“The current residential appraisal system is impaired due to inconsistent and conflicting standards and guidance; inadequate and uneven oversight and enforcement; a shortage of qualified and experienced residential appraisers; and, the absence of a robust and standardized data system. The National Association of Home Builders (NAHB) believes these problemsmust be addressed in order to restore confidence in the residential real estate market and to establish a foundation for sustainable growth of the U.S. economy. This can only be accomplished through sound valuation practices, policy, and procedures that produce more credible valuations under all economic circumstances.”
You can find the full article here: http://www.nahb.org/fileUpload_details.aspx?contentID=195703
Here is a rebuttle to this article was written by Alice Sorenson and published in Valuation Review.
“LRES’ Alice Sorenson talks NAHB white paper, industry issues and solutions
When the National Association of Home Builders (NAHB) released a white paper that determined “serious problems in the residential appraisal process must be addressed in order to restore confidence in the residential real estate market and to establish a foundation for sustainable growth of the U.S. economy,” it didn’t take long for appraisers to speak out against that opinion. It was the latest assault on appraisers who have seen their fair share of blame and potshots. Still a month after the release, the conversation continues. Valuation Review talked to Alice Sorenson, chief acquisitions officer of LRES, an appraisal management company based in Orange, Calif., about the NAHB slant, what’s really going on in the appraisal industry and how we can work together to solve the problems we actually have.
“Everyone seems to think that appraisers have a magic wand that’s going to fix the industry. It’s been going on for quite a long time,” Sorenson said. “This white paper is really a persuasive paper. The NAHB is busy trying to convince someone of their position. They’re only presenting their version of their side of it. The paper alleges that there are serious problem within the appraisal and housing industries. I think this is an industry problem. It’s not just restricted to the appraisal industry.”
Sorenson, a 35-year veteran of accounting, finance, banking, portfolio management and administration and a champion of transparency in not just the appraisal industry, but housing industry in general, believes that the housing industry needs to have a serious conversation about developing a holistic approach to solving the housing issues that face the nation. As far as Sorenson can see, no one — from the government to the NAHB or Mortgage Bankers Association (MBA) — has attempted to find that middle ground.
“The NAHB paper stressed the need for reform — regulatory reform, reform within the data and technology standards, practice and process procedure reform. If you didn’t know anything about the industry, you’d think that none of that exists. But of course all of that exists,” she said. “This white paper, because it is trying so hard to achieve its own agenda, is showing a lot of ignorance for what really exists. The one glaring elephant in the room is that this paper doesn’t address cost at all. It doesn’t mention cost. Some of the things they are talking about are going to be extremely expensive — especially the data aggregation and technology they recommend. Who’s going to pay for that?”
As appraisers know, the industry has seen its fair share of regulation and reform, from the ever-adapting USPAP standards to the uniform appraisal dataset (UAD) and countless regulatory hoops the appraisers, AMCs and appraisal firms have to jump through. Sorenson acknowledged that, of course, there are issues not just in the appraisal industry, but the housing industry that continue to persist — poor lending practices, cruddy appraisals and outright fraud are still prevalent. The NAHB, among others, are simply asking the wrong questions.
“Whether or not oversight is complete and efficient; whether or not all the existing rules and regulations are being enforced today to the best of their ability — those are legitimate questions,” Sorenson said. “I think they are enforced more than the NAHB thinks they are. What I don’t think is being done is the follow through. When there is a violation, what are the consequences? We need to enforce those consequences so that people are deterred from doing the wrong thing.”
Despite being worlds-away in terms of opinion, Sorenson isn’t saying that reform and improvement isn’t necessary. Of course, the industry can always progress, working toward implementing better practices and more advanced and usable technologies. But the industry needs more solutions and less finger pointing.
“I think the fact this paper has stimulated so much discussion is excellent,” she said. “We need to talk about the things that aren’t right. We need to talk and collaborate on how these problems can be set right. The NAHB put forth a number of solutions in their paper. I’m of the opinion that every one of those proposed solutions exists to one degree or another. We don’t need more solutions — we need to enforce the rules, regulations and structure that we have today.”