards Board (ASB) develops the generally accepted standards of practice for the appraisal profession which is the Uniform Standards of Professional Appraisal Practice. These are reviewed every two years. Everyone can comment while they're being updated.
Each US state or territory has a real estate appraiser regulatory agency that is responsible for licensing and certifying real estate appraisers and supervising their appraisal-related activities, as required by Federal law. Here is a list of all the state regulatory agencies for real estate appraisers.
Here in California we didn't need a license until 1994 after FIRREA passed. Real estate appraisers had nothing to do with the Savings & Loan crisis but as usual they were falsely blamed and later more heavily regulated. I fully support all real estate appraisers being licensed. It should have happened when they licensed real estate agents. I was both a real estate agent/broker and appraiser at the same time. I was first licensed as a real estate appraiser in 1994. I was licensed as a real estate agent in 1983 and broker in 1986.
After the great recession the Dodd Frank Act was passed in 2010 which added even more regulations for banks, lenders and real estate appraisers. Again, real estate appraisers were blamed for the crisis. Real estate appraisers only report value based on past sales. We don't drive sales or affect the market. The problem was lenders giving loans to people regardless of their ability to pay them back. When the bubble burst many people who couldn't make their payments lost their homes.
The Dodd Frank Act set up a system of Appraisal Management Companies (AMCs) via the Home Valuation Code of Conduct (HVCC). "The Home Valuation Code of Conduct (HVCC) is a set of federal guidelines designed to make the home appraisal process more reliable. The HVCC prohibits mortgage brokers and real estate agents from selecting or paying appraisers. Instead, lenders or third-party companies selected by the lenders are the only parties allowed to contact, retain, and compensate appraisers. This adds a buffer between the appraiser and the interested parties trying to close the deal. Conventional conforming loans backed by Fannie Mae and Freddie Mac must comply with the HVCC. FHA loans and VA loans are excluded from compliance with the HVCC." Instead of having the mortgage broker or real estate agent assign an appraiser the lender now hires the AMC who hires the appraisers. The AMC is the new middleman. The purpose was so the lender wouldn't be able to pressure the appraiser to hit an appraisal price.
The concept of AMCs did not work. The appraiser still must contact the owner, borrower to inspect the property. The owner, borrower sometimes says "Here are some comparable sales from the lender and my real estate agent. I need a value over $500,000." Not only that but after the appraisal is submitted to the AMC who gives it to the lender the owner, borrower, lender, AMC can request a reconsideration of value, an appraisal appeal. They can request that certain other comparable sales and factors be considered. The lender can also make requests in underwriting. The addition of the AMC has only lead to increased appraisal costs, time and red tape for the borrower.
The real estate appraiser does not have to make the requested changes unless they are legitimate. Obviously if you refuse legitimate changes you won't be hired again. The owner, borrower, lender can also order another appraisal. There are some agents, lenders who refuse to use certain appraisers because they didn't hit their price points in the past. The only thing AMCs did add is an extra middleman fee paid by the owner, borrower. If you are paying $650 for an appraisal, $300 goes to the AMC and $350 goes to the appraiser. If you want a review, it can cost even more.
If you have a problem with an appraisal, request a reconsideration of value. Here's an article I wrote about how to do that. You can also call the appraiser. If you leave a ranting voicemail, they probably won't return your call. Their client is the AMC. The appraiser doesn't have to speak to you after the appraisal is completed. We only have to speak to the owner in order to inspect the home.
If you have a problem with an appraiser that is beyond a reconsideration of value, you can file a complaint with the state where they are licensed. You can also file a complaint with the federal government depending upon the nature of the complaint. HUD handles discrimination complaints. Below describes the process for HUD housing discrimination complaints. If you as the home owner or borrower have a problem with an appraisal which was ordered for the lender, you don't have a legitimate legal basis for discrimination because you are not the intended user. Your complaint will be dismissed.
https://www.hud.gov/program_offices/fair_housing_equal_opp/complaint-process
Below is a chart showing the outcome of HUD discrimination complaints for 2019. Most complaints are for disability discrimination and not skin color or race. Only 2% of the HUD housing discrimination complaints had cause. This is for 2019. 37% had no reasonable cause, 7% withdrawn, 36% conciliated, 14% administrative closure, 4% DOJ referral. This sounds about right. I've seen a few friends claim discrimination about a transaction. I ask them what happened. So far almost all of the time it wasn't discrimination that caused the issue. Most of the time it appears to be quick appreciation or a second appraiser appraising the property way above market value by using sales in a much superior area. Now when it comes to every day events I see discrimination all the time especially as it relates to skin color, gender, race.
Right now August 2021 some buyers, borrowers feel they are being low-balled because some homes are under contract for more than they are appraised. Appraisals are coming in under purchase price. The problem is the skyrocketing market and limited supply which is causing people to bid over list price and over market value. Appraisers used sold comparables to support the value. That means we're 1-3 months behind the market at times. If there isn't a recent sale of a similar home we have to use older comps. We also can't appraise over the highest unadjusted sold comparable home even though we can time adjust. This is not our fault as we are following the law and regulations. It's happening to everyone regardless of color. Just because your appraisal came in low does not mean the appraiser was racist and discriminated against you. Appraising is a math formula based on home location, size, condition, amenities. Racism and discrimination exist. That doesn't mean every appraisal that is lower than what someone would like is the result of racism. The most common cause of loan denial is actually the creditworthiness of the borrower.
More information below about real estate appraisal regulation.
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Mary Cummins of Animal Advocates is a wildlife rehabilitator licensed by the California Department of Fish and Game and the USDA. Mary Cummins is also a licensed real estate appraiser in Los Angeles, California.
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