Appraisal regulations are like a multi-dimensional board game.  Regulations regulate process.  Process results affect everyone, including:

• Quasi-governmental organizations (Fannie/Freddie/App. Foundation)
• Non-appraiser valuators
• Homeowners
• Taxpayers
• Veterans
• Lenders

Valuation affects everyone.  It touches on racial/minority bias, wealth transfer, homelessness, family values, and even mental health.  Many aspects of appraisal process still follow the data-context of old history.  A history of paper-and-courthouse data, today replaced by instant on-line sources.

The “spaghetti-bowl” complexity of “appraisal” regulation is well documented.  In the past few years, this complexity has expanded and deepened.  Each unintended (or overlooked) consequence – such as in the Dodd-Frank bill – is fixed by yet another regulatory fix or another “administrative” layer.

All this, amid the political confusion of who is responsible.  Is it the States?  The professional organizations?  FannieMae/FreddieMac?  The banks and lenders? The several federal departments which regulate banks, fair housing, and finance:  CFPB, the ‘Fed’, FDIC, OCC, HUD, FHFA?  And how about laws and acts TILA, RESPA, and the noted “Dodd-Frank” Act?  All this, not to mention the 54 States and territories, which commonly have similar state-level organizations.  Who is responsible?

All this, not to mention that the States enforce appraiser licensing and appraisal management companies (AMCs) and administer appraiser education.  (On the other hand, they have no power over appraisal alternatives: “non-appraiser appraisals” and exceptionals, such as AVMs (Automated Valuation Models), GSE waivers, home data gatherers (unlicensed), and “evaluations.”)

All this, not to mention The Appraisal Foundation, which replicates or tweaks the “Standards” mostly unchanged after some 40 years.  These standards continue to insist that appraisers follow, as the core requirement, to be “believable.”  (The word used is “credible,” precisely defined as “worthy of belief.”)  Aside from this test of worthiness in USPAP (Uniform Standards of Professional Appraisal Practice), there are only three specific “violations” of USPAP: 1) Failure to keep records; 2) Failure to identify the client (with ‘care’); or 3) Be “grossly negligent” in conduct. (It seems “moderate negligence” is ok.)

Lots of admonitions and no best practices – except use “all information necessary” and “data as available.”

Other requirement “rules” placed on appraisers by USPAP, as enforced, are solely a matter of judgment.  “Review”  may be admonition by another licensed appraiser, or by a non-licensed reviewer, or by an “administrative” lender-reviewer, or by automated, algorithmic checklist and “acceptable” word usage Ai text checker.  Each of these test for credibility, believability, and worthiness.

Finally, recall that only appraisers are subject to these rigorous imperatives.  And none of this applies to other “valuations.”  Not to AVMs, not evaluations, not data collectors, not the algorithm creators of “appraisal software.”

And none of this even addresses the real issue: risk.  The entire industry continues to apply the reasoning and analysis developed 80 years ago:  Pick comps and make adjustments.

Non-disclosure States and proprietary ownership of data is a problem.

Groupthink is a problem.

We are locked into a system that is pricing our society out of home ownership.  A system which presses to ignore “black swan” risks, yet adds transaction expense at each property transfer, and for each new property improvement.  Transaction people gain.  Society loses.  A massive bail-out, a fix, and yet more regulation of the regulations.  A react-response, another repeat, another economic meltdown.