Fee Simplistic is a regular post by Martin Tessler, whom after 30+ years of commercial fee appraiser-related experience, gets to the bottom of real issues by seeing the both the trees and the forest. He has never been accused of being a man of few words and his commentary can’t be inspired on a specific day of the week. In this post, he opines that tightening appraisal compliance expectations not on the radar of the lending and investment community (translation: the lights are on and nobody is home).”_ …Jonathan Miller
Being a member of the Counselors of Real Estate (CREs) who primarily undertake counseling/consulting assignments provides one with a perspective that is not colored by the Wizard of Oz world of FIRREA/USPAP that binds appaisers who toil solely in the world of estimating market value. To put it simply, CREs can be more creative in servicing their clients (as long as they are not certifying to value) than appraisers who are umbilically tied to FIRREA/USPAP (although many CREs are also MAIs or certified appraisers). And so it was that a recent posting on the CRE organizations website caught my interest. It solicited insights and opinions about how changes to FIRREA and higher compliance expectations are affecting lenders and the investment community.
My initial reaction was either this CRE was kidding to think that this expectation of higher compliance was going to have any impact upon lenders and investors. Or if he was really serious he needed some immediate counseling to disabuse him of his misconceptions. Although I retired from the appraisal department of an international bank I have kept active consulting to an international organization that spans the appraisal and investment world. Relying solely on dealings and anecdotal conversations with appraisers, counselors, CMBS underwriters and packagers, and investment property brokers I can unequivocally opine that tightening FIRREA will have no impact upon the lending/investment world. It must be remembered that FIRREA was imposed to prevent fraudulent appraisals and USPAP was linked to it to insure minimal qualitative underpinnings that support estimates of value. To think that higher compliance expectations resulting from changes to FIRREA would have an impact upon lending and investments would be tantamount to implying that the fraudulent appraisals and lending practices of the late 80s was still prevailing or that the original regulations were not doing their job.
A reality check of the lending/investment world would tell anyone toiling in the world of valuation that as long as a competent appraisal supported the mortgage being requested nobody is going to be bound, unbound or rebounded by FIRREA. As the volume of investment dollars that are seeking deals expands-office building sales in New York City in 2006 totaled nearly $30 billion compared to nearly $20 billion sales already under contract scheduled to close in the first quarter of 2007-it is laughable to think that the investment community is going to lose sleep over FIRREA.
Certainly the busy appraisers will be losing sleep but not because of FIRREA but because the lenders will be keeping them ultra busy.
Semper Fee Simplisitc