Before the 1980’s, anyone could be a real estate appraiser simply by saying that you were an appraiser. There were no licensing requirements. And oddly enough, even though there was little to no regulation, the profession as a whole flourished, and was self policing.
It was self policing in that professional appraisal organizations trained new appraisers by offering certifications to new appraisers. The public at large may not know if an appraiser was qualified, but if the appraiser could show certification from an appraisal organization, the appraisal buyer could have some assurance that the appraisal product could be relied upon. So if a mechanism for training and qualifying appraiser’s already existed, what happened to change all of that?
The Savings and Loan Crises of the 1980’s
The Federal Home Loan Bank Act of 1932 created the Savings and Loan system, and it was designed to provide a mechanism for home ownership of working class people. The S&L’s offered lower than average mortgage rates, and they flourished. By 1980 there were over 4,000 S&L’s with total assets of over $600 billion, and almost all of their loans were in residential mortgages – the S&L’s were specifically not allowed to compete with banks in commercial real estate lending.
In 1982 President Reagan signed legislation that removed many restrictions on banks and S&L’s, which permitted the S&L’s to use federally insured deposits to make commercial loans, a product type that they had never loaned on previously.
These factors and other contributed to the collapse of the Savings and Loan industry. In 1987, the fund that insured S&L’s (the FSLIC), declared that it was $3.8 billion underwater. In 1989 George H Bush bailed out the industry with new legislation known as FIRREA.
The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), established the Appraisal Foundation (TAF). In addition to TAF, FIRREA required the establishment of the Appraiser Qualifications Board, (ABQ) which established Appraiser Qualification Criteria, which in turn required all states to set up appraiser licensing and enforcement. Although each state can set up its own specific criteria for appraisal licencing, the specific minimum guidance given by ABQ bureaucrats, and (TAF), falls along four major criteria:
- Must be a US citizen and find a supervisory appraiser will to train a novice.
- Must complete 75 hours of appraisal education from an accredited institution, (all education is typically at your expense) which must include a 15 hour Uniform Standards of Professional Appraisal Practice, (USPAP), with exams.
- As of 2018, most states require a background check, including a fingerprint clearance card.
- Must keep a log jointly maintained by the trainee and the supervisory appraiser. Typically there is a fee of several hundred dollars to apply for Trainee status in the state you are in.
- Must complete all of the criteria for the Trainee Appraiser.
- Complete an additional 75 hours of appraisal education, for a total of 150 hours, (with exams).
- Also, at a minimum, must have 1,000 hours of appraisal experience in a log jointly maintained by the trainee and the supervisory appraiser.
- Take and pass the state exam for Licensed Residential appraisers.
If you complete all of the above, you will be licensed to appraise “non-complex” 1-4 residential units having a transaction value of less than $1,000,000, or a “complex” residential unit of less than $250,000. However you can’t appraise FHA insured mortgage assignments unless you have a Certified Residential license or more, which is outlined below.
The criteria for Certified Residential include, at a minimum, (your state may require more)…
- In additional to all of the criteria listed above, you must have a Bachelor’s Degree in any field of study, or an Associates Degree in either: Business Administration, Accounting, Finance, Economics or Real Estate. Or complete 30 semester hours of college in courses that include English, Macroeconomics, Finance, Algebra, Statistics, Computer Science, Business or Real Estate law, and some electives. Or 30 semester hours in a CLEP program, (College Level Examination Program).
- There is an additional 125 hours of appraisal education in very specific topic areas, including Highest and Best Use, Site Valuation and Cost Approach, Sales and income approach, report writing and case studies, statistics, advanced case studies, and other electives.
- Must have 1,500 hours of residential experience.
- Must take and pass the state exam for Certified Residential Appraisers.
If you complete all of the above, you can accept Federal Housing Administration (FHA) insured residential appraisal assignments, provide that you register with FHA.
The Certified General appraisal license qualifies you to appraise all types of real property. That said, according to ethical guidelines, if there is a property type you have not been trained in with your supervisory appraiser, you can not accept the assignment unless you tell the customer that you have never appraised this property type, but that you will gain the knowledge to complete the appraisal, which may require asking another appraiser with experience to assist.
- In addition to all of the criteria listed above, you must find a Certified General Appraiser willing to train you in commercial valuation, which is vastly different than residential appraisal work.
- Must have 300 hours of qualifying education in total.
- Must have 1,500 hours of experience in commercial properties.
- Must take and pass the state exam for Certified General.
If you elect to be an appraiser, you should probably join an appraisal organization. These organizations still offer training with certifications and designations, just like they did before the FIRREA laws, which set up the federal bureaucracy known as The Appraisal Foundation, (TAF).
If you elect to purse these additional certifications and designations, the training will enhance your understanding of valuation work, and with it, your professionalism.
The best and most well know of the appraisal organizations is the Appraisal Institute, which have affiliate chapters throughout the United States, and in other countries. The Appraisal Institute is also the only organization to push back against the 14 employees of TAF, whose regulations greatly impact the lives of appraisers, but none of whom have ever completed and appraisal. In essence, the TAF bureaucrats create rules and regulations for appraisers, yet never have had to live with the consequences of the rules they create. They create these rules through their sister organizations the Appraisal Qualifications Board (AQB), and the Appraisal Standards Board (ASB).