When appraisers talk about changes in the appraisal industry, I think most of the real estate community only hears “blah, blah, blah” or rather the sound Charlie Brown’s teacher makes when speaking. But today I want to share about a specific change that is coming up in 2015 anyway because this is worth knowing about.
A College Degree? Beginning in 2015 an individual will need a Bachelor’s degree or higher from an accredited college or university to obtain a Certified Appraiser’s license. An entry-level appraisal license can still be earned though with only 30 semester college units or an AA degree, but the problem is that the “Certified” license level (which is a step above the entry-level license) has really become the standard for many lenders and private clients. This means the Certified license is inevitable for anyone serious about appraisal work.
The Big Idea: The idea with increased educational requirements seems to be to improve the quality of appraisers, which is probably a good move. Yet at the same time it is already an uphill battle to become an appraiser in California because of how difficult it is to find a mentor and work as an appraiser trainee. On top of this, it is an aging industry, which complicates things further. For reference, I attended an all-day class two weeks ago and only 1 out of 60+ appraisers in the room had a trainee (it used to be much more common). Moreover, the stat I keep hearing is that the pool of appraisers in California has shrunk from about 20,000 to 12,000 as a result of the carnage of the real estate bubble bursting and the mess of HVCC.
Why does this matter? The regulation and education pendulum for appraisers has swung far in recent years as a reaction to mortgage fraud and shoddy appraisal work. On one hand this is great and has potential to possibly increase the quality of appraisers over time. Yet on the other hand it could lead to a shortage of appraisers and end up stifling the industry. Only time will tell.
Question: Is this a good move or not? Should a 4-year degree also be required to obtain a real estate license or broker’s license? What do you think?
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Bill Cobb says
I believe this is most definitely a positive change, that this industry needs to become much, much more professional and some of the norms since State Certification passed in 1989, like Appraisers wearing tattered shorts and flip flops to inspections, need to die. Here’s why.
As the years have progressed, I’ve seen first hand how damaging “State Certification” or Appraiser Licensing was by States – because it opened the door to any Tom, Dick or Lisa that could take 120 hours and many of the local “Appraiser education schools”. Yes, there was a short on the job training and then BOOM, you’re an Appraiser. So, in Louisiana, you had an enormous amount of State Certified because it was too easy to gain access to profession and Joe Bubba out there appraising homes not really knowing what they were doing. B & C Paper Mortgage Brokers, those needing $10K to $25K more than home was worth, LOVED this situation because there were now ample Appraisers that would give them any value they needed for a larger than average fee….and that Mortgage Broker could charge 5 to 10 points per deal for their profit. There really wasn’t much of any regulation and if an Appraiser was turned into the Appraisal Board for obvious USPAP violations, they were poorly staffed and didn’t have the training or experience to know how to review or even recognize these violations. This is also part of the reason for the financial meltdown of 2008-2011. Yes, Mortgage Brokers, Appraisers and State Appraisal Boards who open the gate too wide and made it too easy to enter have some responsibility for the meltdown.
During the hey day of 2003-2006, the fraudster State Certified Appraisers drove the nicest autos and lived in the nicest homes. An SRA designation nor college degree meant absolutely nothing to the industry except for Attorneys and CPAs. In fact, the more credentialed you were, the more likely you wouldn’t obtain orders because you were less likely to bend on hitting a target value.
In Louisiana up to 1989 and before State Certification was enacted, the Appraisal Institute and two other organizations were the path to a professional Appraisal career. Appraisers met in professional environments to exchange ideas. Now, 24 years after State Certification was enacted, I attend USPAP Courses with Appraisers wearing tattered shorts, flip flops, complete camouflage suits, etc.. The old timers in the room are generally the ones the still look like professionals…and that’s ashamed for a “profession”. There’s a time and place for everything and when you’re in the daily role as a professional Appraiser, there should be certain professional standards and expectations in place. Look at Dustin Harris, the Appraiser Coach and what example does he set for Appraisers? I see him presenting a professional model, professional dressed and with a college degree.
This is just my opinion after 24 years in this business with a late MAI Grandfather, active MAI Dad and an Uncle in the business. I’m a third generation Appraiser and proud of the professional example my Grandfather and Dad were to me. Also proud of other examples of men and women from many different Appraisal organizations like Wayne Pugh, MAI, Dave Towne, Woody Fincham, SRA, Tom Horn, SRA, George Mann, MAI, Frank Lucco, SRA, Brian Davis and yourself, Ryan. And, there’s lots of dedicated professional Appraisers out there without designations behind their name that my hat’s off to and I looked up to as peers. To me, it’s the attitude of a professional that goes a long way in this business.
As as profession, I think we need a college degree for the future of Appraisal Industry to clean up the wrongs that State Certification put in place and the damage it inflicted. When a Consumer or Professional Attorney is paying $300 to $500 for a Home Appraisal, then you don’t have the right to dress in shorts and flip flops and show up looking that way. They deserve a professional to handle their most valued asset in their lifetime, their home.
Ryan Lundquist says
Wow Bill, thank you for such a thoughtful response. I appreciate the background as well as the kind words. I suppose I shouldn’t wear my Birkenstocks and muscle shirt today then… (kidding). I appreciate your dedication to the profession.
I agree with what you are saying, but I’ll admit the real issue in my mind is training. A college degree does not mean a new trainee will get good training. That is the real meaty issue to focus on in the industry.
I’d love to hear what others think. Agree? Disagree?
Paul Merican says
As it stands, you can have any degree from a totally unrelated field and it will qualify. I understand that higher education breeds a better pool of professionals, but I fail to see how a degree in an unrelated field will make Appraisers better in their field. Proper training/background is the only way to acquire the vast and varied amount of knowledge an Appraiser must have in order to be “good”. In my opinion, they are not aiming to make applicants hone the skills that make an Appraiser good; it appears that they believe by making it harder to enter the profession, that only “good” Appraisers will be in the profession. I disagree with their logic.
As for the future and the amount of Appraisers in our profession, I don’t think it would be appealing to those entering the workforce when compared to alternative options. Why would someone spend $40-$80k on a degree, just to start from scratch with a mentor for 2500+ hours, USPAP classes, R.E. Classes, Tests, etc. just to get into a field where AMC’s take a larger cut of the fee, the workload per file has more than doubled, the liability has doubled, underwriter requests have doubled, E&O has almost doubled, (usually erroneous) complaints have more than doubled, etc., etc., etc. Then, after finally earning it all, you can lose it all overnight by a large bank like Chase (or now a GSE like FNMA http://www.appraisalinstitute.org/aiconnect/presentations/02aug/Working-with-an-AMC-2.pdf ) putting you on a blacklist that other lenders use and that you usually don’t know you’re on.
The law of competition would suggest that an objective person with a degree would opt to go with the many more beneficial options out there that don’t have such liability or overhead.
I understand about dressing professionally and only say this with respect, but I pay a LOT more than $350 to the contractors who work on my most valuable asset(s), and I’m fine with the way they dress as long as they do their job right (i.e.: don’t judge a book by its cover).
Thanks for reading,
Ryan Lundquist says
Hi Paul. I appreciate your thoughtful response and I think you make great points. I think you and I both agree that the real issue here is getting good training. I am also fine with how contractors dress for the most part, though I think plumber’s “crack” is definitely avoidable with a good belt and jeans that fit. 🙂 Thank you again.
Alyssa Weber says
I thought this was interesting today: http://realtormag.realtor.org/daily-news/2014/01/29/fannie-mae-eyes-quality-monitoring-appraisers
Ahead of the trend Ryan!
That article made me think of this post. I think a more in-depth school should be required of both Realtors and Appraisers, not unlike a trade school for mechanics, cosmetologists, veterinary technicians or dental hygienists. We deal with what is, for most people, the largest debt anyone will take on in their life and it is easier to get licensed than any of the previously mentioned fields. It does create a bad name for both industries when there are a bunch of rookies running around making mistakes because trial and error is not the way to do it in this industry. Of course, ideally, Realtors start as apprentices under a knowledgeable broker but often times the Brokers don’t care because they have e&o insurance to cover “these types of mistakes.”
I am biased against college (because I dropped out to work and) because the costs of tuition are ridiculous, costs of textbooks are exorbitant. Much of the education they give you doesn’t help you in real life and costs you an arm and a leg (Freshman year seminar anybody?) and costs of education have risen much, much higher than inflation.
College has really just become a business and I wouldn’t be surprised if Cal State or Dept of Education lobbyists pulled this off. College should be a way to better educate our youth, prepare them for the real world and produce productive members of society. Many people do come out of college with great jobs and ready to go, but many graduate $40,000+ in debt without a real idea of what to do next. I would hate for this to be a Realtor because the first thing you have learn at this job is how to budget! We aren’t salaried, so if we have loans and the costs of marketing, driving and maintaining your lifestyle while trying to pay down that enormous debt… I could see a recipe for disaster.
Ryan Lundquist says
Thanks Alyssa. I appreciate your thoughtful comment. I’ll check out that link. It’s going to get interesting in the appraisal industry with the public introduction of Fannie Mae’s new list of appraisers. The UAD code was introduced in recent time, and it’s a way to help all appraisers describe condition and other elements in a uniform way in appraisal reports (I have a blog coming on this soon), yet it is also a way to track appraiser errors and monitor appraisers.
I think you are right about the need for increased training. I definitely feel the trade school vibe you’re talking about. Technically a brokerage and appraiser mentor/trainer should feel like a trade school, but obviously that does not happen in all cases to say the least.
Interesting thoughts on college. It reminds me of some good friends that still have tens of thousands of dollars (50K+) after graduating college in the 1990s.
Alyssa Weber says
I also follow this hedge fund investor closely and think his college comments are spot on. Here’s his list of 8 alternatives to college http://www.jamesaltucher.com/2011/01/8-alternatives-to-college/
And if I could add #9, it would be work with a very successful mentor in the field you want to be in.
Ryan Lundquist says
Thanks Alyssa. College is definitely not for everyone, which is why trade schools exist. There are many ways to get an education. I’ll check out that article. Obviously I do value a college degree to a certain extent since I have a BA from a university. I will say though a degree does not mean you are intelligent, ethical, wise, business-savvy or really anything other than dedicated to get that degree (and of course educated if the education worked and you are applying your degree). In the world today a degree does make someone more marketable in the job market though, so it’s difficult not to have one in certain fields. Like you said though, if you are going into a different field that requires a relationship with a mentor/trainer, college may not be necessary.