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You’d think client/user expectation would follow wise professional leadership.  Hah!

Innovation and leadership in knowledge and education has declined.  The profession and its key organizations have long lost their default position.  Pride in designations are diminished. Replaced by licensing, outdated appraisal processes, echoed education, and octopus-like regulation.  These are built upon subjective, belief-based ‘credibility’ standards.  Each of these re-reinforce what clients want and expect.  Why?

Lender-client employees focus on appraisal review, management, and loan production.  Reviewers and Collateral Risk Managers are mostly appraisers.  Loan production and underwriting practices are built on ‘established’ appraisal standards and regulatory requirements.  Client/user policy is a repeat of what appraisers have learned, have licensed, have standardized, and have complied with.  The doing/done/required process is circular.  The five frictions of valuation, process, standards, education, client expectation, and regulation, reinforce stale procedures and policies.

USPAP (Uniform Standards of Professional Appraisal Practice) is edited every two or three years. New updates may simply undo prior updates. Chugga chugga.

USPAP mandates the use of “recognized methods and techniques.”  The repeated required benchmark is ‘credible’ — defined as “worthy of belief.”  The entire document focuses on credibility, the worthiness of the appraiser, not the reliability nor reproducibility of the result.

Appraisers are required to repeat the same education and repurchase the USPAP book every two years, even when changes take place over a three-year period. And pay fees for the privilege.  “Automated valuations,” “evaluations,” and “waivered” ways do not have such taxes and ‘regulatory guidance.’ This creates a market advantage for the lesser-quality product!

Most importantly, USPAP sets the hard requirement for acceptable appraisal work scope: when it meets or exceeds “Expectations of parties who are regularly intended users for similar assignments.”  And:  “What an appraiser’s peers’ actions would be in performing the same or a similar assignment.”  Users expectations and peers’ actions.  Again, non-appraiser appraisals are not subject to such scrutiny.

Appraiser peers do what they are taught and what their peer-trainer-bosses were taught.  The peer-trainer-bosses form the cadre of teachers of USPAP and the “recognized methods and techniques.”  Then they take jobs with lenders and state regulatory administrative agencies.  Round and round.  (I have been one of these.  My teaching conformed to what was directed, in turn-the-page instruction.  In point-by-point class workbooks.)

Collateral lenders, particularly the GSEs Fannie Mae and Freddie Mac, (now under the effective public direction of the Federal Housing Finance Agency) then set ‘guidelines’ which echo and add to the subjective standards of worthiness.  Thus the resulting client expectations comprise regulations, habit, conforming education, and peer’s peers.  They continue to do what peers do – only the recognized methods and techniques.  Any superior (but unrecognized) methods and techniques are discouraged.  New methods may cause clients to complain.  Avoid, avoid, avoid.  No newfangled stuff!

Client/user expectations are embedded in the past.  Why rock the boat?

Can we create a better, self-righting boat?  Can we generate a new system of progressing regulations? A new system founded on today’s technology, not 1930s paper and pencil data gathering.