James L. Murrett of Hamburg, New York, is the 2018 president
of the Appraisal Institute, the nation’s largest professional
association of real estate appraisers. He serves this year as
chair of the organization’s executive committee and chairs
its policy-setting board of directors. Since 2009, he has been
in management roles with Colliers International Valuation
& Advisory Services, currently as the executive managing
director of compliance and quality assurance, where he is
responsible for the general oversight of appraisal quality for
Colliers. Reach Murrett at email@example.com.
Home sales have steadily increased in the country in the last several years, which means there also has been an increase in the need for appraisals. All signs point to
this trend continuing.
To keep up with this demand, everything should be
done to make it as seamless as possible for appraisers
to provide opinions of value that meet the needs of
lenders and borrowers alike. Unfortunately, the regulatory system in place for the nation’s valuation profession is full of outdated, inefficient and duplicative
rules and requirements that run completely counter to
The current regulatory system forces appraisers to
overcome multiple, complex layers of regulation by
making use of a redundant federal oversight agency to
audit state licensing agencies, which in turn set up their
own specific licensing requirements for appraisers.
Ideally, federal oversight would come in the form of
some type of nationwide multistate licensing system
(NMLS), similar to the NMLS structure used now for
mortgage originators. Under the current system, there
is no national platform for states to coordinate licensing, which makes it extremely inefficient for appraisers
to work across state lines.
The appraisers who safeguard home purchases for
borrowers and reduce risk for lenders are being overburdened by current regulations that ultimately hurt
their ability to serve their clients. The situation calls for
Indicative of the challenges facing the appraisal industry, a 2017 study conducted by the National Association of Realtors found that excessive regulation is one
of the most common reasons for appraisers wanting
to leave the profession — among appraisers who say
they are likely to leave the industry within five years.
Standards and associated required coursework for the
profession change every two years, for example, causing appraisers to devote additional fees and significant
time for minute, inconsequential updates.
Because most appraisers operate as small businesses, these regulatory requirements become a
significant burden. To put it simply, appraisers are
inundated with unnecessary, tedious requirements
that change often and may not be recognized outside
of the state where they practice.
This aging regulatory structure, which has been in
place for nearly 30 years, has layers of federal rules
and regulations that are duplicative and unnecessary
while adding time and costs without additional lender
and borrower benefit. This structure is unlike any in
the federal system and has no comparable model —
not for land surveyors, insurance agents, real estate
brokers or mortgage originators.
In fact, the two most prominent parties that meet
with homebuyers — real estate agents and mortgage
originators — do not have direct federal oversight of
their licensing functions. Instead, what mortgage originators do have is an efficient multi-state licensing
program that can serve as a model for appraisal-regulatory modernization.
The real estate valuation profession should be able to
adopt a structure based on this NMLS now in place for
mortgage originators. Such a system would maximize
efficiency through improved coordination among
state regulators, lower cost burdens, and expand
lender and consumer benefits. Lessening burdensome
regulations also can potentially counteract the negative sentiment about over-regulation of the profession
In fact, updating the 1989 Financial Institutions
Reform, Recovery, and Enforcement Act by developing
and integrating a multistate licensing system like the
NMLS was recently highlighted by the U.S. Department
of Treasury in a report on technology and harmonizing
state licensing laws in the financial services industry.
The report recognizes the benefits of the NMLS
structure for other professions — which has been “to
reduce duplicative regulatory requirements, promote
greater information sharing and coordination, and
maintain consumer protections and the strength and
resilience of regulated firms.”
The report recommends efforts to build a more uni-
fied licensing structure and supervisory system across
the states. This approach also would help to reduce
inconsistencies across state laws and regulations.
Creating an NMLS-like structure for the appraisal
industry would provide better coordination among
regulators and allow for simpler flow of information
by providing a single stop to access data. Regulators
could use one uniform database for appraisers across
states. In contrast, in the current regulatory structure,
in each state operates with different systems and
Many states now require background checks for
appraisers, for example, without a central-processing
or management system. While the mortgage originators’ NMLS features one-stop shopping for background
checks, appraisers — who often work in more than one
state — are forced to navigate a patchwork process that
increases costs for lenders, consumers and appraisers.
Recognizing the growing need to address the regulatory obligations and challenges of the current
system and its inefficiencies, one proposed solution
has been to waive the appraisal process altogether.
This does not address the inherent structural problems, however, and creates more risk for lenders and
end-consumers by not having fair market valuations in
cases of default.
Appraisers Are at a Crossroads
There is a growing need for a better regulatory system for the appraisal industry
By James L. Murrett
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Continued on Page 122 >>