[Shortsighted] Appraisal Institute Decides To Leave Appraisal Foundation
Posted by Jonathan J. Miller -Tuesday, September 7, 2010, 10:01 PM
12 Comments
[click to hear presentation by Appraisal Institute President Leslie P. Sellers, MAI, SRA]
In a period with perhaps the most turmoil in the history of the appraisal profession including The Home Valuation Code of Conduct (HVCC), Appraisal Management Companies (AMC) and Financial Reform legislation, the Appraisal Institute is needed now more than ever on behalf of the appraisal industry.
Despite this need for its members, the Appraisal Institute [AI] has decided to leave the Appraisal Foundation [TAF]. The Appraisal Foundation was founded in 1987 by eight major appraisal organizations to help regulate the appraisal profession within the US.
Here is the AI president’s announcement in addition to the video above. When listening to the way this situation is described, you’d have to be crazy to side with the TAF. And if you read the TAF letter, you’d have to be crazy to side with the AI.
I want to clear that I am not taking sides – that is not the point of this post.
Anecdotally, I am aware of many leading appraisers in the NYC metro area are sharply against the move so I find it curious how 100% of the comments on the video page are in in favor of it. Are these comments being filtered? Or are opponents afraid to speak up? Either way is unacceptable.
What a disaster. This will result in the dilution of MAI designation. The video suggests that the AI will now be free to do more for its members. If that were true, why wouldn’t they have done this years ago if it would be better for its members?
I’ve been following the soap opera for several months between the Appraisal Foundation and the Appraisal Institute. Frankly, the Appraisal Institute makes such a strong one-sided presentation that makes it sound like the Appraisal Foundation is randomly attacking them. Doesn’t pass the smell test.
Although I do have some inside perspective on this that is not being shared, I have learned the hard way that it takes two to make an argument and a response of righteous indignation is not a pragmatic solution – consider middle eastern geopolitics for a second and ask how that’s working out.
Here’s the suspension letter from the Appraisal Foundation.
Here is the withdrawal letter by the Appraisal Institute.
From the Appraisal Institute:
This dispute with the Foundation is based on AI committee discussions about possible legislative language with which the Foundation disagreed. The Appraisal Institute must be able to discuss freely issues of concern to, and advance the interests of, its members, the profession and the public, which The Appraisal Foundation has made clear, is inconsistent with Foundation sponsorship.
In other words, the Appraisal Institute is leaving the Appraisal Foundation because the Appraisal Foundation disagreed with proposed language in legislation that the Appraisal Institute proposed?
Seriously? Based on this, I’m speculating that the Appraisal Foundation was upset that the Appraisal Institute wanted to take some or all of their powers in financial reform legislation. Self-preservation. What else could prompt this type of blood feud? Certainly not the way it has been characterized in these letters.
I have read comments around the blogosphere about fighting the good fight. Good grief. If it comes down to a few bruised egos and a 3.5 month suspension…
Whatever the facts are, and I’m sure both sides can argue their points quite elegantly for days on end, but both sides have to be complicit for this lack of decorem.
Over the years, the weight of the SRA designation (for residential valuation) has been significantly if not completely diluted by licensing to most clients (no insult meant to SRA designation holders, but that is the reality) and now the MAI designation (for commercial valuation) is in danger of the same fate. How can the Appraisal Institute NOT be part of the solution to the serious problems facing our industry? Without membership in the TAF, I don’t see how they can help lead the industry.
AI membership is down sharply from peak, the costs of membership continue to rise, its members are seeing dwindling work volume, appraisers are being replaced by automated valuation models, they completely missed the boat on the appraisal management company phenomenon of the past two years, the predecessor to AI was complacent about licensing in the late 1980s and the AI was complacent about HVCC in 2009.
The Appraisal Institute needs to rethink this situation and begin to work for its members again if it wants to be relevant. For that matter, the Appraisal Foundation should rethink theirs as well.
AI has brought a host of educational and professional upgrades to the profession over the years and provided much of USPAP and other assets to TAF when it was founded.
I started writing this post out of frustration and ended up angry. However I have no solution other than replace the parties on both sides and start over.
It sounds like both parties need a desk review from a third party, and hopefully it is not an AMC.
UPDATE: [Kids in the Sandbox] Appraisal Institute pulls out of Appraisal Foundation [Commercial Grade]
[...] appraisal politics fascinating? My partner, Jonathan Miller, has written on the subject in his Matrix blog, and even added video (which I have not yet learned how to [...]
Interesting and informative take on the situation. At some point entities need to re-examine their purpose and actually DO what is in the best interest of the profession and it’s members, not just the same old thing (or in many cases, nothing).
Thanks for the blunt commentary.
Jonathan:
You got a few things about the fight correctly. I spoke to Mr. David Bunton the president of TAF the day after the spat began, I have been in contact with both TAF & ASC leadership over the 2008 education requirement that I wrote you about in 2007, which I believe was a sham, and not the real fix for the problem.
Your statement about the predecessors of the merger that formed AI getting it wrong on licenseing was off base, there was no licensed appraiser in the original 1990 law there was only 45 & 46. The Appraisal Institute and other founders of TAF lowered the requirements for certification and added licensing supposedly because there was a shortage, but I believe it was to protect the franchises, MAI,SRA, ASA, SRPA etc.
I agree with you, the AI is the only organization that has good education courses, and a recognizable brand, the problem is that their plan may backfire after twenty years. Blame James KLOPFENSTEIN AND MILES ETTER.If the AI did simply let the AQB design the proper education and experience requirement for Certfication (both residential & general)as staed in FIRREA, it would have been correct to concentrate on its designations as the pinacle of professionalism as long as they a granted based on proven expertise. I’m still at it, and speaking with the ASC, the AI, and TAF and yes I hope the AI stays in the Foundation, but it does not have to, it finally got its wish. The Education received by Certfied General Appraisers is finally enshrined as the junior courses for it’s MAI. That was the original intent.
Thanks Cecil for the insights. What I meant about licensing in the late 1980’s was that our industry had a chance to shape and steer reform to reflect the realities of the day, but instead chose to only focus on protection of the designations and be in denial about what licensing would do to them. I remember that period distinctly and felt strongly that the organization missed an opportunity and missed the boat. The SRA designation has been diluted and MAI is in danger. All I want is for the AI to get in sync with what is happening now to its members and champion our cause, not be mired in politics that have no upside benefit to its members. I’m surprised we have sunk this low as an organization and I am not sure AI will ever recover. It is amazing how this parallels NAR present situation. Perhaps large organizations who were founded for a particular reason are slow to react and adapt to a sea change in their industry. I’d like to think AI can.
Well balanced views and comments on the matter, Jonathan. I’m seeing quite a lot of misinformation and misstatements of the facts (in some cases amazingly far from the truth) among the online discussions and emails out there. I am happy to speak directly to any appraiser groups that may have concerns or questions and clear up any confusion.
Having been in the AI for nearly 30 years, it is clear that this organization has never worked in the interest of its members. They have continuously lowered the bar for membership beginning with the Society merger in the late 80’s, and continued waiving, diluting of requirements. While members privately all agree with this, they are afraid of speaking out publicly, because they are afraid of retribution. The MAI designation, before state licensing was an “unofficial” requirement to get work. After FIRREA, state licensing became the actual legal requirement. The result was a dramatic dilution in the value of the MAI. At the same time, the MAI was continually requiring more stringent (and illogical) standards, that licensed appraisers did not have to abide by. One example, was the hypothetical scenario rule. It was at this point that AI members started walking away from their designations as banks no longer needed their signature, and attorneys could not use their services for certain types of arguments (ie: presenting hypothetical scenarios).
Most recently, the AI proposed another shortcut to membership for certain people such as professors. The pitch was that this would increase the profile of the membership. The truth is, it is a way to generate more members and more fees to support the behemoth in Chicago.
It is time for the members who have worked so hard, spent so much of their hard earned, and I do mean hard earned money over the overs, and have put up with all the BS over the years, to take control and restructure the organization. Increase barriers to entry to ensure only the most competent valuation experts have the designation to make the MAI something to be proud of; get lean and mean on expenses and overhead to make dues reasonable; work toward refining standards and ethics to reflect the real world instead of all of the boilerplate useless BS that makes the industry look out of touch (ie: the “phonebook”) and focus on how to make the designation relevant in the brave new world we are approaching and economically valuable for its members. Anyone who has had this designation for at least 20 years knows exactly what I’m talking about.
[...] week a wrote a post on Matrix called [Shortsighted] Appraisal Institute Decides To Leave Appraisal Foundation where I expressed my frustration at the rift between The Appraisal Foundation and one of its [...]
Jonathan, your points are well taken. As a long time associate member of the AI and general cert. appraiser here in Illinois, I, too, have been watching the volleyball (or is it dodge ball?) match these many months. I am aware that there are professional points of view about the AI from other organizations, and I am sort of a confirmed cynic when it comes to bureaucracies. Someone’s nose clearly got out of joint at TAF. Today the AI issued a statement to members that exposes more detail about the events that produced the suspension; if the statement is true, then TAF may have gone overboard. Rumor has had it that this is really all about whether TAF is going to go whole hog into the education business, which could steal some of the AI’s thunder. To paraphrase an old song, there’s plenty of money to be made supplying appraisers with the tools of the trade. More succinctly: follow the money.
Your comment about large organizations is apt. It’s hard to turn the Queen Mary around.
Commenter John, a question: when you indicate that the AI has a “hypothetical scenario rule,” I couldn’t tie that to anything specific in my experience. USPAP has the hypothetical condition “rule,” and the AI has current seminars that use it, including its seminar on environmental contamination valuation. Maybe you are thinking of the various fairly recent articles in the Appraisal Journal debunking the use of contingent valuation. Actually, the most recent article, from Summer 2008, missed some recent literature on the subject. At any rate, I’m not aware that the AI restricts the use of hypothetical scenarios as long as USPAP is followed.
Thanks for the feedback Kevin. Actually the idea that TAF is getting into teaching is part of the miscommunication problem – they aren’t and this is being inferred by AI to create a paranoid he said she said situation. Take a listen to the David Wilkes interview I had on my podcast. Should clear up that line of reasoning. http://www.thehousinghelix.com I presented a post today on my email correspondence with Sellers. http://matrix.millersamuel.com Very disappointed in the party line being presented. Not standing on a soapbox here but I get annoyed when someone pulls a say it over and over again one sided spin tactic on me. Its disrespectful to the organization and in fact damages its credibility.
Full disclosure is the mantra of a good appraiser and somehow this doesn’t seem to apply to the organization.
Jonathan,
I listened to your podcast interview with David Wilkes earlier this a.m. over granola, and found it very interesting. I agree with your feeling that Leslie Sellers could do a similar interview, though I think the document posted yesterday on the AI website laid out the events regarding the GRC (see below) in fair detail.
There may some aspect of Rashomon going on here–David was very articulate in expressing his view that TAF is not a “partner” or “parent,” and does not want to get in the way of the sponsors doing their things. On the other hand, the AI seems to feel that TAF was acting in loco parentis–a suspension certainly seems like punishment, and that’s usually doled out by an entity with power and authority over another. When he said that the AI, going to various government entities, was a “grab for power,” I wondered, whose power did he think they were grabbing? Some of TAF’s, apparently.
So I think part of the cognitive dissonance arises from TAF suggesting that they are a sort of neutral presence, putting forth appraisal standards and guidelines for practice as the trade groups go about their business, while the AI feels like TAF is holding some sway over them.
The key aspect of the latest incident is symptomatic of this disjunction in viewpoint. Leslie Sellers told us that the GRC came up with proposed legislative language that was purportedly along the lines of the Safe Act, but that when the committee language got back to Sellers and the BOD of the AI, they scuttled it. So, from Seller’s point of view, the AI did a good thing–they conducted their internal governance and stopped something that should have been stopped. But from Wilkes’ point of view, the AI didn’t do what it should, because the GRC actually did circulate the proposed language and lobbied for it, so Sellers was being obtuse (my term for what I believe Wilkes means) when he thought he should get a “pat on the back” (Wilkes’ own words) from TAF. Wilkes then compared the GRC, in so many words, to a rogue trader at an investment banking firm. I guess my thought would be–if the investment banking firm found out about the rogue trading plan and stopped it before it was put into action, would the SEC have suspended the firm for its bad behavior?
A further complicating aspect: the AI has developed a pretty active lobbying operation in Washington. Given the way that lobbying works, if you have to get clearance from another entity for each initiative, I can imagine it would become cumbersome. When the AI asked for a “set of rules,” maybe they were being coy, as David said, but maybe they asked for it, even though no one else raised their hand at the pubic forum, because this is something with more current practical import to the AI than to, say, NAIFA. I don’t think it was necessarily inapt for the AI to ask TAF for clarification of rules; after all, USPAP keeps getting revised, and there are over 200 FAQs now, and why? Because the users of the rules have needed clarification.
Well, I know there’s more behind the scenes that those of us not privy to it will ever know or understand. Over-parsing this incident may have a “grassy knoll” aspect, and I think the historical details are not as important as the reactions of the participants are in revealing their points of view about the two groups and how they relate.
TAF was established by Congress, and has an important role to play—I wouldn’t want to see its power and authority in fulfilling that role diminished. The AI obviously has a very prominent role in the national appraisal profession. Both have established reserves of power and authority in their own ways. They need to look at their respective missions, figure out where the points of intersection or overlap might be, and then decide how they can either be of mutual aid or stay clearly out of each other’s way.
BTW, your blog and websites are very interesting. Did your firm appraise Stuy-Town a few years ago? My old college roomie lived there years ago.
Kevin, I really appreciate you taking the time to present such a clearly articulated impression of the content relating to this incident – I’d welcome continued input. And I know I am being a bit wonky on this whole issue but I am more about the big picture rather than the nuance which can be argued forever. Whatever the circumstances, it is a disservice to members to make the organization less relevant in this chaotic environment plus tell its members that it is a great opportunity without merit. AI membership deserves better.
No we didn’t get the call when it was sold a while back.
Kevin, you’ve made many good points and spoken well about the matter, and although we might not entirely agree on what action should have been taken, I smiled when I read your reference to the “grassy knoll” and nodded in agreement. With that in mind, the only item I wanted to specifically respond to was your mention of the “grab for power” comment, which I may not have stated in a way that was comprehensible. To clarify, it was not TAF that asserted that AI was making a “grab for power” but, rather, the other way around. Apparently AI’s leadership stated that they felt TAF was doing this. The “GFP” comment (since TAF likes acronyms) seems to reflect the paranoia I referenced. I’ve said it many times now, but TAF not only has no interest in encroaching on the education programs and educational opportunities of its sponsors, but frequently looks for ways to create new opportunities for the sponsors to enhance their own offerings through our various initiatives. (Don’t forget, a large chunk of our Board itself is made up of sponsor members, including several from AI.) I think that in our efforts to build these opportunities, some of our actions have unfortunately been misunderstood, e.g., a “grab for power”.