Appraisers...and the band plays on - We manage to survive, even thrive - Part 1

It would be too easy to write a doom filled article. No doubt you recently have read some. Just open a paper, any paper, a magazine, a web site, a blog. These articles recycle themes such as “the world is turned upside down,” “nothing means anything anymore,” “a failure of leadership, controls, systems, and an entire way of life,” “the past is no guide, the future bleak.” Such articles inevitably end up trying make simplistic sense out of the mess and point blame. It’s the way of the world that bad things happen all the time. Life goes on…Somehow, we manage to survive, even thrive, in the midst of the worst of times. That is my theme for today. Remember the Temptations? If you do, you’re old or you have parents that are. In any case, your memory and taste should be applauded. Keep that in mind. They’ll be back at the end. Here are some bad things. For some of you, you lived these; for others of you, these pass into history. The October 1987 stock market crash – there’s something about October and the economy – the market recovered, dealt with it, bounced back. Real estate began a dip shortly thereafter that was ugly but kept appraisers busy for a good part of the early 1990’s. Similarly with the late 1990’s crises and the dot com bust, etc. Markets processed events and moved on. Times around 9/11 were more stark. While many real estate markets declined in the aftermath, it was not long before the long real estate boom began as interest rates reached historical lows. At that long moment in September there was doubt whether all markets would fold up, never to recover. Didn’t happen. Markets digested the terrible news, adjusted, and rebounded. It was a horrific time but it was not the end of markets or of civilization. Many seemed paralyzed by recent events. Certainly, we are undergoing something historic and it’s not pleasant. We’ve only begun “adjusting” to new realities. The process is likely to be lengthy and not linear. As for housing, this latest shock surely will prolong the downturn and the recovery. Add a very still economy to all else, and housing markets nationally will slowly claw back to some semblance of normalcy. The housing mess has been with us for a time and has been thoroughly dissected. But, it continues to be very puzzling, very troubling, as if something else out there that has not yet come to light. Which brings us to appraisers. Since the end of the boom, the residential appraiser has been prone to the effect of supply and demand and ruinous competition. So many new appraisers came in during the height of the boom and once the boom was over, demand for appraisal services declined. This has created an ongoing crisis in this business. Here are some positive things to mull over. • USPAP is your Friend. As the actual implementation of solutions to this mess begin, various types of appraisals, review appraisals, AVM like products, due diligence, etc. will be needed. Now is the time to begin understanding what may be needed and how appraisers can get their fair market share. Many appraisers feel hamstrung by USPAP and licensing requirements but in fact USPAP provides appraisers with tremendous flexibility in provided services to client. • Value Added Services. There are lending clients out there who may not be doing much new origination but may need help in understanding what they have in their portfolio. This is as good a time as ever to see if those clients need assistance for foreclosures, workouts, etc. This is an area that appraisers seemed to have been pushed out of but is clearly a place where experienced and skilled appraisers can provided “value added” services in addition to or on top of those many “valuation services” provided by non-appraisers. • The Home Valuation Code of Conduct, which seemed like a near certainty just a few months ago, appears to be on hold. Some say for a long time. The strong negative response to this misguided initiative from many quarters was encouraging. Most appraisers and many appraiser users thought the HVCC was not a solution at all but a new problem. This is a good thing for appraisers. • Don’t believe all that you read. There has been sufficient press about the ‘failure of appraisal regulation” which suggests that underfunded licensing boards are somehow responsible for the housing meltdown. This is a time when appraisers and their clients can be of use to the profession by sending in “bad” appraisals so that they can be acted on. The very nature of professional oversight boards is that they can react to what is brought to their attention and many appraiser boards have been frustrated by the lack of complaints filed, rather than by a deluge. Part two will appear in the December 12th edition of NEREJ in the Appraisal and Consulting section. William Pastuszek, MAI, SRA is principal of Shepherd Associates, Newton Mass. • Don’t believe all that you read, Part 2. Another set of articles and letters suggested that appraisers can be circumvented altogether in the solution of the mortgage mess through the utilization of sophisticated programs to value the assets in many of these toxic securities. Excuse me, but didn’t the utilization of sophisticated program create the valuation problem we are facing. Someone some morning is going to have the bright idea that people value housing better than machines… • Build a Client Base. This is a time to build new clients. The old ones aren’t doing anything for you. Find new ones. They’re out there. • Developing New Skills. New clients are likely to want different types of appraisals. This many mean developing expertise in new areas. • Education. Money is tight but this is a great time to take new education in new and different topic areas. The education offerings are out there to be taken advantage of. There are on line and face to face classes. Call me old-fashioned but I always pick up information and contacts face to face. • Network. You must do this. With some effort, there are so many ways to develop new clients. There are many resources out there: books, on line, classes, mentors. You can find face to face business networks, online communities. • Opportunities. The training of an appraiser is highly useful because it is broad and far ranging. As appraisers, we tend to pigeon hole ourselves and allow our clients to do so. The analytical and knowledge skills of an appraiser come in very handy in related fields. Be flexible. Use your training and experience as a stepping stone. Here’s a piece of wisdom. From the Temptations, c. 1970, “Ball of Confusion:” “Round and around and around we go. Where the world's headed, nobody knows.” The rest of the lyrics are somewhat topical but here is another snippet” “Just a ball of confusion . . . Oh yeah, that's what the world is today.” And finally, “and the Band Played on.” That’s the punch line. If that’s what the market are – the band – then let’s get on with it. Remember, I didn’t say it was a great song, though they had many that were. I said you had good taste if you remembered the Temptations. As for staying positive, we are adaptable creatures. New realities require new outlooks. And remember, appraisers don’t get old, they just adjust! William J. Pastuszek, Jr., MAI, SRA is principal of Shepherd Associates, Newton MA. The firm consults with a wide variety of clients on valuation related issues.