An organization can decline in one of two ways: 1) Failure to keep to its original mission; or 2) Failure to modify its direction in the face of change.
The Appraisal Institute is the historical 1991 merger of the AIREA (American Institute of Real Estate Appraisal) and the SREA (Society of Real Estate Appraisers).
Each organization was dedicated to education, ethics and standardizing the appraisal process, uniform practices and methodologies. Each also emphasized the art and science of real estate valuation, while enhancing skills to stay current with industry standards.
The merger brought about an educational commitment to “remain at the forefront” of industry practices, while “continually expanding and refining” methods and standards.
What happened?
The original mission stagnated to then-existing industry practices and standards. The art stayed with the science available in the 1930s. The practice remained “pick some comps, adjust those comps.”
The Appraisal Institute was a victim of its own original success. The practices, the standards, the community was lost. Lost to the winds of multi-layered bureaucracy, regulation by fear, and emphasis on the commodity of “lowest-price” competition.
Success in developing and promoting uniform practices and methodologies effectively precluded the use of innovative, repeatable, and reliable models and algorithms. The “innovation” came from competitors in the form of AVMs (Automated valuation models), hybrids, evaluations, and waivers. “Modernization.”
The Appraisal Institute mission became protection of established practices, and preservation of “recognized methods and techniques” (as per USPAP SR1-1). But ignored the “principle of change” (as mandated in Rule 1-1(a).)
As so often happens in business and social organizations, with a loss of influence and prestige – it leads the organization to turn inwards. Inward to survival, rather than outward to the service originally intended.
The focus becomes: “How do we save the organization?” Instead of “How do we help our members serve and do more than just survive?” Survive and prosper in new possibilities and services.
Do we consider why we have lost market share? What do our competitors provide that we cannot? What do our customers really want?
Do our customers truly want an opinion of a hypothetical point value? Or do they want to know their risk of collateral loss? Do they want to know their probability of investment gain? Or do they want to know how reliable is their decision of fairness (such as, in the courts or assessment officials)?
Does the world need your believability-credibility? Or is the need for reproducible reliability?
Should we replace “trust me” credibility? Or emphasize “see my evidence”?
April 30, 2025 @ 9:47 am
Picking comps and adjustments. I asked the local real estate broker how they reached a value to list a property at. The broker stated he runs a list of properties from that Market area, looks at the amenities – bedroom/bath count, square feet, quality levels, etc. Then the broker will run it by the seller. The seller looks at the neighbor’s property that sold a year ago and says that’s what my property is worth. Market participants use the “pick comps” method. Hum!
What is different today, then yesterday? The broker has an MLS system that states the absorption rates, time on the market, prevailing interest rates, what direction the real estate market is going, etc… All the tools are there.
Stats, graphs, etc. It’s all there and available through the changing technology from the MLS systems.
Appraiser adjustments. Back then the appraiser was told what to adjust for and the amount. This was enforced by the reviewer, the manager, and the underwriter. Now with the tools available. The appraiser can defend any market adjustment.
For track homes and low loan amounts, why can’t the Banks use AVM models? What the appraiser needs are the tools for completing simple value conclusions within 5-10 minutes. Similar to BPO or even faster. The appraiser has the training and desire to complete these assignments. The appraiser can complete a 1-page report or a 75-page report. The options are yours. Just ask.
The appraisal institute has become irrelevant over the last few years (training & direction).
May 1, 2025 @ 1:23 pm
Well said. You hit the nail on the head George!!!! The appraisal profession needs modernization that actually includes appraisers. And the AI has proven it’s not the organization to lead the way, too busy infighting and serving outside interests. Is it time for a new grassroots organization to lead the way???