Larry Disney is the Executive Director of the Kentucky Real Estate Appraisers Board, licensed Kentucky Real Estate Sales Broker, Kentucky Certified General Real Property Appraiser, SRA designated member of the Appraisal Institute, 2005-2006 President of the Association of Appraiser Regulatory Officials (AARO), and is certified by the Appraiser Qualifications Board of The Appraisal Foundation as an instructor of the Uniform Standards of Professional Appraisal Practice (USPAP).

Disclaimer - I preface the following comments and information with the fact that I am a past President of the Association of Appraiser Regulatory Officials, and I am currently the Executive Director of the Kentucky Real Estate Appraisers Board.  The remarks and information given for this interview represent my personal opinions and views.  They are not intended to, nor are they implied to, represent the views of the jurisdictions, the leadership or the individuals affiliated with the Association of Appraiser Regulatory Officials, the Kentucky Real Estate Appraisers Board, any agency, official or employee of the Commonwealth of Kentucky.

BUZZ: Larry, Tell us who AARO is and what they do.

LARRY:  The acronym for the Association of Appraiser Regulatory Officials is AARO. The mission of AARO is to improve the administration and enforcement of real estate appraisal laws in member jurisdictions.  That mission is accomplished by communication, research, education, and cooperation with other organizations whose objective is similar in nature to the objectives and purposes of AARO. 

Membership in AARO is open to any state, district, or territory, commonwealth, or possession of the United States which has enacted an appraiser licensing and certification act.  The term “jurisdiction,” meaning any state, district, territory, commonwealth or possession of the United States, shall be used to signify membership.  Therefore, individuals who are board members, employees or other affiliated representatives of the jurisdiction may act in the day-to-day operation of AARO.    

There are other regulatory agencies that offer programs for, and represent the interests of, regulatory officials in real estate sales, and lending.  However, AARO is the only organization that exists today for the sole purpose of carrying out the mission of communication, education, research, and cooperation explicitly for appraiser regulatory officials.  

BUZZ: Can appraisers attend your meetings?

LARRY:  The AARO conferences are open to anyone who completes a registration form and pays the conference fee.  Therefore, in my opinion real property appraisers are not only welcome to attend, they should also be encouraged to attend.

BUZZ: What challenges do you see for appraisers?  What do you see as opportunities?

LARRY: Today, in light of the notoriety of lender pressure issues, I receive messages daily from Kentucky licensed and certified appraisers who reveal requests from lender clients that the appraisers believe are tantamount to lender pressure, e.g. “If you can’t get the value, call before doing the appraisal;  2) We must have a value of $XXX; 3) If you cannot omit request for repairs, photographs or other comments that reveal deficient property conditions, we will never use you or your company again;  4) You are the only appraiser who refuses to work with us, and get the highest value we ask for; and 5) You are the only appraiser who refuses to be paid a higher fee for deals that work, and not bill us for assignments in which loans do not close.

Appraisers are often told by the lenders, or their agents who make the above requests, if they fail to perform the assignment as requested, they will be removed from approved lists. 

In blatant disregard, and apparent total indifference of the increased scrutiny being placed upon the lending profession, the pressure being placed upon appraisers is reported to be more rampant today than ever before.  The State appraiser regulatory agencies can do little, if anything, about policing acts of pressure against appraisers.  Fortunately, or unfortunately, the agencies can take action only if the appraiser complies with any request that is proven to produce an unethical action.     

In my opinion, requests that include pressure and other threats are equally as egregious as the Associated Press  article allegations of lax enforcement within the appraiser regulatory system.  The article would have been more credible if some of the other issues, outside the control of appraiser regulatory agencies were made known. 

In light of the problems described above, why would I recommend someone enter the profession of real property appraising? 

It is my opinion that there is no time like the present to do so!  During the past two years I am on record of saying that now is “the” opportune time for qualified and energetic applicants to enter the real property appraisal profession. 

Why do I have this belief?

In my opinion, today’s debate and discussion will expose problems within all groups.  The subsequent discussion of those problems will bring challenges, those challenges will result in positive change, and that change will bring rewards for professional appraisers, and the appraisal profession. 

While I sincerely believe the above will occur, I shall continue to advise aspiring applicants to make no mistake in believing that earning a real property appraisal credential will be easier in the future.  Quite the contrary, the steps for program entry, and the requirements to earn a credential will present increasingly stringent challenges. 

Licensed and Certified appraisers should also understand that the opportunity to earn a real property appraiser credential is a right; but keeping a credential is a privilege that is earned through competent practice and ethical behavior, a credential should not be considered a personal property right that cannot be taken away.

While the path will be challenging, I believe if one has the tenacity to accept and conquer the challenges there will be both quality work and economic reward, especially for those who specialize in the areas of real property appraisal that expects and demands the services of a highly trained and qualified professional, i.e. right-of-way acquisitions, estate planning, conservation easements, consultants in the legal arena, and financial consulting, to name a few.                                    

BUZZ: I saw the AP article “Weak Rules Cripple Appraiser Oversight”. It’s a pretty tough indictment of State Appraisal Boards. Your thoughts?

LARRY:  The article was less than flattering for the regulation of real property appraisers.  However, many of the problems highlighted are attributable to more than one group or agency.  It is not fair to point out only the appraiser regulatory agencies to blame for sub-prime lending problems, or for the lack of funding to investigate appraiser complaint cases.  Also, the appraiser regulatory agencies should not be given total blame because the legal process of a State does not result in the revocation or suspension of a credential. 

In most States and territories of the United States the decision to revoke or suspend a practice license must be handed down through a legal proceeding.  There are probably few, if any, appraiser regulatory agencies that are given the final decision for revoking or suspending a credential without the matter eventually being heard before a trial judge, administrative hearing officer, or some legal forum.

The true crux of the problems that hamper effective appraiser enforcement stems from the lack of available funding for the majority of appraiser regulatory agencies. 

As is the case with most agencies within State governments, available funding becomes the pivotal driver that ultimately establishes the measure of success, or perceived failure. 

The problems pointed out in the AP article are not new.  Within the past six years the Government Accountability Office (GAO) completed an extensive study of the appraiser regulatory process.  That study revealed that the regulatory programs were not perfect.  But, the study also partitioned blame to the ASC, and The Appraisal Foundation.  But, the GAO failed to make any recommendation for how to specifically correct the problem areas, other than a suggestion to allocate more funding to the regulatory agencies for purposes of hiring additional staff, attorneys, and investigators.

No doubt, the majority of State appraiser regulatory agencies would welcome a means to have more funding for purposes of providing effective appraiser regulation.  The question becomes how to do so?

When the U.S. Congress passed Title XI, the result was a unique regulatory system that, in my opinion, does not exist within any other State or Federal legislation.  The process involves a three group process, each dependent upon the other.  But, the three groups were not created with equal funding expectations.

Title XI gave the ASC authority for 1) monitoring the requirements established by States for the certification and licensing programs, and 2) for monitoring and reviewing the practices, procedures, activities, and organizational structure of the Appraisal Foundation.

The Appraisal Foundation was recognized in Title XI as having the “sole” authority to set the minimum appraisal standards through the Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the ASB, and to set the minimum appraiser qualifications through the AQB criteria. 

Contrary to popular opinion, Title XI did not mandate or force States to enact legislation to carry out appraiser regulation.  That decision was totally voluntary on the part of the State legislative bodies.  But, if a State did volunteer, and I assume all of them did, the subsequent act was mandated to at “minimum” create a real property appraiser regulatory agency that would enforce the minimum standards of USPAP, and enforce the minimum education, experience, and examination requirements for licensed and certified appraisers. 

The State enforcement programs are often referred to as an unfunded mandate, because the States were the one entity of the three groups named above in which Title XI did not provide a funding mechanism for program operation. 

Title XI, Section 1109 included language granting the ASC the authority to collect fees from appraisers, and to make grants in such amounts as it deems appropriate to the Appraisal Foundation, to help defray those costs of the foundation relating to the activities of its Appraisal Standards and Appraiser Qualification Boards.” (My emphasis)

Funding for the State enforcement programs was not referenced in Title XI.  It was assumed the State appraiser regulatory agencies would be self-funded with fees charged to licensed and certified real property appraisers.  However, it is common practice for the money collected from the appraiser fees to be deposited into a State general fund account.  Upon being deposited the funds are typically not dedicated solely for the appraiser regulatory agency use. 

BUZZ: What is the problem?

LARRY:  Unlike simply voting someone out of an organization or group, the State agencies are required to exercise and extend to all licensees the right of due process.  Therefore, simply filing a complaint with the allegation that an appraiser committed fraud or some other major infraction, without proof and factual evidence, will not result in a revocation or suspension of an appraiser’s credential by a State enforcement agency. 

I am in total agreement with the fact that in the absence of proof and factual evidence to the contrary, cases should be summarily dismissed.  No credential holder should be sanctioned solely on the basis of an allegation, or another person’s best practice belief.

The article failed to include information or data as to how many of the complaints dismissed were due to the lack of factual findings. 

Also, there was no discussion or list of how many credentials have been voluntarily surrendered in lieu of a revocation or suspension.  Typically, the ASC does not list voluntary surrenders as a revocation.  However, many enforcement agencies will accept the voluntary surrender in lieu of a hearing, therefore the agency records that action the same as a revocation.           

BUZZ: What do you see as the solution?

LARRY: I am sure most of the appraiser regulatory agency employees and board members will agree that the appraiser regulatory process would be made stronger with additional funding.  Also, there is no doubt the agencies strive to have consistent and timely enforcement, and settlement of complaint cases.  But, both of these endeavors will take time, require a unified effort by all interested groups, and most critical will be the need for adequate funding.         

There has been positive activity within the appraiser regulatory programs that the AP article did not address. 

The AQB 2008 minimum criteria was a direct result of the users of appraisers services continually asking for increased competency of real property appraisers through a stronger education curriculum, and a more stringent national examination that will test for acquired skills in lieu of the previous examination that was simply a regurgitation of completed education course content.  As of January 1, 2008 the State agencies are enforcing the enhanced criteria and the revised national examination.

We should all remember that state appraiser regulation is in its infancy.  It is not at all uncommon for programs to have growing pains as they are developed.  We should embrace discussion of the problems that are now being discussed.  Having done so, we must also begin working toward positive change.  

We must all come together as regulatory officials, professional appraisal organizations, lending regulatory agencies, and the ASC for the common good of the profession.  If we do so, within the next decade the appraiser licensing programs will be better served due to the combined efforts of a unified effort.  

Although the AP article made it appear the system was completely broken, there have been some positive results recognized from the regulatory efforts.

It is often easy to say whatever the group wants to do, or I don’t care, or there is no hope, or we are doomed.   Instead, of those responses, let’s commit that we will all work together for positive change. 

In closing I will propose the following questions, and ask that everyone who desires a stronger real property appraiser profession make an effort to become involved for making the programs better, stronger and more respected. 

How far would our profession have come from the 1980’s loan problems if we had initiated “no” regulation or enforcement of appraisers’ activities? 

Without Title XI, what would be the recognized minimum appraisal standard, the recognized minimum appraiser qualifications, and who or what agency would provide enforcement for all professional real property appraisers who are licensed and certified to perform appraisal assignments for federally related transactions and real estate related loan transactions?

I thank you for the opportunity to comment on the AP article and my view of the appraiser regulatory process. 

If anyone has a question, or wishes to send me a message, the following is my personal contact information.

Larry Disney
859-543-8943
Fax 859-543-0028
larry.disney@ky.gov