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performance and customer service.
This would include timeliness of the
process and the overall accuracy of
the appraisal. If done correctly, the
appraiser and AMC could use this
feedback to improve service.
These simple steps could begin a
process of self-regulation that would
benefit the whole industry. Overall
customer service has been a victim of
the dramatic changes in this industry
over the past five years. All parties have
taken steps to correct the mistakes of
the past, but more needs to be done.
More government regulation is not the
answer, however. By beginning self-regulation, the industry can create
greater trust among key constituents
and help move the market and the
economy for ward. •
Is the Best Regulation Self-Regulation?
Changes within the appraisal process could help the industry regulate itself
Why isn’t the housing industry solving
its own problems? The answer is that
the principal players — Fannie Mae
and Freddie Mac, mortgage lenders,
appraisal management companies
(AMCs), appraisers, and mortgage brokers — often don’t trust each other and
are working at cross purposes. The industry lacks transparency, creating
more uncertainty, inefficiency and a
lack of trust among the players.
Although there are no easy fixes, two
steps can be undertaken immediately
to help tackle the issue of trust.
1. appraisers need a forum to express concerns about the process.
Seasoned appraisers are leaving
the industry because of improper
pressure from AMCs, poor pay and
an avalanche of new regulations.
Many appraisers are asked to work in
markets where they have no experience or knowledge of local conditions.
Others are asked to use foreclosures,
short sales and other improper
properties as comparable homes.
In addition, they should be able to
evaluate clients on whether their
demands are reasonable, if they
are slow to pay or if they pay below
the standard. If this data was made
widely available, appraisers could
avoid undesirable clients. Meanwhile, clients who provide better support through the appraisal process
would attract the best appraisers.
Such a mechanism would allow for
greater transparency and improve
the opportunity for self-regulation.
2.;Create consistency and accuracy in
the appraisal process. Appraisers
must adhere to established standards. When multiple appraisals
are called on a property, valuations
often differ and the variance can’t
be explained by market conditions.
This calls into question the credibility of the valuation. It is difficult
to know exactly how the appraisal
process actually works. Mortgage
professionals should be able to evaluate appraisers and AMCs on overall
As the writer Keith Davis put forthinhis“ironlawofrespon- sibility” more than 30 years
ago, “Those who do not use power
in a manner which society considers
responsible will tend to lose it.” No
industry proves this point better than
the real estate industry. The mortgage industry contributed to a housing
bubble of historic proportions.
Although numerous sources have
spelled out the problems within the
real estate industry, few have offered
solutions for restoring trust. As a good
starting point, the industry should be
its own watchdog.
Housing traditionally has been a mainstay of the U.S. economy. The sector
accounts for about one-fifth of the
gross domestic product. Each newly
built home creates three new jobs and
$90,000 in tax revenue, according to the
National Association of Home Builders.
Studies of past recessions have shown
that housing has been a main driver in
roy l. Simerly
Scotsman Guide Residential Edition | scotsmanguide.com | February 2014
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roy l. Simerly is co-founder of Appraiser Trac.com
and is a professor emeritus at East Carolina
University. His field is strategic management.
Reach Simerly at (919) 761-7013 or