Local, State, and Federal policy can play a significant role in an appraiser’s business – it is important to stay informed about what is happening around us. Most appraisers have been busier than ever over the past year and may be struggling to keep up with deadlines. It may benefit you and your business to stay updated on policy as it relates to the appraisal profession.
There are things happening around appraisers that can impact the trajectory of their businesses. There are many facets to the appraisal business: lending, non-lending work, residential, and commercial work. Policy can affect all segments of the appraisal profession. Any appraiser that has been in business for years has seen the business change and evolve over time. Many, many years ago, the majority of appraisers had no idea what an AMC was. Not so long ago, there were very few appraisers that knew about property inspection waivers. Who even knew about desktop valuations or evaluations? How about PAREA and Fair Housing? Answer: the appraisers that paid attention to policy changes and the inner workings of the mortgage industry.
Most appraisers that focus on federal policy are typically related to mortgage rates. Low mortgage rates have resulted in an appraisal volume that, for many of us, is unprecedented. Understanding what drives interest rates should be of utmost importance to an appraiser that is doing predominately lending work. It is important to stay in touch with monetary policy, both in the United States and globally. A sudden rise in rates, triggered by the bond market, can leave an appraiser shaking their head and saying, “What the heck happened?” Today we can all open our email in the morning and take as much work as we can handle. Mortgage work is driven by interest rates. Take some time to educate yourself on how interest rates work and prepare accordingly. Federal policy regarding taxation of capital gains can be an opportunity to provide appraisal services to financial advisors as they seek to help the public reduce tax burdens resulting from recent policy changes.
Fannie Mae, Freddie Mac, VA, FHA, and FHFA create policy that appraisers doing mortgage assignments abide by. This policy relates to completing appraisal reports for mortgage finance transactions. The Appraisal Foundation and its various boards create policy that affects appraisers. Among the policy is USPAP, creating standards for licensure, and issuing guidance that promotes education and upholding the public trust. Check for updates and news that these federal entities put out. Awareness may help you prepare for changes that are proposed, and changes that have been implemented. For example, the 2020-2021 USPAP will now be effective until December 31, 2022. The GSEs implemented policy around the COVID-19 pandemic to temporarily allow for flexibility in reporting and inspecting/observing properties. For those of you that have been keeping up, Fannie Mae and Freddie Mac’s last extension of those flexibilities ended May 31, 2021.
States can also adopt policies that affect an appraiser and their business. California recently passed legislation that can trigger reassessment of real estate upon an inter-generational transfer. Passing properties down to children has long been a tax deferral strategy for many homeowners with significant equity. A result of the passage of Proposition 19 is financial planners and attorneys ordering appraisals. State and local building code changes can create opportunity in niche areas of appraisal. California building code now allows ADUs and is mandating solar on new construction.
Keep your finger on the pulse of policy in your state. The awareness could create an opportunity to expand your appraisal business.
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