Whist is a “…card game for four players in two partnerships that is played with a pack of 52 cards and that scores one point for each trick in excess of six”. You know of course that dinosaurs did not play Whist, right? Now, the question to ask yourself is, “Why did dinosaurs not play Whist?” And you already know who Mickey Mouse is. But did you know he failed miserably as a wizard? Now, you ask, “Tim, just how are you going to tie Whist, dinosaurs, Mickey Mouse, and a wizard together?” Oh, and did I mention a broom?
As of this writing, the real estate appraisal industry is undergoing a shift of tectonic proportions, not all of that shift in our favor. Over time, as the earth’s tectonic plates shift, a great deal of pressure builds up. When that pressure reaches an inflection point, there is an earthquake. That ‘quake may be relatively small. However, whenever the pressures within the earth reach that inflection point (and remain at that point long enough), there is a disruption in the status quota. That disruption (aka change) tends to generate consequences unplanned, abrupt, and long-lasting (and sometimes even deadly).
Another thing about tectonic shifts is that they are so leviathan in their scope that their control is outside of the influence of any one person, group, or philosophy/ethic. In other words, resistance is futile, so it’s best to accept those inevitable disruptions, change whatever it is you need to change, and then adapt to the new normal. This is the situation in which appraisers now find themselves.
Nobody knows for sure if the dinosaurs died out (a) for a bunch of reasons, if there were a series of (b) small events, or if there was a (c) cataclysmic event that ended their rule. But die out they did (likely from a single cataclysmic event). For whatever reason(s), they died out, never to be seen again (well, other than outside of the Jurassic Park franchise). After that die-out, the remaining animals were much smaller (thus required less food and less real estate in which to find it), so they survived.
Eventually, homo sapiens came along. One of them remarked, “I need help finding a better cave”, thus the real estate broker was born. Then one of them asked, “If that cave were higher up the mountain, how many more bison skins would it take to have that one, rather than the one I have now?”, thus giving rise to the need for appraisers – somebody to analyze the cave market in light of the number of bison skins a cave could command (which did not provide the bison with any benefits [but has nothing to do with Whist, etc]).
But getting back to dinosaurs: is the appraiser a dinosaur? Are we incapable of adapting to our environment as that environment changes? As with so many areas of our lives that are appraisal related, the answer is “it depends”. There is no bright-line division between “yes” and “no”. Therefore, we must look at that grey area in order to answer that question to our personal satisfaction.
Recently I was chatting with another appraiser who is at the end of his long career. At one time, he was wildly successful, billing well into six figures each year, and enjoying the perqs that went with it, too. But then 2007 came along and the European vacations, etc. came to a screeching halt. While the good times indeed had rolled for him back in the day, the term “laissez les bon temps rouler!” no longer accouters his vocabulary. I asked him what he was going to do to reverse the situation. He responded that he was too old, and technology had passed him by, so he was going to retire gracefully and indulge his grand kids while pursuing his passion to read the Classics. There is nothing wrong with any of that, by the way, but it certainly cemented his status as a dinosaur.
While that tectonic shift we talked about (above) is solidly beyond the control of any one person, organization, and so forth, how we prepare for it, how we react to it, and then adapt to it post change to take advantage of it, is totally within any one appraiser’s personal control. Thus, we can choose to be dinosaurs (and thus die), or we can choose not to be dinosaurs (and thus thrive). So, let’s talk about thriving.
Given technology (and its light-speed rate of change), as well as Big Data (which is one off-shoot of the tectonic changes in technology), the future of the residential real estate appraiser who limits his/her practice solely to first mortgage work, and depends solely on AMCs and lenders for sustenance, is likely a diplodocus. Whereas that appraiser who transitions into more so-called private work, tax appeal work, expert witness work, litigation support work, and so forth, is more like the cheetah – smart, fast, and deadly – and still extant.
Does that mean residential real estate appraisers are going to do bifurcated appraisals, hybrid appraisals, and/or (revulsed shudder!) evaluations? In all candor, there is no single answer to that question. There is merely your answer to the question.
There is no question the mortgage lending industry wants to rid itself of its adult supervision (that means us appraisers), since we kill deals. Just as clearly, the mortgage-lending industry wants to speed-up its ability to generate and then book those fat loan fees that (they want to think) we are taking from them. We apparently are the big hold-up in the process. In reality, we are not. It appears that fee-shopping AMCs, dim-bulb reviewers, stupid stips, and arrogant real estate brokers are also major roadblocks (but for some reason we get the blame. Could it be we have a greater sense of due diligence than our fellows aforementioned; perhaps a greater sense of ethics, a greater sense of trying to promote and maintain a high level of public trust? Naw, those could not be why they consider us roadblocks – could they?).
That these helots want us gone is, to some extent, coming to pass, frankly. Via their efforts we see a small uptick in the number of appraisal waivers lenders are offering and borrowers are accepting. Given the recent increase in the residential de minimis to $400,000 from $250,000 (against which the GSEs on the FED voted), we will see more evaluations (although maybe not all that much more – at least at the beginning). Evaluations are already a thing and bankers really love them over appraisals (in certain instances, anyway). But let’s face facts: banks have the right to order the products that help them make money. That notwithstanding, however, to deviate from the protocol of the traditional appraisal, which has for years served banks well as a risk management tool, does appear to be somewhat short-sighted, does it not?
You are also likely aware the US Treasury (those fine folks in the federal government in charge of banking stuff) have decreed that the real estate appraisal process is to be modernized, aren’t you? That the good folks at the Treasury Department did not first inform us appraisers of our need to modernize, nor their arrogation of that responsibility, speaks volumes about what it thinks of our ability and desire to carry that mandate-for-change out.
So, we are to undergo “modernization” (which begs the question we need to modernize). OK, admit it: appraisers are not sufficiently organized as a group to modernize the real estate appraisal industry without extensive outside influence. Such an organizational effort would be akin to herding cats. Nor are we exactly at the forefront of all the technology changes that have revolutionized and streamlined the remainder of the mortgage lending industry. Nevertheless, the zeal to modernize real estate appraisal, the impetus to get that change accomplished now, begs the question that the fundamental principles underlying appraising, the protection we have heretofore provided for the lending industry, no longer are valid. This begs that question since absolutely nobody has proven, or even demonstrated, those fundamentals and that protection are no longer valid, nor that the mortgage lending industry no longer needs them.
With all of the whiz-bang gimcrackery with which the geeks, techies, and nerds have burdened and enlightened us, no gadget, no app, no software can replace the mind, the eye, and the heart of a human being – of an appraiser. There is not an AVM out there, there is not some hybridized appraisal reporting form extant, that can be the adult supervision on the mortgage lending industry in the same competent, independent, impartial, objective, and clear-eyed manner that the appraiser brings to the table. Let me give you an example.
Most of you are not old enough to remember Walt Disney’s Academy® Award winning movie Fantasia, and the dark, yet uplifting, tale of knowledge, independence, subservience, and self-mastery it tells. The short version is that Mickey Mouse, the apprentice to a wise, old, competent wizard stumbles across a spell and uses it to bring a broom to life. He commands that now ensorcelled broom to fetch water, a job Mickey previously had and one he loathed. With software-like precision and devotion to duty, that broom performed Mickey’s once-hated task. In a relatively short time, the Wizard’s cistern is full of water and Mickey has not even broken a sweat (admittedly, there is something positive to be said about the delegation to underlings of onerous tasks).
However, while Mickey found the spell to make the broom fetch water, Mickey, in his apprentice-ignorance does not know how to make the broom stop. It just keeps fetching water even though the cistern is full to overflowing. Mickey, in a fit of rage, grabs the broom and breaks it, thus (he hopes) solving the problem. But the pieces of the broom merely rise and, en masse, begin to haul water from the well to the cistern.
Mickey, at his wit’s end, is beside himself. He is terrified of the damage the near-oceans of excess water will wreak on his master’s lab. He is also terrified the Wizard will discover Mickey has been messing with powers he had not mastered, and privileges he had no right to assume. And, of course, that is exactly what happened. Because the Wizard knew how to control his powers, he stopped the innundatory brooms with a simple command, and then banished Mickey to the onerous (and now much larger) task of cleaning up the mess his ignorance and irrational exuberance created. The moral here? It is “…learn before you encorcel…”; to measure the benefit of the change before you make that change for the mere sake of making change.
So, we’ve covered Whist, dinosaurs, Mickey Mouse, a broom, and power unearned and uncontrolled. Now it’s time to tie all of these together.
We’ll never know if dinosaurs could have learned to play Whist since they became, well, dinosaurs, and then died out. If we appraisers become as dinosaurs, we will die out, too (although some of us may learn to play Whist first). We have to avoid that petrifying fate since we also function as the wise and temperate Wizard as we exert adult supervision on the mortgage-lending industry. So, how do we avoid an extinction event? Just as did the Wizard, we educate ourselves into excellence so that those who need our wisdom and supervision realize we offer those not out of arrogance, but out of a humble sense of being there to help the irrationally exuberant mortgage-lending industry avoid sloshing its way, broom-like, into its own oblivion. Who knows, maybe learning how to play Whist is part of that education?