Overview of Appraisal Profession Larry Trede

January 5, 2018 | Author: Anonymous | Category: Business, Finance
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Overview of Appraisal Profession Economics 354X Larry D. Trede Professor Emeritus, ISU and Secretary-Treasurer, Iowa Chapter, ASFMRA January, 2011

Overview of Appraisal Profession • Background & History of Appraisal • History of Rural Appraisal (Iowa State Involvement)

• American Society of Farm Managers and Rural Appraisers • Uniform Standards of Professional Practice (USPAP) • Professional Rural Appraisal Qualifications & Licensing

Background & History of Appraisal • Appraisal profession -- 18th century “thrift institutions” in England • 1831 U.S. “building & loan” institutions; rudimentary forms of appraisals • Savings & Loan Crisis in 1980s and 1990s – – – – –

Rapid growth in residential house in 1950s & 1960s Deregulation & wider array of “savings products” “Risky” loans based upon inflated property values Higher interest rates to slow inflation; Property values declined; S&Ls failed

Background & History of Appraisal • Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989 – Established independent agency to oversee 12 Federal Home Loan Banks – Established new appraisal standards • Appraisal Subcommittee (ASC) established to provide oversight & input to The Appraisal Foundation • Appraisal Foundation develops Uniform Standards of Professional Appraisal Practice (USPAP)

– USPAP; minimum standards for all state-certified appraisers • All appraisers must conform to these standards • Standards are reviewed periodically (2 years)

History of Rural Appraisal (Iowa State Involvement) • Depression of 1930s; “windshield” appraisals • ISU Professor; W.G. Murray – Refine appraisal methodology – Started a farm appraisal class

• 1929, ASFMRA founded; discipline of farm management • 1931, ASFMRA recognized need for farm appraisal – 1933, “intelligent land appraisal” conference – 1936, ASFMRA established its ARA program; • Dr. Murray, chaired committee reviewed 16 candidates

History of Rural Appraisal (Iowa State Involvement) • 1940s – Appraisal closely tied to Farm Credit System – Relied heavily on “income” approach to value – Encouraging farmers to maintain economic size unit

• 1950s – 1980s – Continuous rise in farmland values – Farm appraisal methods shifted more to “market” approach • Refinement in comparable sales • More critical analysis of “comparables”

History of Rural Appraisal (Iowa State Involvement) • 1980s – “Farm Crisis” with declining land values – Development of USPAP – More balanced approach to rural property appraisal • • • •

Stressed 3 approaches to value More refined methods Development of “computerized” appraisal programs More emphasis on “reconciliation” of three approaches

• Today – Rely heavily upon three approaches to value – Continuous emphasis on conforming to USPAP

American Society of Farm Managers & Rural Appraisers ASFMRA & Iowa Chapter • ASFMRA Objectives – – – –

Professional development & education Improve ethics, standards, and quality of services Promote profession of farm mgt & rural appraisal Provide accreditation program

• Membership – 2,010 members (33 state chapters) – 45% accredited, 40% associate, 3% affiliate, 3% academic, 9% others

American Society of Farm Managers & Rural Appraisers ASFMRA & Iowa Chapter • Iowa Chapter, ASFMRA – – – – –

Objectives parallel objectives of ASFMRA 182 members 59 AFMs, 14 ARAs, 14 Dual (AFM/ARA) 60 State Certified General Appraisers Work responsibilities • Farm Management -- 101 members • Rural Appraisal -- 74 members • Consulting -- 36 members (Many members are involved in one or more of these)

Uniform Standards of Professional Practice (USPAP) • Assures “quality control” standards -- all appraisers • Administered by The Appraisal Foundation – Appraisal Standards Board (ASB) – Appraisal Qualifications Board (AQB)

• Prescribes standards but not appraisal methods • USPAP contains 10 Standards – Covers development of appraisals – Covers valuation methods used – Covers specific practices, writing, and reporting

Professional Rural Appraiser Qualifications & Licensing • State Certified General Appraiser (Iowa) – Approved by Iowa Real Estate Appraiser Examining Board – Required to do appraisals for federal lending agencies and others

• Requirements – State Certified General Appraiser (Iowa) – Minimum of Bachelors Degree (any field of study) – 300 hours of Qualifying Education (conform to AQB criteria) – 3,000 hours of work experience in no less than 30 months (1500 hours in non-residential appraisal work) • Maintain a documented log • Work with supervisor • May be required to interview to defend work experience

Professional Rural Appraiser Qualifications & Licensing • Apply for Certified General Real Property Exam • Pass the Certified General Real Property Appraiser Exam

• Complete Work Product Review (WPR) process – Submit work log – 3 appraisals (randomly selected) reviewed by Board – Appraisals may be reviewed by outside consultant

• Submit Application

Accredited Rural Appraiser (ARA) American Society of Farm Mgrs. & Rural Appraisers (ASFMRA) • ARA Requirements (ASFMRA) – – – – – –

4-year college degree or equivalent Complete and pass ASFMRA required courses 5 years of real estate appraisal experience Submit one demonstration report Submit six (6) actual appraisal for committee review Complete and pass ARA accrediting exam

Information Sources • “Savings & Loan Crisis,” Wikipedia, the Free Encyclopedia, www.wikipedia.org/wiki/savings_and_loan crisis • “Financial Institutions, Reform, Recovery, and Enforcement Act of 1980,” Wikipedia, the Free Encyclopedia, www.wikipedia.org/wiki/Financial_Institutions_Reform,_Recovery,_ and_Enforcement_Act_of_1989 • “Land Management and Valuation, 1929-2004,” ASFMRA, Denver, Colorado, www.asfmra.org • Iowa Real Estate Appraisal Examining Board, www.state.ia.us/government/com/prof/appraiser/home

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