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There is often confusion in the marketplace, even among those in the industry, about the use of and meaning of terms such as Licensed Appraiser, Certified Appraiser and the appraisal designations such as CREA, SRA, MAI, etc.. A brief history of the appraisal profession as it relates to qualifications will be helpful in explaining the myriad of labels associated with appraisers. A look at the residential market will be illustrated but its' example can be applied to the commercial markets as well.
The licensing of real estate appraisers is a very recent occurrence which dates only to 1991. The bank failures associated with real estate loans during the Great Depression led to the formation of various early appraisal organizations which conferred upon their members designations based on the individual appraiser meeting their basic requirements of education and experience. Generally, lenders and users of appraisals looked to appraisers who held these designations as a basis of their qualifications and ability to perform credible appraisal services.
As the mortgage markets developed in the later half of this century, quasi-governmental institutions such as the FNMA (Fannie Mae) & FHLMC (Freddie Mac) were organized to acquire and sell the packaged loans originated by independent lenders or brokers. Until the early 1980's, many appraisers applied and were approved with Fannie Mae or Freddie Mac. Lenders, who were the primary users of appraisal services , looked to the appraiser to have a FNMA number as a measure of their qualifications. The FHA & VA had individual fee appraisal panels who performed their appraisals.
The early and mid 1980's brought about significant change in the demand for appraisals due to the low interest rates and changes in the tax laws which resulted in a dramatic increase in the requests for loans. Many homeowners will recall the weeks or months it took to get an appraisal of their home in regards to a loan during this period. As a response to the increased demand, the secondary market investors discontinued their appraiser approval procedures and relied on the individual lenders to qualify their own appraisers. In many cases the lenders looked again to the appraiser designations as a basis for their approval process. This led to an influx of various appraisal organizations who were competing for the "business" of designating appraisers. In some cases, the designation requirements were very strict and took years to complete. In others, it was only a matter of days, if not hours, to complete the requirements and obtain their respective appraisal designation.
The "savings and loan crisis" in the late 1980's led the congress to enact Title XI of FIRREA (Financial Institutions Reform, Recovery & Enforcement Act-1989) which mandated that the individual states would license appraisers so as to protect the interests of the public. As part of this effort, the congress authorized the formation of the Appraisal Foundation, which is charged with establishing appraisal standards and appraiser qualifications. The U.S.P.A.P. (Uniform Standards of Professional Appraisal Practice) were developed by the Foundation for use by the states in licensing appraisers. While licensing is not mandatory in all states, the licensing requirements generally conform to USPAP and set some minimum qualifications for appraisers who achieve licenses.
Most states have various levels of licensing which are based on the appraiser's experience. Only individuals may hold appraiser licenses. There are no appraisal licenses issued to business entities. The licensing levels are generally as follows;
A person who has meet the education requirements of licensing but has not yet accumulated the necessary experience for licensure.
2. State Licensed Residential Appraiser:
A person who has meet the education requirements (75hrs or more) and has accumulated the minimum experience (generally 2 years) in appraising residential properties.
3. State Certified General Real Estate Appraiser:
A person who has meet the education requirements (165hrs or more) and has accumulated the minimum experience (2 years with 1 year of nonresidential experience) in appraising and/or consulting.
Many states are adopting various levels of licensing including a Certified Residential Appraiser license with corresponding educational and experience requirements. Therefore, when the user of appraisal services is in the process of evaluating various real estate appraisers, the use of the license can be viewed as a determination of an appraiser's minimum qualifications. The designation can give an indication of the appraiser's abilities, but only if the user of the appraisal is familiar with the appraisal organization and the requirements of the individual designations. Special Note: The USPAP contains a competency provision that states that licensed appraisers are obligated not to perform appraisals on properties with which they are not familiar in terms of the market and the property type, unless this has been disclosed to the client in advance and the appraiser takes appropriate steps to ensure that the appraisal is performed competently and will not be misleading. The user of the appraisal services should make an effort to determine if the appraiser has the necessary experience with their type of property, regardless of the level of licensure or significance of the designation. Designations should not be construed as to confer infinite wisdom in all aspects of the appraisal profession.
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