Regulate those Pesky Out-of-town Appraisers

Have you heard horror stories about out-of-area appraisers driving 200 miles to appraise properties in places they know nothing about? There is a new bill (AB 1796) to pay attention to as it relates to real estate appraisals and this very issue. You can read this very short one-page bill HERE. In essence, AB 1796 looks to require the Director of the Office of Real Estate Appraisers (OREA) to adopt regulations for Appraisal Management Companies (AMCs).

I understand the reasons behind this bill, but the part of the bill that actually really concerns me is the following:

The director shall adopt regulations governing appraisal management company activities, including, but not limited to, the following:   (a) Use of out-of-area appraisers.

I understand the need to limit those pesky out-of-town appraisers who are “killing deals” because they are appraising in locations they know nothing about. I get that, but there are several good reasons why “regulation” language concerns me as it pertains to this point: 

1) There are certain properties in my own county and city that I wouldn’t even think of appraising. Not all appraisers are qualified for all types of properties – even in the city they live in. I don’t know of an appraiser who would say it differently. So the issue is not about distance from the property per se, but does the appraiser have the experience to get the job done (or can he gain the experience)?

2) I’d hate to see the government impose some sort of a “two county” rule where AMCs could only send appraisers to properties within two counties or 50 miles of their location. Again, some appraisers have vast experience in multiple counties. This would probably hurt appraisers located in more rural areas too.

3) I’m not a big fan of the government imposing more rules and regulations on the appraisal industry. Appraisers are required already to be “geographically competent” by USPAP (our uniform standards) and if an appraiser is not, then the hammer needs to come down from the appropriate authorities already (OREA) instead of inventing new rules. This is a bit like parenthood. If you have rules in place, you need to enforce them. Don’t just go make new rules if you are not enforcing the old ones.

Isadore Hall of Compton, CA authored this bill.  

Isadore Hall
Box 942849
Room 6025
Sacramento, CA 94249-0052
Phone: (916) 319-2052

I know I sound a bit ranty, but trust me, I’m concerned – not hostile. How this bill is ultimately handled can have big implications for the real estate industry. I am optimistic that OREA will not make some hard and fast “2 county” rule as I mentioned above, but my internal sensors are dinging and I’m aware of the importance for our legislators to understand how the appraisal industry works as it pertains to appraising in multiple counties. 

I’d like to hear what you think. What is the solution to the problem? What implications do you see for the appraisal or real estate industry if this was handled poorly? Feel free to comment below.

Comments

  1. says

    “Not all appraisers are qualified for all types of properties – even in the city they live in” is exactly right and I often get the feeling that some people think if you are an appraiser then you can and will appraise any type of property.

    • says

      I imagine every trade is like that too. Not every plumber can handle every job. Not every computer technician can fix every problem. Not every real estate agent can sell every house. And on and on….

      • says

        Lets just hope that the senate adopts similar language as the house, and the HVCC will be eliminated. I couldn’t agree with you more, crack down on the riff-raff with laws in place and we’ll all be better off. Great blog.

        • says

          Good thoughts, Michael. Thank you for the comment and the encouragment. Personally speaking, I’m not optimistic that HVCC will be going away, especially since FHA just instituted their own version. I’ll be curious to see what happens.

  2. Anthony Blackburn says

    An interesting sidebar is reviews. Appraisal reviews are valuations. They are appraisals. We do desk reviews for several clients in many areas. I may be at my desk doing a review on an appraisal on the other side of the state. LandSafe has thier LARA product in which an someone from Texas runs an avm and has an appraiser in the state the property is in sign off on it. The scope of work on reviews in many cases does not require what many would call geographic competency. I know not everyone agrees, but it is USPAP compliant (with the right scope of work) and it is a fact of life in the industry. I wonder how that will be addressed?

    • says

      Interesting indeed, Anthony. I hadn’t thought about that. I would be very curious to see how reviews are addressed for proposed legislation like this. Are you a fee appraiser or staff appraiser? Thanks for your comment.

      • Anthony Blackburn says

        Dennis Kerns and I own Apple Appraisal, Inc. We are the appraisal company for a couple lenders and we do all the reviews for a couple CA offices of a large lender that is based in Sacto. I know Sacto like the back of my hand for example. I have Geographic competency, even though I am not there. I have MLS, I talk to agents all the time and I see dozens of appraisals a month from the Sacto Metro area. With a two county rule, I’d be out of business. Or I’d have to hire someone there and be less profitable or charge clients more.

        • says

          I’m sure you’ve seen some interesting things in your line of work since you do reviews. I assume you have Sacramento MLS as one of your sources. I’ve never reviewed anything out-of-state. That’s intriguing. Let’s keep an eye on how this legislation moves and where it goes. I think it’ll be very important to share our views with the OREA.

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