Tuesday, 27 September 2022 | The Latest Buzz for the Appraisal Industry

The Most Important Part of the Appraisal Process

Write it down. I was wrong. Wrong about the timing, for certain, but correct in predicting the trend. I thought The Home Valuation Code of Conduct was a “call to quality”. Clients would be clamoring to find competent and ethical appraisers.

All of the guidance and regulations about the due diligence process point to one thing… “appraiser selection is the single most important part of the appraisal process”. Instead loads of money was invested in automating the review process, not refining the appraiser selection process. This has all come to a zenith now. This is the year, folks.

With the Home Valuation Code of Conduct arriving on the scene in March 2008, our world, as we knew it, blew up. There really was no other course. Soon to follow came updates to the Interagency Appraisal & Evaluation Guidelines in late 2010. IAEG had not been updated since 1994. In short the profession had gotten fat, sloppy and stupid. I am sorry for those who prefer to remain in denial. Yes, appraisers played a significant role in collapsing the housing finance system. Did they do it all by themselves? Of course not.

It takes a crisis for major reforms. We sure got one. With the advent HVCC I was yelling from the rooftops that appraisers had a Hallmark card worthy holiday, Appraiser Independence Day. I know, you are still waiting. And eventually I had to be right, just had to.

I can say with absolute certainty that there are tangible changes afoot. Market disruption is challenging for everyone. The best you can do during periods of major disintermediation is to educate yourselves. Be a sponge. Read everything you can get your hands on. And so with that theme in mind I have written a paper on Fee Panel Management. Not just any paper. It is 32 pages and obviously a bit of an obsession of mine. So trudge through it please. I think it will help appraisers to understand the regulatory pressures confronting both lenders and AMCs.

What does all of this mean to appraisers? First it is good news. Or at least it is good news for honest, competent appraisers. Those who aren’t fond of transparency, for whatever reason, aren’t going to like the scrutiny by which your clients will place upon you.

That call to quality I spoke of a few years ago has arrived. Regulators are enforcing now, with a firm hand, appraiser selection, based upon the best appraiser, not the fastest and not the cheapest. Those have always been best practices but no one knows better than you that enforcement had been remiss for many years.

And now you have Fannie Mae’s rollout of Collateral Underwriter (CU) later this month. Don’t panic. They too are about to identify those who behave unethically or are lacking in the skillset to produce a credible appraisal report. That is a good thing. That also means that your clients can’t afford to engage the cheapest appraiser. If they do that will cost them dearly.

Have any comments or would you like to submit content of your own. Email comments@appraisalbuzz.com.


  1. Perceptive.
    How is that the industry cum profession of appraising missed all of this and chose instead to stick its collective head in the sand.
    Instead of focusing on inadequate education and cronyism I still hear the call to battle licensing because it is the true root of all our evils.

  2. Fannie certainly has a right to reduce risk. No argument there. My concern is that with the implementation of Collateral Underwriter roll-out on January 26th Fannie will be relying on lenders and amcs to triage the flags and messages before asking the appraiser to respond. CU is no where near perfect and will produce quite a few false positives, most notably in non-conforming tracts. Responding to this additional workload is something that the lenders and especially the amcs will not be keen on doing. They are just not staffed up or trained for it. What they ARE trained to do is quickly pass along the flags and messages with a demand the appraiser fix it immediately, for no pay. They are good at that.

  3. Hmmm, I think this is the 2nd time I have agreeded with Joan. As the old say goes, computer data is only as good as what is put in it. Thats what scares me about CU !!! Where do they get their data? From other appraiser’s who we don’t know whether their data is correct or not. I have been in the business over 25 yrs and I know there are bad appraisers out there and a lot of data used by these bad appraisers is not correct. Thats one of the reasons I quit doing review work. I think the future will bring I lot of call backs and appraisers having to spend a lot of time explaining where their adjustments and data is coming from. So I have raised my fees and I sugest other appraisers raise their’s. The time is now.

  4. The housing collapse of 2007-8 was caused in large part by low interest rates and deregulation of the financial industry(Glass Steagall). Real Estate Appraisers did not play a “significant role” in the collapse as you said: “Yes, appraisers played a significant role in collapsing the housing finance system.” . That is a crock! The values that were opined by appraisers by large were actually the market values resulting from irresponsible Government influence and poor lending practices leading to a seller’s market and expanded affordability index. Appraiser fraud was pennies in the bucket!

  5. Joan, I’ll believe CU will help when I see it. Past efforts to improve the system have completely backfired. It won’t take appraisers long to figure out which adjustments will be accepted and which kicked back for “proof”. Poor appraisers will probably make their work conform to the new guidelines and go on their merry way. Good appraisers will probably be under even more pressure to give up on value accuracy and go along to get along.
    Earlier today I found out that the most experienced and respected house appraiser in a nearby town is closing his office (once the largest in the area) and taking a 9:00 to 5:00 salary job in a related industry. Trying to appraise the right way was just too unprofitable and too frustrating. Depressing.

  6. I totally agree with Joan on one particular pointe, the appraisal selection process would appear to be the most important part of the appraisal process, and does not appear to be a major factor to the amc or lender, The industry does’t appear to be getting any better regarding that aspect of the process.


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