an update on the appraisal foundation

An Update on An Update on The Appraisal Foundation The Appraisal Foundation

By Paul BierschwaleMember of the Board of Trustees

The Appraisal Foundation October 2009October 2009

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An Overview of The Appraisal Foundation

Presentation Presentation OverviewOverview

Updates on the following:Updates on the following: Appraiser Qualifications BoardAppraiser Qualifications Board Appraisal Standards BoardAppraisal Standards Board The Appraisal FoundationThe Appraisal Foundation Legislative & RegulatoryLegislative & Regulatory

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AQB UpdateAQB Update

Update on the Activities of Update on the Activities of the the

Appraiser Qualifications Appraiser Qualifications Board Board

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Increase in number Increase in number of hours of qualifying of hours of qualifying (basic) education for (basic) education for all classifications all classifications that must follow that must follow Required Core Required Core CurriculumCurriculum

College-level College-level education required education required for Certified for Certified Residential and Residential and Certified GeneralCertified General

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AQB UpdateAQB Update With the 2008 With the 2008 Required Core Required Core

CurriculumCurriculum, each component of , each component of Qualifying Education will already have Qualifying Education will already have been tested, meaning new exams now been tested, meaning new exams now focus on a candidate’s ability to focus on a candidate’s ability to applyapply the knowledge learnedthe knowledge learned

New exams are application-based, New exams are application-based, including many “scenario” questions including many “scenario” questions where candidates will have to study where candidates will have to study problems and determine how to apply problems and determine how to apply the correct solutionsthe correct solutions

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New exams consist of 165 New exams consist of 165 questions, including 15 questions, including 15 “pretest” items not scored.“pretest” items not scored.

New exams allow six (6) to New exams allow six (6) to eight (8) hours, depending on eight (8) hours, depending on the classification level.the classification level.

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For the first time, all 55 For the first time, all 55 jurisdictions that license and jurisdictions that license and certify real property appraisers certify real property appraisers are using the same examination.are using the same examination.

Examination developers and Examination developers and state appraiser regulatory state appraiser regulatory agencies may also develop exams agencies may also develop exams and apply for equivalency to the and apply for equivalency to the AQB.AQB.

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AQB UpdateAQB UpdateSample Question (2008 Exam)Sample Question (2008 Exam)

ScenarioScenario: An appraiser is asked to appraise an : An appraiser is asked to appraise an apartment complex consisting of 120 units apartment complex consisting of 120 units broken down as follows:broken down as follows:

Thirty (30) 1-bedroom units, renting for $500 Thirty (30) 1-bedroom units, renting for $500 eacheach

Sixty (60) 2-bedroom units, renting for $750 Sixty (60) 2-bedroom units, renting for $750 eacheach

Thirty (30) 3-bedroom units, renting for Thirty (30) 3-bedroom units, renting for $1,000 each$1,000 each

The complex has historically had a vacancy and The complex has historically had a vacancy and collection loss expense of 3% and operating collection loss expense of 3% and operating expenses/replacement reserves of 35% of expenses/replacement reserves of 35% of effective gross income. Assuming the vacancy effective gross income. Assuming the vacancy rate and all expenses are forecast to remain rate and all expenses are forecast to remain constant in the foreseeable future:constant in the foreseeable future:

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AQB UpdateAQB UpdateSample Questions (2008 Exam - continued)Sample Questions (2008 Exam - continued)

1. 1. What is the Potential Gross Income for the What is the Potential Gross Income for the complex?complex?A. $75,000A. $75,000B. $90,000B. $90,000C. $87,300C. $87,300D. $56,745D. $56,745

2. 2. What is the Effective Gross Income for the What is the Effective Gross Income for the complex?complex?A. $75,000A. $75,000B. $90,000B. $90,000C. $87,300C. $87,300D. $56,745D. $56,745

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Review and Approval of College Review and Approval of College EducationEducation

Classroom hour based education Classroom hour based education versus university based credit versus university based credit hour education.hour education.

College graduates with university College graduates with university valuation education often at a valuation education often at a disadvantage regarding state disadvantage regarding state acceptance of courses.acceptance of courses.

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AQB UpdateAQB UpdateAQB University Graduate Program AQB University Graduate Program

Review Review Commencing this year, the AQB is Commencing this year, the AQB is

reviewing and approving graduate reviewing and approving graduate programs offering a degree in programs offering a degree in valuation.valuation.

Programs reviewed and approved by Programs reviewed and approved by the AQB will be posted on the the AQB will be posted on the Foundation’s website. A breakdown of Foundation’s website. A breakdown of the hours approved will be included. the hours approved will be included.

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AQB UpdateAQB UpdateAQB University Graduate Program AQB University Graduate Program

Review Review Approved Programs include:Approved Programs include:

Texas A&M UniversityTexas A&M University Masters of Real Estate ProgramMasters of Real Estate Program University of Denver, Daniels College University of Denver, Daniels College

of Businessof Business Degree in Real Estate & Degree in Real Estate &

Construction ManagementConstruction Management

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ASB UpdateASB Update

Update on the Activities of Update on the Activities of the the

Appraisal Standards Board Appraisal Standards Board

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2008-2009 2008-2009 USPAPUSPAP

Single-bound book contains USPAP, Single-bound book contains USPAP, Advisory Opinions, and Frequently Advisory Opinions, and Frequently Asked Questions in separately tabbed Asked Questions in separately tabbed sectionssections

Master index reflects where topics can Master index reflects where topics can be found in all three sections of the be found in all three sections of the documentdocument

Electronic version available from The Electronic version available from The Appraisal Foundation offers search Appraisal Foundation offers search capabilitycapability

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2010-2011 2010-2011 USPAPUSPAP

Effective January 1, 2010, changes Effective January 1, 2010, changes include:include:

Prior to accepting an assignment, Prior to accepting an assignment, an appraiser must disclose to the an appraiser must disclose to the client and in the report client and in the report certification, any services regarding certification, any services regarding the subject property performed by the subject property performed by the appraiser within the prior three the appraiser within the prior three years, as an appraiser or in any years, as an appraiser or in any other capacity.other capacity.

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2010-2011 2010-2011 USPAPUSPAP

Deletion of an appraiser’s Deletion of an appraiser’s obligation to allow the client obligation to allow the client access to the workfile for a access to the workfile for a Restricted Use Appraisal ReportRestricted Use Appraisal Report

For clarifications purposes, a For clarifications purposes, a re-write of the appraisal review re-write of the appraisal review standard, standard,

Standard 3Standard 3

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Foundation Foundation UpdateUpdate

Update on the Activities of Update on the Activities of

The Appraisal FoundationThe Appraisal Foundation

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New PublicationsNew Publications 7 and 15 Hour On-Line 7 and 15 Hour On-Line National National

USPAP CoursesUSPAP Courses USPAP for Non-Appraisers USPAP for Non-Appraisers

(Attorneys, Accountants, Lenders)(Attorneys, Accountants, Lenders) Consumer BrochureConsumer Brochure

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Promoting Greater Consistency Promoting Greater Consistency Among the State Appraiser Among the State Appraiser

Regulatory AgenciesRegulatory Agencies Training Classes for State Training Classes for State

Appraiser InvestigatorsAppraiser Investigators Disciplinary Guidelines for State Disciplinary Guidelines for State

Appraiser RegulatorsAppraiser Regulators

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National National RegistryRegistry

RecordsRecords Individual Individual AppraisersAppraisers

20012001 87,50087,500 75,00075,000

20092009 120,000120,000 104,000 104,000

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AppraiserAppraiser Training Training

There was no corresponding There was no corresponding increase in the membership of increase in the membership of the professional societies.the professional societies.

What type of training did these What type of training did these appraisers receive?appraisers receive?

Who did the training?Who did the training?

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FoundatiFoundationon

InitiativeInitiativess

Appointed a Supervising Appraiser Appointed a Supervising Appraiser Task Force to develop a set of best Task Force to develop a set of best practices for supervising appraisers. practices for supervising appraisers.

Task Force work product has been Task Force work product has been forwarded to the AQB for possible forwarded to the AQB for possible future development of supervising future development of supervising appraiser qualifications.appraiser qualifications.

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Legislative/Legislative/Regulatory UpdateRegulatory Update

Legislative and Regulatory Legislative and Regulatory

UpdateUpdate

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Appraisal Appraisal LegislationLegislation

H.R. 1728, H.R. 1728, The Mortgage Reform & The Mortgage Reform &

Anti-Predatory Lending Act of 2009Anti-Predatory Lending Act of 2009 Passed the U.S. House of Passed the U.S. House of

Representatives on May 7 by a Vote Representatives on May 7 by a Vote of 300-114.of 300-114.

Sent to the U.S. Senate for Sent to the U.S. Senate for consideration.consideration.

Handout Available Outlining Key Handout Available Outlining Key Provisions.Provisions.

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HUD/FHAHUD/FHA Legislation enacted on August 1, Legislation enacted on August 1,

2008 requires FHA to use state 2008 requires FHA to use state certified appraisers or appraisers certified appraisers or appraisers certified by a professional certified by a professional appraisal organizationappraisal organization

FHA has decided to only use state FHA has decided to only use state certified appraisers as of October certified appraisers as of October 1, 20091, 2009

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Homeowners ValuationHomeowners Valuation Code of Conduct Code of Conduct

Effective May 1, 2009Effective May 1, 2009 Banks May Use Their Own Staff Banks May Use Their Own Staff

Appraisers for the Initial Appraisers for the Initial Appraisal if the Appraiser Does Appraisal if the Appraiser Does Not Report to the Loan Not Report to the Loan Production DepartmentProduction Department

Certain Restrictions on Banks Certain Restrictions on Banks Owning Appraisal Management Owning Appraisal Management CompaniesCompanies

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Mortgage Brokers are Prohibited Mortgage Brokers are Prohibited From Ordering AppraisalsFrom Ordering Appraisals

Overall, the Code was diluted Overall, the Code was diluted from its original contentfrom its original content

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Independent Valuation Protection Independent Valuation Protection Institute (IVPI), which has yet to be Institute (IVPI), which has yet to be constituted:constituted:

1.1. Conduct ResearchConduct Research

2.2. Establish Consumer and Appraiser Establish Consumer and Appraiser Hot LinesHot Lines

3.3. Mediate ComplaintsMediate ComplaintsWas to be funded by Fannie Mae and Was to be funded by Fannie Mae and

Freddie Mac with $24 million over five Freddie Mac with $24 million over five years.years.

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CommunicatCommunicationsions

Communicating with the Foundation Communicating with the Foundation and its Boards is easy:and its Boards is easy:

Internet: Internet: www.appraisalfoundation.org Phone:Phone: 202.347.7722202.347.7722 Fax:Fax: 202.347.7727202.347.7727 Address:Address: 1155 151155 15thth Street NW, Suite Street NW, Suite

1111 1111 Washington, Washington, DC 20005DC 20005

an update on the appraisal foundation

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