[Vortex] Did We Get There? The Promise of Licensing Appraisers
Posted by Jonathan Miller - Tuesday, May 22, 2012, 11:32 AM
Every so often, a Matrix reader submits something they feel very strongly about it and bravely enter the Vortex where I post it.
Guest Columnist: Cecil Simon
Cecil has been a New York general state certified appraiser since 1992. He takes a look at the intersection of professional education and licensing. He’s weighed in here before. Like me, Cecil was an appraiser before the licensing law in 1989 and in fact wrote Congress about this matter as early as 1986.
Admittedly this is super appraiser wonkiness, but it’s worth the read.
May 12, 2012
Did we get there? the promise of Licensing Appraisers.
How technically prepared are Certified General Appraisers? A recent editorial by Henry H. Harrison in his Real Estate Valuation Magazine, suggested the answer is not very well. In fact, Mr. Harrison even challenged readers to provide evidence that Certified General Appraisers did not make at least 80% of their living writing residential work.
I believe he is correct on the preparation issue, and incorrect on what Certified General Appraisers do in the industry. Most Certified General Appraisers have now become the workhorses for fee shops run by designated appraisers, working as independent contractors at low rates and without benefits. This was by design, and the education and experience requirements set by the Appraisal Qualifications Board in the early 1990s, later amended in 2008, bears me out.
It is now generally accepted that the requirements for General Certification set in 1991 were deplorable, although Harrison and other in his group did not think so when I first wrote to him in 1993. The 2008 fix with the addition of a course in Highest and Best Use and Market Analysis, and one in Report Writing was a plus, but the remaining content was just a split of two former lower level courses into some 120-140 hours. The final product was three hundred classroom hours, more than were required for the MAI in 1990, yet these were junior courses.
FIRREA had a specific mandate. That mandate required that the education and experience required for General Certification be such, that a person with those qualifications would be able to appraise any property without regard to value in a Federal related transaction. That is a high standard, which was well known to the Chairman and members of the Board from 1991 to 2004, yet they did otherwise. The reasons often given in support of the lower standards were the use of the term minimal education required, that States could add to the basic core, and that Certification requirements were intended as a beginning. But the mandate certainly does not imply that.
Basic appraisal education requires only six courses, seven if you add the new Quantitative Analysis course, which is a plus. The seven courses are Appraisal Principles and Procedures, Highest and Best Use and Market Analysis, Land Valuation and the Cost Approach, Direct Sales Comparison Approach, Income Approach, Quantitative Analysis, and Case Study and Report Writing. These names can be applied to Residential and General [Vortex] Did we get there? the promise of Licensing Appraisers.
Certification courses with different content, and all that is currently listed by the Appraisal Institute as Level 1 and 2 and required for their MAI designation can be covered in those seven courses. Hours can be assigned based on the content to be covered.
The seven basic courses plus four years of experience, and the State Exam, is more than adequate to lay the groundwork for Certification as well as any designation. It should be noted that the six courses used prior to 1990 for the MAI, and the four used for the SREA (101, 102, 201, 202), were all taught in less than three hundred hours. These courses produced some of the best educators and practitioners currently working in the industry, including Mr. Harrison. Even Universities that grant Undergraduate and Graduate Degrees in Real Estate offer only one or two courses in Valuation.
I took the trouble to review the education requirements for all of the original members of the Foundation that deal specifically with Real Property interest. The Appraisal Institute of Canada arguably has the best program, and the Appraisal Institute is the only one with Advanced Courses. Some startling facts also come to mind. The education requirements for the MAI designation have increased from 267 hours in 1990 to 482 in 2008, an increase of 215 hours, all without any change in the theory and methodology of valuing real property. The only industry change during that period was the use of software that makes database searches and data analysis easier. In fact, one group, The American Society of Appraisers could not even remember when they last hosted a basic course.
I believe that The Appraisal Institute is the best professional association representing appraisers and the leader in the industry, but its continued creation of advanced courses in order to create the illusion that its members and candidates are better prepared than Certified Appraisers is a farce. The same seven courses could easily serve as the core education requirements for candidates as well as General Certification. Additional requirements for designations can be added. The MAI designation is a highly recognized brand, and could be granted based on work experience and peer review. Downgrading the education requirements for Certification is a dumb idea, and it is clear that The Appraisal Subcommittee fell down on its mandate to monitor and review the practices and activities of the Foundation.
There are a few good textbooks out there on Appraising Real Property, and I place The Appraisal of Real Estate, published by the Appraisal Institute at the top of that heap. Now I would hope that any State that puts its imprimatur on the qualifications of any individual to call that person a Certified General Appraiser, expects that they have covered the content of that text from cover to cover. That was the intent of FIRREA. But it appears that by separating the content into General and Advanced sections, both the Appraisal Institute and the Appraisal Qualifications Board that it has controlled since 1989 seems not to think so. This difference in education is the centerpiece of Harrison’s thesis.
The Qualifications Board should simply set the education requirement as successful completion of a course in the seven areas and forget hours, and if a rigorous State exam is made part of the process, then The Appraisal Institute will be sure to include much of what it now calls advanced content in those seven courses.
On the issue of college education, professional associations may find this a plus, and hopefully the appraiser has written enough college papers to be able to write properly, but degrees in most disciplines will not make you a better market analyst.
The answer to my original question is yes and no. We now have a mechanism to punish bad apples, although better enforcement is needed, but the standards for education, experience and testing did not.
C M. Simon.
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