Sunday, December 3, 2023 | 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.

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Mark Buhler

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