Matrix Blog

Government, Politics, Regulations & Policy

[Housingwire] Hey 50-percenters, there is no “appraiser shortage” so knock it off

June 15, 2017 | 4:32 pm | Articles |

As a longtime reader of Housingwire, I always saw them as a great resource on the goings on in the mortgage industry. But lately, I grew concerned about the one-sided coverage as it related to my industry – residential appraisal.

HousingWire recently published an “appraiser shortage” blog screed that was tone-deaf to the problems facing appraisers. To their credit, Jacob Gaffney, the editor-in-chief, reached out to me for a rebuttal after reading all the negative appraiser feedback in the comments section. Rather than address specific failings of this piece, I opted to focus on current appraiser reality.

To start, the residential appraisal industry has a perception problem.

Read my full post on HousingWire.

Here is another thought on this appraisal shortage silliness. Not too long ago there was a webinar hosted by Housingwire that included some Powerpoint slides by one of the panelists, Matt Simmons. He is a Florida appraiser and former state regulator. He shared it with me and one of his slides is quite amazing. He matched mortgage origination volume with the federal registry of appraisers.

The finding?

The ratio of appraisers to mortgage volume has been higher since the housing bust than during the housing boom. While the chart only goes to 2015, both total origination and appraisers have changed little since then, so the ratio would remain stable, consistent with the post-financial crisis pattern. In other words, there are more appraisers now than there were during the Housing Bubble based on mortgage volume.


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Doubling Down On Appraisers as ‘Lone Wolves’ – Valuation Review

March 23, 2017 | 7:29 am | Articles |

Note: I have been a subscriber of Valuation Review and it’s predecessor for years. It provides a wide perspective on the appraisal industry and I’ve always got something out of it. Over the past few years, I’ve noticed that the voices in the magazine seemed to be skewing more and more towards national level AMC executives. I suspect the PR departments of these firms make their top executives readily accessible washing out the voices of individual appraisers. So I sent the editor a note offering another perspective with links to my content. He was immediately interested in getting another voice so he interviewed me.

From the Wednesday, March 22, 2017, Valuation Review Article:  CEO suggests appraisal industry comprised of ‘lone wolves’.

CEO suggests appraisal industry comprised of ‘lone wolves’

Reasonable compensation, lender and AMC issues are constantly on the mind of the appraiser. When things aren’t falling into place, the process of assigning blame kicks into high gear with appraisers continuing to look for guidance.

“That’s the problem in that there really isn’t any leadership for appraisers to follow. The false narrative of an appraisal shortage continues to be pushed by AMCs, unfairly tarnishing the image of individual appraisers,” Miller Samuel Inc. President and CEO Jonathan Miller told Valuation Review. “When an industry takes a 50 percent pay cut overnight, good people leave or struggle to hang on and weaker players are attracted-which equals problems. But is it the fault of the remaining individual appraisers?

“AMCs are at a seminal moment,” Miller added. “In what other industry does the company managing the talent get about the same compensation as the talent them? An agent representing a Hollywood actor isn’t going to get $1 million if their client is receiving that same amount for a movie role. It is a broken model.”

Like many in the appraisal profession, Miller strongly believes that there is not a shortage of appraisers. In fact, he more than challenges one reason for such a shortage is that too many burdensome regulations are being placed upon appraisers.

“There is a shortage of appraisers willing to work for 50 cents on the dollar,” Miller said. “The AMC model has hit a wall. AMCs have run out of new people willing to work for 50 cents on the dollar. Sadly, consumers think appraisers are getting the appraisal fee stated in their mortgage documents. They aren’t and typically the appraiser receives as little as 50 percent of it.

“The Appraisal Institute says there is a shortage of appraisers and seem to be championing the AMC concept but appraisers don’t understand why,” Miller added. “I’m not against AMCs; rather, I’m against the execution of business by the AMCs. They treat appraisers as a commodity rather than a professional service.”

For the rest of the story, visit here.

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Banks Make Regulations Onerous By Over-Interpreting Them

March 8, 2017 | 11:52 am | Investigative |

Some people are their own worst enemy. And that old saying also applies to financial institutions.

With all the talk about revisiting, gutting or eliminating Dodd-Frank, a significant part of the problem with mortgage appraisal related lending actually exists within the bank risk management themselves. Their over-interpretation of what the regulations require gives outsiders the impression that appraiser related regulations or standards are more onerous than they actually are.

Fannie Mae Allows Trainee Inspections Without Their Supervisory Appraiser
One of the biggest issues today is the lack of mentoring by experienced appraisers because it is not financially feasible under current lending practice. Both banks and AMCs – who act as a bank’s agent – generally do not allow trainees to inspect a property without a licensed or certified appraiser alongside. So in an era where AMCs control as much as 90% of mortgage appraisal work, the lenders are requiring AMCs to require something the GSEs (the party buy their mortgage paper) do not require. This risk aversion is residual from housing bubble collapse. Mortgage lenders today, subjected to low rates and a very narrow rate spread, remain irrationally averse to risk.

However, their underwriting risk management is effectively destroying the future quality of appraisals that will be done on their collateral because the new wave of appraisers is essentially only book-smart without real world context (mentoring). Experienced appraisers can not afford to invest the time to inspect the property with the trainee (in addition to their own inspections) for the multi-year experience period before the appraiser is certified after already taking a 30% to 50% overnight pay cut from AMCs.

From the Fannie Mae Seller’s Guide Update – 2017-01 page 2.

Reporting “Material Failures” to State Boards
In reference to appraisal oversight, let’s consider how banks determine whether an appraiser is reported to their state licensing board.

Dodd-Frank says the following in 12 CFR 226.42(g)(1). Whereby a lender has to report an appraiser for…[bold, my emphasis]

(g) Mandatory reporting—(1) Reporting required. Any covered person that reasonably believes an appraiser has not complied with the Uniform Standards of Professional Appraisal Practice or ethical or professional requirements for appraisers under applicable state or federal statutes or regulations shall refer the matter to the appropriate state agency if the failure to comply is material. For purposes of this paragraph (g)(1), a failure to comply is material if it is likely to significantly affect the value assigned to the consumer’s principal dwelling.

When the CFPB was asked what they meant by a “material failure” – the following table shows the difference between material and non-material.  So how much is a material failure? A value off by 2%, 10% or 30%?

And by the way, the third option for reporting a material failure seems absurd although I suppose it has to be said – Who is dumb enough to admit that they accepted the assignment because they knew they would “make the deal” happen. The obvious lack of a definitive paper trail in such a situation makes this very hard to prove.

I’ve always had a problem with setting rigid rules in considering the concept of appraisal oversight. With valuation expertise, how does a state agency apply hard rules to value opinions, comp selection and adjustments, etc.? There needs to be a great deal of latitude for regulators and an “I’ll know it when I see it” approach should be allowed.

Separating gross negligence from negligence

Here is the rule.

“Performing an appraisal in a grossly negligent manner, in violation of a rule under USPAP.”

While subjective, it represents a very severe extreme to which an appraisal would be reported to a state board. The rule goes on to say…

“Accepting an appraisal assignment on the condition that the appraiser will report a value equal to or greater than the purchase price for the consumer’s principal dwelling, is in violation of a rule under USPAP.”

But big national mortgage companies today like Wells Fargo and others are reporting appraisals to state boards where the value is not supported. ie weak comps, unreasonable adjustments, etc. Reports with those issues may, in fact, be negligent but do not fall under the definition of gross negligence. Let’s not wreck an appraisers career because they missed some better comps. Once these reports are referred to the state, the state must investigate. It opens up the appraiser to more risk of unintended consequences. Think of a scenario where a cop pulls over a driver for a missing taillight and learns that the driver doesn’t have his wallet with him.

Gross negligence requires a much higher test than applying it to an appraiser who is just being stupid.

It is defined as:

Gross negligence is a conscious and voluntary disregard of the need to use reasonable care, which is likely to cause foreseeable grave injury or harm to persons, property, or both. It is conduct that is extreme when compared with ordinary Negligence, which is a mere failure to exercise reasonable care.

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“Kleptocracy Initiative” to Stop Money Laundering in Real Estate up for Renewal

January 23, 2017 | 9:03 am | Infographics |

Almost two years ago the real estate new development world was rocked by the New York Times epic page one story by Louise Story and Stephanie Saul about foreign investment in U.S. real estate. The vehicle for “Towers of Secrecy” purchases was the ubiquitous LLC shell corporation. While I’m no advocate of illegal activity for the sake of preserving the health of a real estate market, I was very skeptical and outspoken about the challenge of measuring the impact of this new rule. Especially since the new development market had already started to show signs of over supply by mid 2014 in both Manhattan above $3M and Miami above $1M. It also seemed to single out wealthy buyers who did not want to get a mortgage. How could the effectiveness of this six month rule be measured reliably enough to be extended or made permanent when the market was already falling?

Since these series of articles came out, I have learned a lot more about the scale of kleptocracy around the world and more appreciative of what the rule attempted to accomplish.

MHjmkleptocracycallout

Fast forward to 2017 and the super lux (≥$5M) new development condo market cooled sharply. The rule has been extended but is now up for renewal in a month. It is not clear whether the new administration will renew it. Nicholas Nehamas of the Miami Herald penned are great recap of the rule status. To make it even better, he included a YouTube video of bulldozers playing chicken in the piece.

I have to say I admire the messaging that came out of Homeland Security to justify the rule’s impact. Whether or not the following is an exageration, the mere existance of the rule is probably an effective deterent.

“We don’t come across [money laundering in real estate] once every 10 or 12 cases,” said John Tobon, U.S. Homeland Security Investigations Deputy Special Agent in Charge for South Florida. “We come across real estate being purchased with illicit funds once every other case.”

Here are the areas current covered by the Treasury rule.

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Using the parameters of the rule, the Miami Herald asked that I analyze sales in the five boroughs of NYC since enactment.  I stuck with condos and 1-3 families since co-ops tend not be a preferred property type of foreign buyers. I found that sales dropped 6% year over year for the aggregate of Manhattan sales over $3M and the outer borough sales of $1.5M. This included legacy contracts that closed during the rule enactment period but went to contract before it started. Those sales likely softened the actual decline in sales.

MHsalessinceFinGen

While it appears reasonable that the rule had some drag on demand, a possible repeal in February won’t likely have much of an impact on the oversupply that currently exists.

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Voice of Appraisal Podcast: E136 A Deep Dive into A.I. with Jonathan Miller!!!

January 19, 2017 | 7:12 am | Radio |

I had another great conversation on Voice of Appraisal with Phil Crawford. The conversation centered around AI National’s “taking” policy debacle, my repository for all the documents on this matter (realestateindustrialcomplex), the viral outrage that has overtaken the appraisal industry, released from my first of several Matrix posts on the topic: Sadly, The Appraisal Institute is now working against its local chapters.

We also spoke about RAC, an appraisal organization I’ve been a member of for two decades and recently became the president. RAC works for its members.

Aside from Phil’s dreamy radio voice, he shares a lot of great content each week for appraisers. Well worth a regular listen.

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Real Estate Industrial Complex versus The Appraisal Institute’s Stealth Culture

December 18, 2016 | 8:48 pm | Favorites |

appraisalinstitutelogo

Over the past couple of weeks there has been extreme outrage expressed by the chapters and membership of the Appraisal Institute towards “National” leadership and their stealth policy culture. The last straw was “The Taking” policy of nearly all chapter funds and then charging the chapters to manage them. This major AI policy initiative was passed without vetting of the chapters or the membership. I have written about this in two recent blog posts that went viral.

Sadly, The Appraisal Institute is now working against its local chapters

Incredibly, The Appraisal Institute is taking chapter “excess cash” and charging them for the privilege

Emails, letters and documents are flying everywhere.

On Thursday it was suggested I set up a central repository for all this information since not everyone in the chapters and membership are seeing all the same information.

So we set one up and it is ready to go. This new web site is a forum that allows users to either lurk or register. If you register you can add content and comments. If you’d rather lurk, that’s ok too since the goal here is to create transparency. I preloaded REIC with some of the information I have. I’m happy to upload information for those of you that are less tech savvy…just use my email address below.

But for now, the best thing you can do is SEND THIS URL TO EVERYONE YOU KNOW and start UPLOADING AND SHARING INFORMATION RIGHT NOW!!!

https://realestateindustrialcomplex.com

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Incredibly, The Appraisal Institute is taking chapter “excess cash” and charging them for the privilege

December 14, 2016 | 4:56 pm | Investigative |

After last week’s post went viral: “Sadly, The Appraisal Institute is now working against its local chapters“, I thought I’d follow up with additional thoughts on AI National’s chapter money debacle.

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On November 18, 2016 the Appraisal Institute Board of Directors adopted their Chapter Financial Management and Administration Policy. I assume most chapter officers are not aware of the details of this major AI financial chapter restructure plan whose policy is officially in place.

How the sausage is made

Here is a relevant excerpt from the new AI November policy on chapter finances:

Make the phrase “excess cash” part of the professional vernacular going forward. Here is a key detail from the policy:

6. Reserve Fund

a. Cash and Investments Held by Chapters
Excess cash held by Chapters shall be consolidated with the Appraisal Institute’s Reserve Fund Portfolio (“Portfolio”).
In determining the initial deposit into the Reserve Fund Portfolio, cash and investment balances greater than three months of the average monthly Chapter operating expenses will be considered excess cash. The average monthly operating expense will be based on the last three fully closed years.
b. Portfolio Structure
Deposits from Chapters to the Reserve Fund shall be comingled with Portfolio assets, however will be accounted for and tracked separately.

So here’s a hypothetical scenario based on the way the policy reads to me:

Lets say a chapter has $200,000 in the bank. This money was collected from chapter members with their hard earned appraisal fees. The money enables a local chapter to function, bring in guest speakers, cover operating deficits, pay for an executive secretary and other operational items. I already know there are chapters with as much as $100,000 to more than $300,000 in their chapter bank accounts.

Lets say the three year average of my example chapter’s monthly expenses is $5,000. By the AI policy formula, all cash in the chapter’s account above $15,000 (3 x monthly average) will be sent to National. AI has said they will keep records of where the money came from. So in my example, $185,000 ($200,000 less the $15,000 calculated amount) immediately goes to National where it is commingled with other chapter’s funds.

There is a complex (to me) protocol for getting the money back to use at the chapter level. It makes me wonder what happens when a chapter needs money to keep the doors open but doesn’t have it or has a short term financial emergency. For most chapter members who already have full time jobs or a part time executive secretary, the process of getting access to cash at last minute to solve an unforeseen problem seems like an unfair burden. Contrary to the sales pitch given by the president in the previous post, I believe this policy will create additional clerical burdens and reduce the flexibility of the chapters.

As time passes, combined with National’s inability to keep chapters and membership informed in recent years, the details of this “taking” will get hazy as time passes. Over the long term it is unclear what will happen with each chapter’s money. This and other AI policies are being written in such an open ended way, clearly banking that membership or the chapters won’t read it and won’t have a way to stop it once they do. Once National takes most of the money from the chapter bank accounts, the chapters are forever at their mercy. Do chapters really want to be placed in this position?

I recently spoke to an AI member, with a reputation among local peers for cheerleading AI mandates for his own political gain. This person told me that the so-called chapter money was really “National’s money.” I can only believe that such an orientation came from National. I immediately corrected the member, saying that “no, it was the chapter/members’ money.” This position spoke volumes about how National sees the chapters as working for National rather than as National working for the members.

But gets better…

Chapters are literally paying National to manage the chapter fees National has decided to take from the chapters without advanced warning.

Here is a relevant excerpt from the new AI November policy on chapter finances:

Incremental costs (“Incremental Costs”) incurred by the Appraisal Institute Finance Department to execute the responsibilities delineated to it within the Policy shall be funded by a fee payable by Chapters. Incremental Costs represent expenses incurred that otherwise would not have been payable by Appraisal Institute without this Policy and may include, but are not limited to, personnel, technology, banking, audit and tax services. The amount payable shall be calculated for each Chapter as a Base Fee plus a Variable Fee Percent of such Chapter’s average annual expenses. The Base Fee and Variable Fee Percent shall be established by the national Finance Committee, subject to the national Board of Director’s approval, so that total amounts paid by Chapters under this section of the Policy shall reimburse the necessary Incremental Costs incurred by Appraisal Institute to execute its obligations under the Policy. The combined Base and Variable Fee shall be paid in four equal installments on a quarterly basis.

Please get familiar with this policy document and remember that the AI board has already adopted it without vetting it with the chapters. I repeat: this is now an active policy of the AI.

After National takes the “excess” chapter funds (my example of $185,000), it charges the chapter to manage it including costs for additional staff. And even more of a concern, the amount of the fixed plus variable cost structure the chapter will pay has not been determined yet. All AI chapters are effectively losing control of their “excess funds” but don’t know how much National will charge them to manage those funds.

Being penalized for success

Based on the fixed plus variable format, a large chapter will probably pay more than a small chapter for National to manage the chapter’s money. I would argue that the larger chapters are being financially punished by National for being larger. The irony here is that larger chapters reflect a certain level of success by attracting and keeping more members or being able to generate funds for a rainy day. Plus the AI money management process is the same for a chapter with $10,000 in excess funds and one with $200,000 in excess funds. Since the chapter funds are tracked on a spreadsheet or accounting software, the number $10,000 is not easier to enter into a spreadsheet cell than the number $200,000 so the size of the chapter is immaterial. If National maintains that chapter size is material, then the unannounced variable plus fixed management fee should be much larger than if size didn’t matter. I would argue that smaller chapters will require more management than larger chapters, no?

I find the commingling of funds unnerving since membership generally does not trust National leadership and this massive shift in policy was done without communication to the chapters, let alone the membership. The scope of this change is not a simple matter. It should have been vetted on a chapter level if National truly respected their chapters.

Can there be a solution?

Two suggestions for AI National:

  1. I’d like to naively suggest that the National board adopt a chapter level opt in policy so chapters can decide individually whether to allow AI to run their chapter finances. I can see how a few very small chapters that don’t have executive secretaries could be inclined to ask National to manage their funds. However all chapters will be making quarterly management fee payments to National and be subjected to a myriad of rules in this controversial policy. The very idea of an outside party managing chapter funds seems to add more operating burden to understaffed chapters and their executives who already have full time jobs (usually).

  2. The “taking” of chapter funds should be cost neutral. The proposal by National should not cost the chapters a penny. If chapters save operating costs that equals the management fee, then perhaps this can be explored. Otherwise our industry has endured a long term period of fee compression, and this policy simply becomes a money grab by National.

What happens next?

At this point, it looks like the majority of the membership and the chapters are against the AI Board decision to take most of each chapter’s cash.

If chapters resist giving their “excess cash” to National, would it not be too far to suggest that National will nullify the designations of chapter members in a rebellious chapter? Otherwise, what other action could National take to enforce this “taking”? This recent policy and the unrest it stirred has already tarnished the AI brand and will likely accelerate the exodus of existing members. When leadership of an organization is unable to deliver value to their members, the next step seems to be to take something of value from their members. In this case…cash.

The president and board members of the Appraisal Institute demonstrated how little they understand and respect their membership. I believe this is why they enacted a policy to take each chapter’s cash without telling them in advance. As I said in my prior post, AI National is officially obsolete.

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Sadly, The Appraisal Institute is now working against its local chapters

December 6, 2016 | 6:38 pm | Investigative |

appraisalinstitutelogo

I have a lot of good friends and colleagues who frequently give at least a passing thought to quitting the Appraisal Institute, the largest real estate appraisal industry trade group. At the national level, the association has lost the ability to work for its members and has instead, shifted into a political failure spiral by enacting policies that are against their chapters’ and members’ best interests.

I get these types of comments from members at get togethers who say things like…

“I am only paying my dues to retain my designation.”

“The chapters are the only relevant thing AI provides to help me.”

“The self-dealing politics at National sickens me.”

Their announcement of the new administrative policy on November 30, 2016 continues the trend:

As you might have heard by now, the Appraisal Institute Board of Directors recently took a significant step to enhance your chapter’s ability to focus its attention on providing member services by reducing your current administrative burden. This is great news for chapters.

Here’s the letter that was sent to chapter leaders:

ai11-30-16

It reminds me of an old IRS joke: The IRS agent walks into your office with arms extended for a handshake and says:

“I’m from the IRS and I’m here to help you.”

It has been discouraging to watch the Appraisal Institute (National) erode into irrelevance while the appraisal industry is crying out for leadership at a seminal moment in our history. Dodd-Frank is about to be gutted and appraisal management companies have run out of appraisers willing to work for half pay. Instead they have morphed into a trade group that is unable to help its members. I challenge my readers to provide any evidence of such leadership since the financial crisis.

One of the only remaining redeeming features of the Appraisal Institute aside from their SRA and MAI designations has been the strength of local chapters. It’s where the rubber hits the road, where appraisers press the flesh at local meetings, take classes and listen and interact with guest speakers. The real value of AI membership remains at the chapter level.

At the Appraisal Institute headquarters in Chicago (National), they clearly recognize the power of the local chapters. For an organization that has been encumbered by procedural minutae, they developed the ability to enact policy without input or oversight. Here’s the current controversy over a non-vetted decree from National that involves money.

National has enacted a new policy that requires all money at the chapter level be administered by National. It’s a political power grab that will further alienate dues paying members. This is part of the growing pattern of AI’s lack of communication to their members.

The response

The very large New York Metro chapter responded in a letter from their board 2 days later – about being blind sided by the new policy. It’s an incredible read – a full-on indictment of the thinking of National. So many great appraisers in that chapter but how long will they put up with this? You can see how hard the local chapter is holding back it’s anger for such a policy. See link for pdf or the full text below. Bold emphasis provided by me.

AI Metropolitan New York Chapter Board Letter to AI National Board


December 2, 2016

Dear Members of the Appraisal Institute Board of Directors:

This letter is being submitted on behalf of the Board of the Metropolitan New York Chapter of the Appraisal Institute as a response to the National Board’s recent decision to implement a new Appraisal Institute Chapter Financial Management and Administration Policy. The Metro New York Board met this week and unanimously agreed to communicate our disapproval of the new policy and our astonishment that such a major change could be effectuated without any sort of prior notification or consultation with the Chapters and the Membership. Furthermore, to announce this decision as a fait accompli late on a Friday before a holiday week is alarming to our Chapter’s Directors.

The Metro New York Board finds it surprising and unacceptable that such a significant policy change in the governance of Chapter finances could be constructed without any transparency, input or dialogue with the Chapters and Membership. Simply being informed that national will take over our Chapter funds, albeit with assurances of our continued control of our finances, is outrageous paired with the admission that “Adjustments may have to be made to the policy as implementation progresses.” By creating this plan, effectively behind closed doors, you have not instilled any sort of confidence that the policy you are demanding we accept is acceptable to the Chapter. Given that the Appraisal Institute has a model for gaining feedback from the Membership – with the 45-day notice model provided for other significant actions impacting Members and Chapters – the Metro New York Board feels it is not at all appropriate for the national Board of Directors to unilaterally create this new policy in such an opaque manner. Given the potentially serious impacts of this new policy on the individual Chapters, we believe a more extended, perhaps 90-day notice would be minimally appropriate particularly given that this change was basically “sprung on” the Chapters on the advent of the holiday season that creates extra demands on all of us.

Beyond our uneasiness with the lack of transparency and how this new policy was implemented, the Metro New York Board finds the policy itself to be unacceptable. We believe that turning over our funds to national would limit and impact the autonomy of our Chapter and potentially diminish our stature in the local real estate community. The Metro New York Chapter is one of the most active Chapters and has been diligent in providing necessary education opportunities for our members and candidates, organizing enriching events for our members and the broader New York City real estate community, and fostering a supportive framework to help candidates work towards their designations. Importantly, this last goal contributes to the health of the organization nationally. Many of these programs are supported by our members through a historically successful Chapter sponsorship program. We believe our success in these endeavors illustrates that we are proficient in managing our own funds, maintaining reserves, and knowing how to do what needs to be done on a local basis. Certainly stripping the Chapter of its funds, particularly under terms that may be subject to change, will undermine the Chapter membership’s confidence that our efforts to maintain the economic health of the Chapter constitute time well spent. Furthermore, several Chapter sponsors who have consistently supported Chapter endeavors have expressed concern about this change in policy and that it may impact their willingness to continue such sponsorships in the future considering the substantial loss of Chapter autonomy as a result of the new policy changes.

While we look forward to hearing more details regarding the new policy from National on Tuesday’s call, the Metropolitan New York Chapter Board strongly urges the National Board to reconsider implementing this new policy.

Appraisal Institute, New York Metro Chapter
John A. Katinos, MAI, President
On behalf of the Metro New York Chapter Board of Directors


I heard a rumor that AI wants to do away with chapters and I’ve also been told that is not true – but with the opaqueness of National, I don’t know what to believe. And I keep hearing rumors about AI spending millions to expand their footprint across the globe but haven’t seen any measurable success let alone share the status of this effort with members. Is esoteric global expansion worth raising dues in a compensation compressed environment? Is the membership even aware of this effort and the millions supposedly lost?

Most of my peers nationwide have expressed frustration with an organization mired in self-serving politics. And it only seems to be getting worse.

My moment of zen was their self inflicted and childish exit of the Appraisal Foundation a few years ago. I eventually left AI and moved on to two other organizations that provide what appraisers are looking for. Remember that most of us are “lone wolves” and belong to organizations to get other perspectives. I can’t tell you how many SRAs and MAIs I know are talking about leaving the organization.

And did you ever wonder why there are so many statewide appraisal coalitions popping up? It’s largely because of inaction by National or their opposition to issues important to appraisers.

Incidentally, this new policy parallels the changes made by the Chinese government a while back. They moved the majority of the tax income stream from the provinces to the national government. This forced the provinces to go hat in hand to the national government to beg for an allotment of income each year. Sound familiar?

Lots of graft ensued for the provinces to get their “share” of revenue. In fact one of the reasons there are as many as 40 ghost cities in China right now is because the provinces were incentivized to generate GDP. What better way to do that then to build cities for several hundred thousand residents that would never come.

The moral of the story: central planning is never efficient. Through the loophole that National installed allowing them to modify this policy at anytime in the future is a recipe for disastrous self-dealing.

This is the appraisal industry’s moment to have some impact on our future. There are many challenges in front of us. The Appraisal Institute on a national level is now officially obsolete.

Enough with the self-dealing. We don’t make enough money collectively to fund their boondoggle. We need leadership, not politics.

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Housing and the Election Aftermath

November 9, 2016 | 9:56 pm | Milestones |

With any significant unexpected and historic event, the initial impact to housing can be seen in the form of a “pause” until buyers have enough time to process it. I first wrote about my “milestone” theory more than a decade ago. There was a New York Times cover story a month after Lehman collapsed in 2008 that used our data to mark such a milestone. A “pause” can be measured in days or months and market reaction can ultimately go against conventional wisdom.

Back in August of 2011, after S&P downgraded U.S. debt ratings, it was thought to be catastrophic to the U.S. economy yet the world’s investors flooded into U.S. treasuries for safety, pushing interest rates to the floor, ultimately giving a boost to housing.

I may not know much, but I do believe this: potential changes in government social policies should be kept separate from potential changes in economic policies, otherwise it is impossible to take action on anything in your life. This probably includes making decisions about whether to buy or sell a home. This U.S. election campaign has been brutal and at this point we don’t know how much of what was said about social policy will be enacted. This uncertainty may keep some buyers on the sidelines longer than others, but otherwise I’m not sure any of that matters to the housing market. On the margin, I am hearing that a few buyers have placed their purchases on hold. This is a normal reaction after a significant historic event but eventually many of those participants wade back into the pool when they are more comfortable.

Stock futures were down significantly overnight but the financial markets moved higher after initially falling. With a quickly rebounding stock market, I’m don’t think home buyers will take very long to decide whether to rejoin the housing market.

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In addition, the odds of a December interest rate increase by the Federal Reserve dropped sharply despite yesterday’s view of a rate hike as nearly a sure thing. The president elect’s economic platform, which was not widely discussed during the campaign, proposes a large tax cut and investment in infrastructure which are either favorable or neutral to the housing market.

bbcmefutureselectionday

Before the election, the housing market was generally softest at the top over the 18 U.S. markets we cover. I believe inventory will continue to be more readily available at the higher end than for other segments. In New York, the slow down in sales was assumed to caused by the pull back of foreign buyers. However this decline was equally matched by domestic buyers over the same period, so the foreign buyer decline has been a false narrative. The sales share of international buyers has remained stable for for nearly 3 years. I am speaking at the The Real Deal conference in Shanghai next week and will look to understand sentiment towards further U.S. real estate investment.

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Rather than the international buyer narrative, I attribute the New York sales slow down to the visceral view of new residential towers rising from empty lots. Construction lending nearly dried up at the beginning of the year so the pipeline will slow quite a bit over the next two years.

With world economies generally falling or remaining weaker than the U.S. economy and the continuation of near record low interest rates, I don’t see much impact from the U.S. election results after the short term jitters pass.

Of course, I was wrong about the election.

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Voice of Appraisal Podcast: E123 “Solving Problems with Jonathan Miller!”

October 7, 2016 | 10:30 am |

Had a fun interview with Phil Crawford and his must listen weekly Voice of Appraisal talk show. I’ve set up a home button on my iPhone to grab each new interview. My only regret in life is not having Phil’s smooth silky radio voice. He provides a great service to the appraisal community.

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Podcast: My Port Authority of NY & NJ Interview on Regional Housing Market

September 24, 2015 | 12:16 pm | Podcasts |

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A few days ago I was interviewed by Christopher Eshleman at the Port Authority of New York & New Jersey. He works for Alexander Heil who is the chief economist and publishes a lot of great regional economic insights. Although this is a new effort, this was their first podcast conducted outside of the institution so I am deeply appreciative of the opportunity to share my views.

Christopher is a sharp guy and kept the conversation interesting (I even inserted a Jerry Seinfeld joke). It’s about a half an hour.

Check it out.

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The Big Short: The Movie Coming this December

September 23, 2015 | 11:37 am |

Coming to a theatre near you in December…

Aside from playing my favorite Led Zeppelin song “When the Levee Breaks” and being based on one of my favorite books about the housing bust/financial crisis “The Big Short” that was written by one of my favorite authors Michael Lewis (Blind Side, Flash Boys, Moneyball, Liar’s Poker, The New New Thing, etc.) that includes pretty much all my favorite actors – it’s a freakin’ incredible story.

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