Working RE Magazine - Issue 67

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Real Est at e A pprai s ers

Winter/Spring 2025, Vol. 67

DOJ vs. Appraiser and Rocket Mortgage FHFA’s Massive Expansion of Appraisal Waivers: What It Really Means Fair Housing Laws: Impact on Appraisers Fannie, Freddie: New Market Analysis Requirements

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From the Publisher Readers Respond

DOJ vs. Appraiser and Rocket Mortgage

by Isaac Peck, Publisher

16

FHFA’s Massive Expansion of Appraisal Waivers: What It Really Means

by Isaac Peck, Publisher

24

Fair Housing Laws and Their Impact on Real Estate Appraisers

by Jo Traut, McKissock Learning

26

Fannie, Freddie: New Market Analysis Requirements February 4th

by Isaac Peck, Publisher

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Going In-Depth on a Delicate Issue: The Invisible Fence of Racial Discrimination

by Isaac Peck, Publisher

Appraiser Growth and Profitability: Key Things to Focus On

by Isaac Peck, Publisher

Appraiser Diversity Initiative: Training the Next Generation

CHECK OUT: OREP’S LIVE CHAT at OREP.org. 5am-5pm PST, Monday-Friday.

by Isaac Peck, Publisher

Mission Working RE is published to help readers build their businesses, reduce their risk of liability and stay informed on important technology and industry issues.

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Comments & letters are welcome! All stories without attribution are written by the editor.

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Working RE

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Editor

Kendra Budd kendra@orep.org

Working RE is published quarterly and mailed to real estate appraisers, agents and other real estate professionals nationwide.

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From the Publisher

What’s Coming This Year?

by Isaac Peck, Publisher

We are in an interesting moment

in the appraisal world—for a variety of reasons.

For starters, many of you (myself included), are waiting with great anticipation to see how the election of Donald Trump to the Presidency will affect the appraisal profession.

With HUD pursuing over 300 appraisal-related bias “complaints” and the Department of Justice (DOJ) filing their first lawsuit against an appraiser (and Rocket Mortgage) in federal court last year, it will be interesting to see how the new Trump administration will create a new, perhaps more appraiser-friendly environment, at least as it relates to the federal government coming after appraisers. (See DOJ vs.

Appraiser and Rocket Mortgage, pg. 6.)

There are a number of other ways that the new Trump administration may affect appraisers, including the potential privatization of Fannie Mae and Freddie Mac. John D. Russell, JD, a very seasoned industry advocate and attorney, explains these changes in greater detail in his recent 4 Working RE Winter/Spring 2025

article, Now What? On a New Trump Administration (Visit WorkingRE.com; search Trump).

Lastly, many experienced real estate “experts” are predicting lower interest rates in 2025. Trump repeatedly promised to lower interest rates while on the campaign trail, has been very vocal about the Fed Chairman Jerome Powell’s failure to lower rates faster, and has even suggested that the president should “have a say” on interest rates and have some influence on the Federal Reserve.

Lower interest rates would provide a much-needed balm to what has been an incredibly painful economic period for appraisers, who have experienced unprecedented and historically low appraisal volume over the last two years.

It is hard to talk about the current moment, or what is to come for appraisers, without talking about politics. But setting politics aside, there are several reasons that brighter days may be on the horizon for the appraiser profession starting this year. Here’s to brighter days ahead! WRE

Readers Respond The Great Debate on Appraisal Fees Folks, nothing is going to change until the low-fee appraisers start charging what our profession is worth. Appraisers are and have been working for 1990s fees (when those reports took half the time to develop and had far fewer lender requirements and bounce backs) since the introduction of AMCs in or about 2010, seemingly to squash competition by taking the order off the table, thereby creating artificial “Customary Fees.” The only thing I can imagine is that many appraisers are perhaps part-time or have other sources of household income so that they don’t care, or they know better, or perhaps they were recently working for a supervisor on a fee split basis, therefore are okay to continue to work for lower fees. Besides, they will say it is a free country, and it’s nobody’s business what they charge, and technically, that’s true, but not if their reports are wrought with deception or multiple report deficiencies.

Even if AMCs are somehow required to charge “Cost Plus” or account for both their fee and the appraisal fee, and/or required to report the total fee charged to the borrower for the appraisal on the same line on the Loan Settlement Disclosure Statement, I suspect there will still be a large percentage of appraisers content with working for low fees, especially when they likely know that corners can be cut in the Scope of Work. Example: by failing to spend the time necessary to conduct proper observation of subject property, proper analysis, proper building and maintaining adequate records (resulting in a poor quality workfile), failing to provide documented or otherwise credible and replicable support for their adjustments and conclusions, etc. I’ll keep my fingers crossed for things to get better but there are too many entities getting a piece of the pie. —Rod Bien, RAA

Great article. That is exactly what’s happening. Many times a consumer will say “I paid $900–$1,500 for the appraisal” when the appraiser is only getting $350–$450 for large complex homes and multifamily properties.

Not fair for the consumer or appraiser. —Mary Cummins

 Push to Regulate Property Data Collectors The simple solution to PDCs is that nationwide, appraisers need to refuse to sign reports where a PDC has collected the data. I will NOT sign any report where a PDC has collected data that was provided to me by a third party. Appraisers need to stand up and be heard. Do not put your license and reputation on the line by using data from any source or individual that you are not completely comfortable with; this includes AMCs. —John M. Pratt

How exactly does it “help” appraisers if these persons are licensed and further legitimized? I’m sure this will be attractive to the “powerful” rather than paying just a bit more for a truly licensed/certified professional appraiser. It still solves their problem of paying a bit less, getting less of a product, faster+(?), that will substantiate all of their loan approvals, and still underserves the public and professional appraisers. —Tammi The solution to property data collectors is easy and solves other issues in our industry as well. And to think that this was already thought of in the past when the 1004 URAR was created. The current URAR form allows a trainee, licensed, or certified appraiser to inspect a home while another appraiser can finish the report without inspecting the property. Allowing an appraiser to inspect the property while

another appraiser completes the report immediately solves the problem/issue of having to pass regulations on PDC training and eliminates the concerns that arise with liability. In addition, this entices more people to get into our profession since appraisers would see this as an opportunity to increase profit and productivity. This would eliminate the perceived shortage of appraisers, increase productivity, decrease turn time, improve appraisal quality and increase the number of appraisers in the industry.

It is such a simple solution that requires so little time and money to implement. Logically, this would be a win-win for all players in our market.

But we all know that the government does not use much logic. —Jecksan Roberto Jimenez WRE

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Winter/Spring 2025 Working RE

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DOJ vs. Appraiser and Rocket Mortgage

by Isaac Peck, Publisher

As many appraisers are aware, the

“HUD’s formal charges, and the DOJ’s lawsuit, represent two important “firsts” for the appraisal profession.

Will these efforts survive the incoming Trump administration?”

Department of Housing and Urban Development (HUD) has received over 300 discrimination-related complaints filed against appraisers in the last five years.

The majority of these HUD complaints are still currently pending— stuck in investigative limbo. A smaller number of complaints have been dismissed, and an even smaller number have settled quietly for nominal payouts. Some appraisers have seemingly decided that they’d rather settle than deal with the stress of having a HUD complaint hanging over their heads for years and years.

Despite the lack of developments with appraisal-related HUD complaints, on July 15, 2024, the Secretary of HUD issued a formal Charge of Discrimination against an appraiser, as well as the appraisal management company (AMC) and the lender involved in the appraisal. A week later, Francesca Cheroutes (the homeowner who is the alleged victim of racial discrimination), elected to have her claims resolved in a civil action.

As a consequence of that process, on October 21, 2024, the U.S. Department of Justice (DOJ) filed the first lawsuit of its kind—naming an individual appraiser, Maksym Mykhailyna, his appraisal firm, Maverick Appraisal Group, Inc., the AMC, Solidifi U.S. Inc. (Solidifi), as well as the lender in

Isaac Peck is the Publisher of Working RE magazine and the President of OREP, a leading provider of E&O insurance for real estate professionals. OREP serves over 10,000 appraisers with comprehensive E&O coverage, competitive rates, and 14 hours of free CE for OREP Members (CE not approved in IL, MN, GA). Visit www.OREP.org to learn more. Reach Isaac at isaac@orep.org or (888) 347-5273. CA License #4116465.

6 Working RE Winter/Spring 2025

the transaction, Rocket Mortgage, LLC (Rocket). The suit seeks to (1) enjoin all parties from engaging in discrimination on the basis of race or color in real estate transactions, and (2) award monetary damages to Ms. Cheroutes.

The DOJ’s lawsuit is essentially being filed on behalf of Ms. Cheroutes, a process wherein the DOJ stands in and advocates on behalf an individual victim of discrimination. The first line of the DOJ’s lawsuit states that they are bringing this action to “enforce Title VIII of the Civil Rights Act of 1968…on behalf of Francesca Cheroutes.”

During the Biden administration, the DOJ has shown great interest in getting into the appraisal bias fight.

In the well-known Tate-Austin v. Miller case, the Department filed a “Statement of Interest.” The DOJ made a similar filing in a Baltimore case that is still being litigated (Connolly v. Lanham), among others.

HUD’s formal charges, and the DOJ’s lawsuit, represent two important “firsts” for the appraisal profession.

Will these efforts survive the incoming Trump administration? That remains to be seen. For now, this case appears to just be getting started. HUD and the DOJ have filed their initial complaints, and Rocket Mortgage has responded by filing its own lawsuit against HUD. Here are the details of this landmark case so far.

Background In early January 2021, appraiser Maksym Mykhailyna received an appraisal order for 749-751 Ash Street, page 8 8

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Figure 1: History of Appraised Values for Cheroutes’ Property Denver, Colorado, a duplex owned by Ms. Cheroutes. Mr. Mykhailyna conducted the property observation with another appraiser whom he was considering hiring.

Cheroutes later alleged that Mykhailyna was generally aloof, that his “facial expressions indicated … he was not interested in the information provided,” he didn’t take notes when Ms. Cheroutes told him about the $200,000 in property upgrades she had conducted over the last eight years, and he didn’t ask her any questions.

Cheroutes had purchased her property in 2013, and had it appraised six times in the last decade. The DOJ cites the following history of appraisals Cheroutes has received (See Figure 1: History of Appraised Values for Cheroutes’ Property).

After Mykhailyna’s appraisal was delivered with a value of $640,000, over $200,000 less than the appraisal she had received roughly eight months prior, Cheroutes was shocked and immediately began contesting the appraisal with Rocket Mortgage and eventually filing a complaint with HUD. 8 Working RE Winter/Spring 2025

Discrimination Allegations The DOJ dedicates roughly 15 pages of its 47–page complaint to attacking the appraisal itself and detailing what it describes as “a series of intentional choices and suspect errors” that Mykhailyna made. Those choices and errors “signaled” that Mykhailyna’s view of the subject property was “affected by the race of its owner,” writes the DOJ. The DOJ argues that Mykhailyna saw that Cheroutes and her family were Black and then deliberately chose as comparables “properties in neighborhoods with higher percentages of Black residents,” despite the fact that the subject property was located in Hale, a predominantly white neighborhood with higher property values relative to many of the surrounding neighborhoods. Instead of using higher value comparables in the immediate and surrounding neighborhoods, Mykhailyna grouped the subject property with “faraway neighborhoods with much greater Black populations,” the DOJ argues.

On the section of his appraisal concerning market conditions in the

property’s subject neighborhood, Mykhailyna wrote: “comparable properties currently offered for sale in the subject neighborhood ranging in price from $400,000 to $750,000.” But the DOJ says this statement is plainly false, pointing out that this price range did not “accurately reflect home prices in Ms. Cheroutes’ popular Hale neighborhood or similar, nearby neighborhoods. Rather, this range was based largely on properties from distant neighborhoods with far higher percentages of Black residents than Hale.”

The DOJ explains in its filing that, during HUD’s initial investigation of the complaint, HUD asked Mykhailyna to provide a list of the properties he used to define the subject neighborhood.

Mykhailyna provided the properties marked on the map in Figure 2 with black squares (the subject property is the red square). The shading on the map shows the percentage of Black residents. (See Figure 2: Subject and Comparables used by Mykhailyna.)

Furthermore, the DOJ argues that Mykhailyna selected two comps within a few feet of East Colfax Avenue,

Figure 2: Subject and Comparables used by Mykhailyna (Percentage of Black residents overlayed onto the map; Credit DOJ)

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“a street with a well-known reputation for activity considered detrimental to housing value, often drawing law enforcement and thus loud sirens and bright lights late at night.” This reputation and activity had a “significant detrimental effect on the value of homes located near this part of Colfax Avenue” and would have been “common knowledge to anyone familiar with the area and certainly to an appraiser in Denver.”

The DOJ digs in on this point, explaining that one of Mykhailyna’s East Colfax-adjacent comps was “across the street from an abandoned building and adjacent to a car shop specializing in oil changes.” These characteristics are remarkedly different than the tree-lined residential street where Cheroutes’ property is located—and would naturally be expected to depress the value of those comps, the DOJ explains.

Here, the DOJ compares how Mykhailyna handled the adjustments with how he had appraised another fourplex with white homeowners. “Mykhailyna chose to make only small upwards adjustments ($10,000 and $14,000, or two percent of the sales prices) to account for these substantial differences in location and attractiveness. In contrast, when Mr. Mykhailyna conducted an appraisal for the white owners of a fourplex property less than a mile from the subject property, [he] made upwards adjustments of $74,000 and $87,000 (10 percent of the sales price for these comps) for comps he chose that were in locations with lower property values,” the DOJ writes.

Mykhailyna’s fourplex appraisal happened just one month before his appraisal of the subject property.

In addition to the allegations that Mr. Mykhailyna discriminated against

Ms. Cheroutes in his selection of comparables and location adjustments, the DOJ goes on to allege several other errors in the appraisal.

1. Lot Size Adjustments: Mykhailyna made very large downward adjustments to two of the highest value comparables in his appraisal due to them having larger lot sizes compared to the subject property. The DOJ argues that he used “an inexplicably large” multiplier of $40 per square foot for the difference in lot size and points out that in dollar terms this adjustment resulted in a decrease in value of $96,800 and $93,600 for the two comps.

The $40 per square foot for the lot size adjustment was “not only unjustified but also inconsistent with Mr. Mykpage 12 8

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hailyna’s prior practices,” according to the DOJ. Citing the data that HUD collected in its investigation, the DOJ alleges that “in the sixteen appraisals of twoto four-unit properties that Mykhailyna had completed in Denver between 2020 and 2022, he had never used anywhere near such a large multiplier. In fact, in 12 of those appraisals, his lot size adjustments applied a multiplier no greater than $5 per square foot.”

The DOJ also draws comparisons between Mykhailyna’s appraisal and the prior appraisals that Cheroutes had received from other appraisals of the property in 2015, 2018, and 2020, pointing out significant discrepancies between Mykhailyna’s adjustments and those of his peers. “The 2020 appraisal applied no lot-size adjustments. The 2018 appraisal applied a $1 per square foot adjustment. And the 2015 appraisal also applied no lot-size adjustments, despite two of the comparable properties having 50 percent larger lots than the subject property,” the DOJ writes.

2. Excluding Third Bedroom in Subject Property: Mykhailyna also allegedly excluded the third bedroom in the basement of each unit of the subject property, while including basement bedrooms on the comparable properties, according to the DOJ. “Mr. Mykhailyna’s unjustified exclusion of the basement bedrooms significantly lowered the value he assigned to the subject property. In the appraisal report, he wrote that the value per bedroom of the comps was $160,000.

By that metric, if he had included the two basement bedrooms, the value of the subject property would have been $320,000 higher,” argues the DOJ. 3. Incorrect Elementary School: Mykhailyna also incorrectly listed the subject property’s neighborhood elementary school as Palmer Elementary School, which is northeast 12 Working RE Winter/Spring 2025

These errors demonstrate a lack of attention to detail that mirrored Mr. Mykhailyna’s cursory inspection of the subject property and his dismissive attitude towards Ms. Cheroutes,” the DOJ concludes. of the subject, when the actual elementary school is Steck Elementary School, which is south of the subject and much closer than Palmer.

“Palmer has a much higher concentration of Black students (19 percent) than Steck (only 4 percent).

On the other hand, when appraising a nearby property owned by White homeowners, he correctly identified the closest neighborhood school,” the DOJ explains.

4. Other Errors: According to the DOJ, Mykhailyna made a series of other errors in addition to the ones explained in detail here, including using gross living area as opposed to gross building area; undercounting the subject property’s gross living area; failing to mention improvements that had been made to the property; incorrectly stating that the property lacked a fence, attic, and energy-efficient appliances; and incorrectly rating the condition of one of the comps. “These errors demonstrate a lack of attention to detail that mirrored Mr. Mykhailyna’s cursory inspection of the subject property and his dismissive attitude towards Ms. Cheroutes,” the DOJ concludes.

Solidifi Liability After detailing its criticisms of Mykhailyna’s appraisal, the DOJ turns its attention towards Solidifi’s and Rocket’s culpability in the matter.

According to the DOJ’s complaint, the day after his observation of the subject property, Mykhailyna submitted his appraisal to Solidifi, and Solidifi reviewed the appraisal and submitted it to Rocket that very same day.

The DOJ points out that many of the adjustments that Mykhailyna made for lot size, location, “attractiveness,” and so on, were improper and unsupported. Indeed, the appraisal did not meet Solidifi’s own standards, which require a clear and detailed explanation for any gross adjustments to a comp which exceed 25 percent—a threshold that Mykhailyna reached, but did not offer any explanation for, according to the DOJ. In addition to the appraisal violating several specific standards of Solidifi, the DOJ argues more generally that the appraisal did not comply with (USPAP Uniform Standard of Professional Appraisal Practice) because of its many errors, and that Solidifi failed to take any action regarding these USPAP violations. The DOJ’s theory of liability here is that Mykhailyna was acting as an agent of Solidifi, that his actions were taken within Solidifi’s actual or apparent authority, and that Solidifi has a “significant amount of control over how the appraiser completes an appraisal” and its agreement makes clear that Solidifi “owns” the appraisal.

Rocket Liability For Rocket’s part, the DOJ basically says that even after Cheroutes told them she believed the appraisal was discriminatory, Rocket stuck to its guns, adhered to the appraisal, and cancelled Cheroutes application.

Cheroutes made it clear to Rocket that Mykhailyna had undervalued her property because of her race. Her loan officer initially agreed that a 25 percent decline in value (compared to the page 148

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appraisal Rocket had procured for her the year prior) didn’t make sense and referred her to a Solutions Consultant at Rocket, who subsequently referred her to Client Relations. Before she could speak to the Client Relations department, Cheroutes’ loan application was cancelled and she was referred to Rocket’s legal department, which never reached out to her, according to the DOJ complaint.

The DOJ argues that “Rocket was reliably informed that the appraisal undervalued Cheroutes’ property because of race or color. Defendant Rocket had the authority to correct the discriminatory appraisal, or cause it to be corrected, but failed to do so.”

Rocket Countersues Shortly after the DOJ filed its lawsuit, on December 4, 2024, Rocket Mortgage countersued, filing a lawsuit against HUD arguing that HUD’s position on lender liability for discriminatory appraisals flies in the face of Dodd-Frank’s appraisal independence requirements and places Rocket between the proverbial rock and a hard place.

In its complaint, Rocket cites former Maine Attorney General Andrew Ketterer, who observed that HUD’s application of the Fair Housing Act (FHA) “set[s] a dangerous new precedent in the mortgage industry that runs contrary to a central tenet of [appraiser independence]...and risks derailing the regulatory framework established by DoddFrank,” effectively removing the “firewall between the lender and appraiser.”

Rocket points out that the Truth in Lending Act (TILA) and Dodd-Frank make it illegal for anyone, including a lender, to take an action for the “purpose of causing the appraised value assigned, under the appraisal, to the property to be based on any factor other than the independent judgment of the appraiser.”

Moreover, any violation of TILA’s appraisal-independence provision carries an initial civil penalty of $10,000 and 14 Working RE Winter/Spring 2025

then penalties up to $20,000 for each day the violation continues. That provision can also be enforced through private civil actions, meaning lenders can be sued privately even if HUD doesn’t pursue action.

This, Rocket argues, puts lenders on the horns of a dilemma, facing two irreconcilable requirements: “If [lender] takes action with an appraiser regarding an allegedly discriminatory appraisal, then it faces the prospect of a government enforcement action or private lawsuit alleging violations of statutory appraiser independence requirements. But if it complies with those independence requirements by not taking action to ‘directly or indirectly’ attempt to influence the ‘independent judgment’ of a third-party appraiser, then it faces the prospect of government enforcement actions and private lawsuits for alleged violations of the FHA,” argues Rocket.

In short, Rocket’s position is that appraisal independence requirements prevent it from “exercising the kind of oversight needed to meaningfully scrutinize” whether an appraisal violates fair housing laws. As a result, Rocket argues, “liability runs to the appraiser, not the lender.”

Rocket concludes by asking the court for a declaratory judgement that “HUD’s policy of requiring lenders to take responsibility under the FHA for appraisals performed by independent, third-party appraisers is a significant departure from the federal government’s longstanding practice of requiring lenders to honor appraiser independence.”

Rocket also seeks a determination by the court that by promulgating its new policy without notice and comment, HUD violated legal requirements that agencies must offer new policies up for public comment.

Rocket argues that HUD “has avoided public scrutiny over that tension [between appraisal independence and its new bias requirements] by failing to provide notice of, and an opportunity

to comment on, its new policy of seeking to hold lenders responsible for the actions of independent appraisers under the FHA.”

Rocket Pops Off In an interview with National Mortgage Professional (NMP), Rocket Companies President Bill Emerson was defiant, telling NMP: “Our reputation is not for sale” and that the countersuit, which had been filed that day, was based “purely on principle.”

Emerson says Rocket’s Board is in full support of the lawsuit because “you have to stand up when you are wrongly accused! Here’s the reality of life. The way this works is if you’re wrongly accused and you write a check to settle, it just empowers the next time that they do this. I can appreciate a small lender not having the capital to do that, but there have been some larger lenders who have just decided that it’s easier to write a check. We are not that company. We have 15,000 team members who do the right thing every single day,” Emerson says.

Emerson also refutes the DOJ’s allegations that Rocket simply dismissed Cheroutes’ concerns and cancelled her loan application, calling the DOJ’s story a misrepresentation of facts. Instead, Emerson explains, Rocket offered Cheroutes a Reconsideration of Value (as required by law) but that Cheroutes declined it.

“When the client said they didn’t want the reconsideration of value, our team member said, ‘I’ve got to refer you to another area of our organization to see if we can help you out. I can’t help you any longer.’ Unfortunately, [the borrower] took that as us canceling her transaction,” Emerson explains.

Emerson also denies that Rocket factored the incoming Trump administration and how it might likely affect HUD and anti-discrimination policy.

“Changes of administration have different focuses, but let’s remember that there is a bureaucracy that exists at

every agency, and when the politicals swap, the folks that have been in there for a long time are still there and they still have whatever ideology or belief that they have. Sometimes the folks that are coming in new can affect that and sometimes they can’t, so we’ll just have to see how that plays out,” Emerson tells NMP.

Mykhailyna Loses License On January 6, 2025, Maksym Mykhailyna, the appraiser in the DOJ’s lawsuit, signed a Stipulation and Final Agency Order with the Colorado Department of Regulatory Agencies (DORA) wherein he agreed to a fine, public censure, and revocation of his appraisal license.

In its press release, DORA writes that after investigating multiple complaints against Mykhailyna, it determined that he had “improperly retained the ser-

vices of unlicensed individuals located outside of the United States to complete appraisal assignments and then affixed the signatures of credentialed appraisers to the reports, often without their knowledge. This business model was not only misleading to the clients, but also to his credentialed appraisers on staff.” Mykhailyna’s appraisal license was surrendered and he was also fined a total fine of $97,500, which was entirely waived provided he does not apply for an appraisal license in Colorado. If he wishes to reapply for his appraisal license, then he must first pay the fine. DORA’s press release conveniently omitted that the fine would be waived in full provided this condition was met.

This is a developing story. Subscribe to Working RE’s free digital newsletter at WorkingRE.com/Subscribe to stay up-

to-date on the latest news and information in the appraiser profession. WRE

Postscript: Rocket Mortgage Attacks Appraisers In addition to washing their hands of appraisal-related responsibility (and liability), Rocket Mortgage has also launched several social media advertisements that reference appraisers in a derogatory way, including an advertisement which starts with: “The only thing worse than having an appraiser come to your house is preparing your home for an appraisal,” and then goes on to pitch Rocket’s Automated Valuation Model for its Home Equity Lines of Credit (HELOC) product. To view Rocket’s social ad online visit: WorkingRE.com/Rocket-Social.

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FHFA’s Massive Expansion of Appraisal Waivers: What It Really Means

by Isaac Peck, Publisher

In response to the latest news from

“Notwithstanding the problems that Zillow found itself in, they have a view that appraisals can be replaced by big data and see themselves as the curators and holders of that data,” Calabria argues.

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the Federal Housing Finance Agency (FHFA) regarding appraisal waivers, one appraiser on Facebook wrote, “Not to be melodramatic, but I don’t see how our profession survives this onslaught.”

Another commenter wrote that they were glad to be retiring in a year, while a third declared “Everybody hates us.”

On October 28, 2024, the FHFA proudly announced at the MBA Annual Convention in Colorado that it was significantly expanding the eligibility criteria for both appraisal waivers and waivers + property data collections deployed

by Fannie Mae and Freddie Mac (the Government-Sponsored Enterprises, or GSEs)—in lieu of traditional appraisals.

Prior to the announcement, appraisal waivers and waiver + property data collections could only be used by the GSEs on purchase transactions where the mortgage had a loan-to-value (LTV) ratio of 80 percent or less. However, the FHFA announced that now all purchase loans with LTVs up to 90 percent will be eligible for appraisal waivers, and purchase loans with LTVs up to 97 percent will be eligible for a waiver + property data collection.

This is a significant change in policy for the GSEs, who currently control an estimated 65 to 70 percent of the United States’ mortgage market. On its face, this sounds like a tremendous expansion of both waivers and property data collections.

Appraisers are, quite understandably, alarmed. The appraiser profession has been struggling with historically low volume and tremendous fee pressure from appraisal management companies (AMCs), so an expansion of waivers in

today’s current climate is a move that seemingly adds insult to injury.

So just what kind of impact will this change have on the appraiser profession? And what’s at risk for appraisers and other stakeholders in real estate transactions?

Here’s an inside look at what this announcement really means for appraisers and the mortgage industry as a whole.

Risks to the System Mark Calabria, former Director of the FHFA and currently a senior advisor at the Cato Institute, finds this move by current FHFA leadership irresponsible.

It’s not that he is opposed to all waivers; as FHFA Director during the COVID19 pandemic, he approved expanding them for public health reasons, a decision not everyone agreed with, but which he takes ownership of now. “I will take ownership of what we did during the pandemic. In 2020, there were significant concerns about appraisers going into homes and the expansion of waivers was meant for public health purposes. The waivers were meant to be temporary and we made sure there were mechanisms in place to study the performance of loans that were granted waivers,” Calabria says.

But things are different now. There is no public health emergency, and the guardrails that accompanied the COVID19 waivers are being abandoned, according to Calabria. He believes this is because the GSEs see the appraisal process as adversarial to home sales rather than a vital part of the process. “When I was FHFA Director, Fannie and Freddie were very upfront about their view that page 18 8

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the appraisal process was just friction to be smoothed out. They compete with each other for originator business, and they want to squeeze friction out of the process. They don’t see a lot of value to the appraisal process. Notwithstanding the problems that Zillow found itself in, they have a view that appraisals can be replaced by big data and see themselves as the curators and holders of that data,” Calabria argues.

The FHFA worked to slow that process when Calabria was Director, he says, but is now doing a 180–degree turn. “FHFA is supposed to be a safety and soundness regulator. What we’re seeing today is a real abandonment of that. Pressure on appraisals was a factor going into the 2008 real estate crash, so it’s very disappointing to see this regulator, which was specifically created to deal with these very issues, take a different direction. This is a reflection of current leadership that doesn’t see FHFA as a safety and soundness regulator, but instead sees them as a junior version of HUD, laser focused on housing access issues and obsessed with making it easier and easier to get into a mortgage. They are throwing away longstanding safeguards,” observes Calabria.

The result will be that families will get in over their heads and pay the price for these shortcuts, Calabria predicts. “With the historic decline in housing affordability, the Biden administration is looking for scapegoats and appraisers are getting kicked while they are down,” he says.

So what is to be done? Calabria says the appraisal profession needs to better argue its case to the government. He believes there is a real onus on appraisers to “be able to communicate with policymakers in Washington about the value of the appraisal. The general view is that the appraisal is just a compliance exercise and if you can get rid of it, all the better. Appraisers need to educate policymakers on why appraisals are important,” he says.

18 Working RE Winter/Spring 2025

Gaming the System Ed Pinto, Senior Fellow and Codirector of the American Enterprise Institute (AEI), agrees with Calabria that expanding the use of waivers is risky. While Pinto says it will be hard to predict exactly how many additional waivers will result from this expansion, it is easy to see how the FHFA’s move may allow players in the real estate market to game the system, which he argues will ultimately hurt the buyers, sellers, and appraisers.

“When the market finds something like this, they’ll figure out how to game it,” Pinto says, explaining that the industry learned this in the late 1990s with the development of automated underwriting. Loan officers could submit loans multiple times to Fannie Mae, putting higher income numbers in each time, until the system granted a “No Doc” status, meaning the loan was approved with no documentation required. Pinto sees the same logic at work with waiver expansion. In both the past and present cases, what drives the loosening of requirements is FHFA’s goal of increasing affordable housing, he says. “That’s what FHFA said, and it’s the same driver of the stuff that happened in the 1990s and the early 2000s. It was the same reason. The same goal that got them into trouble last time.”

Financially motivated individuals in the mortgage business, enabled by FHFA’s affordability goals, have incentives to find a loophole with these types of automated processes. “We know gaming happened in the early 2000s. Not everybody in the industry, but certainly a portion of the industry is going to be very creative. Last time, it took a long time, but by the time the gaming of the system was figured out, the GSEs were already in conservatorship. If I were at FHFA, I wouldn’t be doing this. I think it’s too risky,” Pinto says.

How It Works It may come as no great shock that Lyle Radke disagrees with Pinto’s and

Calabria’s assessments. As senior director of collateral policy at Fannie Mae, Radke says this change in policy around waivers and LTV is not as substantial as many stakeholders are making it out to be.

It’s interesting to note that based on data published by the AEI, based strictly on LTV, half of the mortgages that Fannie and Freddie issued in the last 12 months had an LTV or 80 percent or less and technically qualified for a waiver, and yet, only around 14% of all purchases actually received a waiver.

This suggests that LTV is not the driving factor behind the decision to issue waivers. In other words, it is as if Fannie and Freddie (and FHFA, by proxy) is saying that they don’t want their hands to be tied by the LTV of a given property. If there is a tract home in a cookiecutter subdivision with 4 comps right next to the subject property, and a prior appraisal on file from 18 months ago, why not issue a waiver at a 90 percent LTV? (Or so the argument goes.)

This leads to a question: If LTV is being rejected as a useful barometer of when an appraisal waiver, or a waiver + property data collection is offered, then what will the GSEs be looking at? Radke begins to answer this question by explaining that a waiver is only offered on properties where Fannie Mae has a prior appraisal, which he says demonstrates how much Fannie values appraisers and needs them for their models. “We appreciate our partnership with appraisers, and we consider them the backbone of our collateral risk management program. The obvious evidence of this is that we need a UCDP–compliant appraisal on file in order to offer a waiver,” says Radke.

The UCDP, which stands for Uniform Collateral Data Portal, is a dataset that is compiled and shared by both Fannie Mae and Freddie Mac. Launched in Sept. 2011, UCDP became mandatory for lenders to use in March 2012. page 22 8

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An estimated 70 million appraisals have passed through it. How recent does an appraisal need to be for Fannie to rely on it for waiver purposes? “I can’t disclose our secret sauce, but I can tell you that we aren’t using appraisals from 2012,” Radke says.

GSEs will also take into account things like significant weather events and natural disasters that may have taken place since the past appraisal.

Such events might mean that no waiver would be offered, or they might trigger further collection of data on the property. The goal is to ensure Fannie has a clear idea about the current condition of the property, Radke explains.

Finally, GSEs will also look at property type and value validation, as Radke describes. “We look at property quality and condition. Because we have a prior appraisal on file, we’ve seen this property before, and we have a full Uniform Appraisal Dataset (UAD) compliant appraisal to reference. We can check the property condition and if the property was in poor condition last time we saw it, we will not offer a Value Acceptance,” says Radke (“Value Acceptance” is what Fannie Mae calls its appraisal waivers).

Value validation will be the biggest reason a waiver will not be offered, according to Radke. “If a property is somewhat unique or there is a lot of complexity in the market data, that would typically result in a lower model confidence which would then require an appraisal. In terms of when we’re going to offer waivers, we’re looking for cases where data is easily validated and we feel the probability that the value is there is reasonable,” Radke explains.

In response to arguments that lenders and loan officers may be able to game the system, Radke points out that the incentive, if it does exist, would be for lenders to lower their value estimates, i.e. producing a safer loan.

“In most types of mortgage fraud that relate to value, one of the facilitators 22 22 Working RE Winter/Spring 2025

is to get an inflated appraisal. In our system, the higher you put the value, the more likely you are to fail the value validation test and not get a waiver.

We do take this seriously, we do have a robust control environment to ensure we’re making prudent decisions in how we validate the collateral. We do model performance testing and we have robust audit procedures. We also do regular post-acquisition loan and ‘value’ reviews. We’re very proud of the robust model control environment we’ve built,” Radke says.

Property Data Collection Addressing property data collections specifically, Radke says that appraisers are well positioned to do property data collections. “Some appraisers really enjoy this aspect of the work and this change allows appraisers to diversify into this. There is a lot of opportunity for appraisers to get involved in this,” says Radke.

But will that involvement come at the cost of professional standards?

When asked directly if Fannie Mae had a position on whether property data collectors should be licensed, Radke says that’s not his decision to make, or even to weigh in on. He points out that the GSEs are not allowed to lobby or attempt to influence federal or state government decision making in any way. “We are completely neutral on the question of whether or not PDCs should be licensed. We’ll leave that up to the government to decide, whether that’s state or federal. We do have guidelines for who can collect property data. Property data collectors need training and vetting. They need to be independent, i.e. a neutral party who has no relationship with the transaction. They need to pass a background check annually. And they need to use technology to collect property data,” says Radke.

In terms of passing an annual background check and being trained

specifically for property data collection and inspections, Radke points out that these requirements are higher than what most appraisers have to meet.

Few appraisers have to get annual background checks and most appraisers spend most of their training on market analysis, rather than learning to collect data on the property, Radke suggests.

Radke also believes that the new technology being developed to assist in the property data collections and to scan properties will help increase data accuracy and cut down on fraud.

“We’re excited about the capabilities of technology. We’ve seen enough cases where appraisals, which have been the backbone of the mortgage industry for decades, have mischaracterized the characteristics of properties. Sometimes it’s a simple mistake, sometimes it’s fraud.

With technology, you can take human discretion out of the process with things like data validation and geolocation, so those aspects of the tools are really interesting,” remarks Radke.

While the GSEs do not take official positions on government policy or questions like licensing, some industry insiders have been quietly suggesting that licensing of property data collectors is not necessary because the technology will soon be available for homeowners to scan their own homes, a prediction that would naturally alarm the profession. In response to that concern, Radke says that no technology or application is quite that good yet. “The practical reality of today is that the technology is not quite there yet. Today’s applications require human data input. The technology is not good enough to collect everything without human input. That’s why we need property data collectors,” says Radke.

Future of Appraisers and Appraisal Volume Strictly looking at the LTV and waiver criteria, FHFA and the GSEs have basically expanded the conditions where

they can use appraisal waivers and waivers + property data collections on all of their loans.

But according to Radke’s comments, as well as the historical way that the GSEs have used waivers over the last few years on purchase loans with LTVs of 80 percent or less, there are many other factors that the GSEs will evaluate when deciding whether to offer a waiver or waiver + property data collection.

FHFA estimates that since 2020, the appraisal waivers that the GSEs have offered have saved consumers roughly $2.5 billion dollars on appraisal fees.

When asked if Fannie Mae has an estimate for how much money he thinks this latest change will “save” consumers, Radke answered that there is no specific offer rate target. “We’re not targeting a specific offer rate. We set what we consider to be the safe parameters for these products. For those properties that fall outside that, we’ll require the lender to get an appraisal. The raw volume of waivers is going to be dependent on economic conditions. If we go into a recession, you’ll see fewer purchases.

If the economy starts expanding really fast, we’ll see more purchases [and more properties that qualify for a waiver, as a result]. That will drive it. Overall, it

will only be a fraction of all loans we get. The offer rate will be relatively low,” says Radke.

Radke addresses the climate of fear and uncertainty that is present in the appraiser profession by making two key points: (1) Appraisers remain a very important, integral part of the GSEs’ collateral risk management strategy, and (2) this latest change will have only a small impact on appraisal volume.

“Based on the announcements that have been made so far, I can understand that appraisers might be concerned. I want to emphasize that this will have only a small impact on appraisal volume. This is an incremental change. Appraisers play a vital role in housing finance, and they will continue to play an important role in the foreseeable future. There are so many things appraisers do well and there are so many loans where we are not comfortable offering a waiver. As we look to the future, it is true that the way appraisers work may be a little different. It’s already evolved and it’s going to continue to evolve,” says Radke.

In order to demonstrate the centrality of the appraiser’s role in the GSEs’ future plans, Radke points to

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the “millions and millions of dollars” he says have been spent designing the new Uniform Appraisal Dataset that is expected to be rolled out in 2026 and 2027. The new UAD will streamline the rules, guidelines, and terminology used in appraisals, eliminating the delays in current data management (so the argument goes).

The GSEs are also partners on the Appraiser Diversity Initiative, where significant investments are being made to support new entrants into the profession. “We’re very serious about supporting ADI. It’s a relatively new program that has grown a lot. We’re very proud of these results. We need people to continue to enter the appraiser profession—people who are analytically minded, able to learn good appraisal and risk management techniques, and who can raise the bar for appraisal quality. We wouldn’t be making these kinds of investment if we didn’t anticipate a large role for appraisers in the future,” Radke points out.

With appraisal waivers sure to increase on some level, and with housing markets as unpredictable as ever, time will tell how negatively FHFA’s latest waiver expansion will hurt the appraisal profession. WRE

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Winter/Spring 2025 Working RE 23

Fair Housing Laws and Their Impact on Real Estate Appraisers

by Jo Traut, McKissock Learning

Fair housing laws play a pivotal role in

ensuring equal access to housing and in preventing discrimination in real estate transactions. For you, as an appraiser, understanding and complying with these laws is essential to conducting ethical, objective, and fair appraisals. This article examines key fair housing laws and their implications for your appraisal practice.

By embracing the principles of fair housing, you not only contribute to the integrity of the real estate market but also to the broader goal of fostering inclusive communities where everyone has the opportunity to thrive.

“By understanding these laws and implementing robust and consistent compliance practices, you can conduct fair, objective valuations that uphold the principles of equal treatment while also mitigating potential liability.”

Key Fair Housing Laws The primary federal laws governing fair housing include: • The Fair Housing Act (FHA) of 1968: Prohibits discrimination in housing based on race, color, national origin, religion, sex, familial status, and disability.

• The Equal Credit Opportunity Act (ECOA) of 1974: Prohibits discrimination in lending based on race, color, religion, national origin, sex, marital status, age, receipt of public assistance income, or exercise of rights under consumer protection laws.

• The Civil Rights Act of 1866: Prohibits racial discrimination in property transactions.

Jo Traut is a certified residential appraiser with more than 27 years of experience, licensed in Illinois and Wisconsin. Jo specializes in appraising luxury homes, valuations for lending purposes, relocation appraisals, appraisal review, and appraisal compliance. Jo previously served as SVP, Residential Chief Appraiser for the fifth-largest bank in the United States.

She currently serves as Director of Appraiser Training at McKissock Learning. Jo holds a CDEI designation from IDECC and is an AQB Certified USPAP Instructor, combining her extensive professional knowledge with a commitment to appraisal education.

24 Working RE Winter/Spring 2025

In addition, many states and municipalities have their own fair housing laws that may provide broader protection.

Impact on You as an Appraiser These laws impact you in several ways: • You must not base your opinions of value on protected characteristics such as race, religion, sex, etc. This applies to both the subject property and the identification of the subject property’s competitive market area.

• You need to be aware of possible unconscious biases and take steps to ensure objective, unbiased valuations. While unconscious biases exist in all professions, you have a responsibility to acknowledge and mitigate these biases to ensure unbiased valuations.

• When describing neighborhoods, avoid references to protected characteristics of residents or subjective qualifiers such as the terms “desirable,” “family-oriented,” and “inferior.” Your appraisal reports must be free of potentially discriminatory language or stereotypes.

• The choice of comparable properties must not be influenced by discriminatory factors. You are required to ensure that your selection is based purely on objective criteria. This practice helps mitigate any conscious or unconscious bias.

Including a diverse range of comparables that reflect the market conditions and relevant characteristics of the subject property is essential.

• Use reliable, non-discriminatory data sources. This means selecting

data from reputable sources that provide comprehensive and objective market analyses. In practice, this involves choosing data tools and technology that clearly outline their selection criteria and methods, thereby avoiding any potential bias.

Compliance Strategies To ensure compliance with fair housing laws, you can: • Stay informed about fair housing laws and best practices. Regular training and education aren’t just requirements; they are also opportunities to enhance your professional skills and ensure that your appraisals align with current fair housing standards. Seek out workshops, webinars, and industry publications to keep your knowledge current.

• Develop and adhere to a robust, objective, and consistent valuation methodology and inspection process. A well-defined process helps ensure consistency across all appraisals, regardless of property location or occupant characteristics. This approach not only fosters fairness but also strengthens the credibility of your work.

•

•

•

•

Maintain detailed records in your workfile that include your decisionmaking process. Clear, comprehensive documentation serves as a valuable reference and demonstrates the objectivity of your appraisals. Include your reasoning for comparable selection, adjustments, and other key decisions in your reports.

When selecting comparable properties, cast a wide net. Consider a range of properties that truly represent the subject property and its market. Don’t necessarily limit yourself to three comparable sales.

Sometimes, including competitive older and distant sales provide additional support for your opinion of value for the subject property—this approach ensures a more defensible valuation.

Rely on objective, measurable data to support your conclusions as much as possible. While qualitative factors have their place, quantitative data provides a solid foundation and helps mitigate potential bias concerns.

Implement a robust quality control process. Use your software’s automated quality control tools, and if feasible, have a colleague or assistant

review your appraisal report before submitting it to your client.

Consequences of Violations Violations of fair housing laws can result in violators receiving serious repercussions, including: • Disciplinary actions by state licensing boards, potentially resulting in the revocation of licenses • Exposure to civil lawsuits and substantial financial penalties • Loss of certification from professional appraisal organizations • Significant damage to an appraiser’s professional reputation Conclusion Fair housing laws serve a vital role in promoting equitable access to housing and credit. By understanding these laws and implementing robust and consistent compliance practices, you can conduct fair, objective valuations that uphold the principles of equal treatment while also mitigating potential liability. As the housing and lending industry continues to grapple with issues of bias and discrimination, a thorough grounding in fair housing requirements is more important than ever for real estate appraisal professionals. WRE

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Winter 2020 Volume 52

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Fannie, Freddie: New Market Analysis Requirements February 4th

by Isaac Peck, Publisher

Fannie Mae and Freddie Mac (the GSEs)

“The GSEs have been critical of appraisers making adjustments (or not making them) in an unsupported and indefensible way— for at least the last decade.”

have not so quietly published new requirements for appraisers that will be effective February 4th, 2025. Lenders have been encouraged by the GSEs to “implement these policy changes” immediately, but face a hard deadline for the requirement implementation in early February.

So just what are these new requirements for appraisers?

According to Fannie’s Selling Guide Announcement (SEL-2024-07), appraisers will be required to: • Establish a minimum timeframe of 12 months from which the overall market trend must be derived; • Identify that the overall market trend may be different from the adjustments applied to individual comparable sales; • Report the market analysis that supports both the indicated overall market trend and market derived time adjustments for changes in market conditions.

Here are some of the details behind these new requirements.

Adjustments At the heart of the new GSE requirements is the idea that appraisers need to provide additional analysis of the market and make time adjustments (or not) based on what the market indicates Of course, the GSEs pushing appraisers to provide support for their adjustments is nothing new. The GSEs have been critical of appraisers making adjustments (or not making them) in an unsupported and indefensible way—for at least the last decade. For example, Fannie Mae 26 Working RE Winter/Spring 2025

indicated that adjustments were one of the most important things an appraiser should calculate as far back as 2015 and 2016.

Why Time Adjustments?

The GSEs specific calling out of time (i.e. market trend) adjustments, and incorporating it into their Selling Guide, raises the question: what makes time adjustments so special?

Will Fried, Chief Innovation Officer True Footage, believes that this singling out of the time adjustment suggests this is likely the single most important adjustment to the GSEs. The backdrop of this new requirement is how appraisers made time adjustments during the COVID–19 “boom” years of 2020 through 2022, Fried says.

“During the COVID–19 years when most markets were seeing over 20 percent appreciation year-over-year (YOY), appraisers were only making adjustments 20 to 25 percent of the time,” says Fried.

In a webinar with George Dell back in 2022, Scott Reuter, Chief Appraiser at Freddie Mac, explained that appraisers’ lack of market conditions adjustments creates a lack of credibility in their reports. “A couple of highlights and what we were seeing was that the amount of time that appraisers were making this adjustment, even trying to develop a market conditions or time adjustment, was maybe 20–25% of the time, and appraisers appear to be very conservative even when they were developing the adjustment,” Reuter says.

By conservative adjustments, Reuter is referring to situations where a full market analysis might lead Freddie to expect an appraiser to make a six percent time

Market appreciation overall in last 12 months is 7 percent (January through December) • Comparable 1 = 5 percent increase as of contract date yields an UPWARD adjustment of 2 percent • Comparable 2 = 8 percent increase as of contract date yields a DOWNWARD adjustment of 1 percent • Comparable 3 = 6 percent increase as of contract date yields an UPWARD adjustment of 1 percent • Comparable 4 = 7 percent increase as of contract date yields NO adjustment For more information, refer to Selling Guide section B4-1.3-09, Adjustments to Comparable Sales.

Figure 1: Fannie Mae Negative Adjustment Example adjustment, but the appraiser only applies a one percent adjustment, for example.

Non-Linear Adjustments One of the more nuanced facets of the GSE requirements is that in addition to accurately capturing how a given market has changed over the last 12 months, appraisers will also be expected to make non-linear adjustments based on how the market has changed, monthby-month, since a given comparable might’ve been sold.

“The vast majority of time, the market does not change in a linear fashion.

So just looking at strictly year-over-year

market changes means we might miss out on the full picture: seasonality, the sharper price appreciation in the spring and summer, the dip and market slowdown in the fall or around Christmas time, and so on,” suggests Fried.

In other words, the GSEs are requiring appraisers to go beyond reporting a flat 12-month trend appreciation percentage, versus what the actual change is in the last four months, for instance.

Here’s an example: Let’s say the market has been appreciating 15 percent YOY in the last 12 months, and the appraiser is using a comparable that was sold four months ago. Traditionally,

an appraiser might take that 15 percent appreciation, divide it by 12, and multiply by 4. (15% / 12 = 1.25% average appreciation per month X 4 months).

However, this example assumes linear appreciation over a 12-month period.

But markets generally do not appreciate in a linear fashion. Using the same example above, if the appraisal’s effective date is December 31st and the appraiser is using a comparable sale that closed September 1st, it’s possible that the market has actually declined in the last four months, even though the YOY appreciation for the last 12 months is 15 percent. page 28 8

Winter/Spring 2025 Working RE 27

7page 27

Figure 2: Heatmap showing neighborhood boundaries by price differences (The market might’ve increased by 20% from January 1 through August 31, then declined five percent from September 1 through December 31, for example.)

This means that appraisers will now need to accurately (A) define the market, (B) determine the 12-month trend and how pricing has been changing, and (C) isolate the specific non-linear, month-over-month change for each comparable. This will make time adjustments more complicated and potentially more time consuming, unless an appraiser has a tool it can use to isolate these numbers.

Data Driven Sometimes the data will show that the adjustment should be linear, and sometimes it’ll be non-linear, according to Fried. Sometimes the data will show that the market is stable and no adjustment is needed at all. It will all come down to the data. “Even if the market has been 28 Working RE Winter/Spring 2025

going up, the appraiser might still need to apply a negative time adjustment. Just look at the Fannie Mae graph example.

It is going to be data driven. Appraisers will need to include an explanation for why adjustments were made and why they weren’t made. So appraisers will need different adjustments for different comps—depending on when the comps closed,” reports Fried. (See Figure 1: Fannie Mae Negative Adjustment Example, page 27.)

What Are Appraisers to Do? This latest change to the GSEs’ Selling Guide is one of the most specific requirements that have been put on appraisers, especially as it relates to adjustments.

Some appraisers may try to use spreadsheet programs like Microsoft Excel to import data from their Multiple Listing Services (MLS) and then manually manipulate the data to create graphs and answer specific questions about each comparable.

Alternatively, appraisers will search to find tools that will help them answer these types of market analysis questions that will meet the GSEs’ requirements.

This is where the TrueTracts platform comes in. TrueTracts is a software platform that Fried has been developing specifically for appraisers to address the GSEs’ requirements.

There is currently a shortage of tools for appraisers to use for this purpose, according to Fried. “Many of the tools that are available to appraisers right now will only provide linear adjustment data, or will provide quarterly data, like Q1, Q2, and Q3, for example. The problem is that it is bucketing into quarters and not providing enough granularity. There’s not a way to make an adjustment from October to December,” says Fried.

The result, according to Fried, is that appraisers will now need to spend considerable time manually analyzing

“In terms of data, appraisers will face big challenges finding enough data to provide the market trend analysis the GSEs are looking for, especially in small, less active, or more rural markets.” and extracting a non-linear adjustment out of the data, or they’ll find a tool that will help them do this. “Appraisers will need software that enables them to determine where this non-linear trend is.

They’ll also need more data because you need sufficient data to figure that out. You have to have both components,” says Fried.

In terms of data, appraisers will face big challenges finding enough data to provide the market trend analysis the GSEs are looking for, especially in small, less active, or more rural markets.

Having a tool that can look outside of the subject’s current market and identify comparable markets, such as nearby towns, neighborhoods, etc. that have similar pricing, similar property features, and so on will be important, according to Fried. “Appraisers are often stuck trying to analyze a small amount of data inside narrow market boundaries because they don’t have a data driven way to justify broadening their search and including data from nearby markets,” says Fried.

Here, TrueTracts is able to identify comparable markets and neighborhoods to the subject neighborhood based on things like property features, type of construction, age of construction, pricing, and so on, so appraisers can then have enough data to properly analyze the market and report more accurate data as it relates to market trends and time adjustments.

TrueTracts also includes dynamic and easy to use heat maps that appraisers can use to easily identify and select data as they slice and dice what they want to include in their analysis (See Figure 2: Heatmap showing neighborhood boundaries by price differences, page 28).

For appraisers who are interested in learning more about TrueTracts, visit True Footage online at: https://truefootage.tech/tools/truetracts. WRE

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Winter/Spring 2025 Working RE 29

Going In-Depth on a Delicate Issue: The Invisible Fence of Racial Discrimination

by Isaac Peck, Publisher

Bias, racial discrimination, and apprais-

“Think about race as an invisible presence, embedded in the structure of our real estate environment, present in our personal biases, an unseen barrier that can influence our valuation.”

30 Working RE Winter/Spring 2025

ing—three things that no one would have used in a sentence five years ago.

Today, they’ve been discussed at length within the valuation space, across mainstream media, and even in various courtrooms throughout the United States.

Indeed, accusations of bias and discrimination have put the appraiser profession under an undeniably uncomfortable spotlight. Lightbox reports that some of the nation’s largest banks, including Wells Fargo and JPMorgan Chase, are retooling their hiring practices to increase diversity in the appraiser training pool, as well as initiating ROVs (reconsideration of value) processes to allow for challenges to appraisals when there are concerns of bias.

Meanwhile, Fannie Mae and Freddie Mac have set up a process for flagging and blocking appraisal submissions found to be using an increasingly unpredictable list of “naughty” or subjective words, and states across the nation are passing new regulations requiring training in subjects like fair housing, fair lending, implicit and explicit bias, and antidiscrimination law.

Many appraisal professionals, while appreciating the need to correct obvious individual biases and create an inclusive housing market, may also feel dread or frustration at the new set of bureaucratic hoops and hurdles to navigate. Many understandably feel that the current spin on housing discrimination unfairly targets appraisers, who report value rather than making it.

There is, perhaps, a silver lining.

The conversations around these issues

are driving the profession to look at things previously unexamined in its distant past, and plot a course for the future that opens up opportunities for professional development and dialogue, mentoring roles, and a new, energized public image for the profession. Even the push towards the use of more objective words may turn out to improve the professionalism of the appraisal practice.

In terms of professional development around these issues, Byron Miller, who is Black, and Craig Harrington, who is white, are the authors of a relatively new course called “Valuation Bias: The Invisible Fence of Racial Discrimination.” The course covers the history, structures, and effects of discrimination in valuation. Miller is a boots-onthe-ground Minnesota-based appraiser and the chair of the North Star Chapter of the Appraisal Institute’s State Government Relation Committee. In this role Miller, has helped pass over half-adozen laws protecting appraisers in Minnesota. Harrington, also from Minnesota, received the Appraisal Institute’s Lifetime Achievement Award in 2018.

Miller and Harrington believe they bring a unique and balanced perspective to the topic of valuation bias, and they plan to adapt their current 5-hour course to meet the Appraiser Qualifications Board (AQB) requirement for a mandatory 7-hour course which becomes effective on January 1, 2026.

Working RE sat down with Miller and Harrington to find out how they approached this sensitive issue for real estate appraisers, and what sets their course apart on this important subject.

Working RE: What do you think makes your course different than other classes on valuation bias and fair housing?

Miller: Our treatment of the issue is what makes our course different. We go into the history: the historical context of how we got here today. Some other courses tend to focus on the “naughty words.” That is, Fannie and Freddie’s “do not use” words. These courses are focused on telling the appraiser how to “stay out of trouble” with state regulators.

Our course is more about providing information. I like to think of this as meeting people where they’re at. I’ve talked to hundreds of appraisers on this topic. Typical discussion goes like: I’m not biased, I’m not racist.

My response is: I’m not saying you are, but we all have biases—let’s look at how they come up. We’re trying to be as balanced as we can be, we’re not going to promote pseudo-science, we’re very careful about that. We’re providing information and history and letting people draw their own conclusions.

Harrington: There were fair housing courses prior to this. Racial discrimination just hasn’t come to the forefront of the appraisal process until recently.

Of course, the issue has been here all along. Cases have been out there, whether HUD prosecuted them or not.

But it’s much more visible at this time.

Our course is focused on valuation bias rather than fair housing in general, so we’re looking at how bias may influence or undermine the appraisal process itself.

Think about the title of the course, “Valuation Bias: The Invisible Fence of Racial Discrimination.” Think about race as an invisible presence, embedded in the structure of our real estate environment, present in our personal biases, an unseen barrier that can influence our valuation. Racial bias goes

beyond cultural differences, and we need a course like this to recognize it for what it is. In the course we look at the construct of how racial bias has been embedded into our system over a number of centuries, and how it came to the forefront in the 1940s and 1950s with segregation policies, and later redlining in lending practices.

Fair housing laws have been around for over 50 years. They aren’t new concepts to appraisers, but understanding the history of structural racism is a revelation for appraisers taking the course.

Working RE: How can learning about bias make appraisers better at appraising?

Miller: We talk about three components of valuation bias: explicit, implicit, and structural. I like to think of it like you’re making a cake with bad ingredients, and those bad ingredients get baked into the system. It is so ingrained that we don’t realize what’s there. We get a lot of feedback from people when we go back to 1866 and the 14th amendment to the Constitution [establishing an equal protection clause].

The media has done a bad job of explaining the historical context of the appraisal controversy. The media mixes unconscious bias with structural. If they were really explaining it coherently, they would say appraisers are reporting price differences in neighborhoods that reflect 130 years of deed restrictions, building covenants, and redlining, but they think that’s boring, so they just say appraisers are being racists.

Appraisers understandably are defensive and feel like they’re getting beat up. Is there bias? Yes. Did the appraisal profession consciously create it? Are appraisers inherently racist? No. But appraisers reflect in their valuations the existing structural bias that is still present in real estate markets. So, we want to build awareness on that.

I was having a discussion with some appraisers, and one of them, after listening to me lay out the historical groundwork of the course, said “Byron, that was 130 years ago. What does that have to do with me today? In my opinion that has nothing to do with me and what I do as an appraiser today.” That was a real eye-opener for me of what we’re dealing with when we’re talking to a lot of appraisers. They don’t necessarily see the importance of that history which they think has nothing to do with them.

But it has everything to do with us today. It created a structure that we’re dealing with today. It caused price differentials in the social and economic structure of our society. To ignore that is dangerous.

We really want to emphasize that we are not blaming appraisers. We aren’t calling appraisers racists. We are saying that historically, the appraisal profession was one of many stakeholders responsible for the structural component of racial valuation bias that we’re still dealing with to this day.

That’s important to bring home.

Harrington: Appraisers did not create that structure, but they participated in the structure. Some people say the valuation process itself is biased in its very construct. That’s not true, but in the course we look at how an appraiser can insert bias into the valuation process. And we look at solutions. Our course is unique in that we’re discussing solutions in how we can deal with these issues.

This course was written prior to the latest edition of USPAP, before the inclusion of the Nondiscrimination section of the ETHICS RULE in USPAP, and we’re still holding our ground pretty well. We’re hopeful that the Appraisal Institute will update our current 5-hour course to meet the AQB requirements for a 7-hour version in 2026. page 32 8

Winter/Spring 2025 Working RE 31

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Working RE: What has been the response of students who have been taking the course?

Harrington: I think it’s been phenomenal. We give participants a number of opportunities for feedback within the course and it’s been amazing. We ask what stood out the most in this or that section. People are not just writing one short sentence, they are writing multiple paragraphs, saying their eyes were opened, they had no idea how deeply embedded discrimination has been in the structure of government and banking. It’s been a real eye-opener for a lot of students and they’ve written some wonderful responses.

Most of the people who first started taking this course were associated with banks or were reviewers for lenders.

And it’s been mostly through wordof-mouth advertising that appraisers are becoming aware of the course.

Byron and I have been blown away at the attendance numbers. People take the course and then tell others about it. For a 5-hour course, it’s pretty comprehensive.

Working RE: Is the course helpful to commercial appraisers?

Harrington: We’ve seen a lot of commercial appraisers benefit from the course. When we designed it, we worked hard to bring in commercial appraisers and make the material relevant to them. We have a number of commercial examples. Commercial appraisers appraise in areas that are racially mixed, that have different ethnic and cultural aspects. We’re aware of commercial appraisers who have thoughtlessly inserted demographics that were race related in their reports.

In such instances, you have to ask why it was there, what purpose it served, and the appraiser needs to understand how it opens up the door to problems for the client and others.

32 Working RE Winter/Spring 2025

“It’s about trying to understand how detrimental racial bias is in valuations from a nonwhite perspective.”

Miller: Some commercial appraisers believe this issue doesn’t apply to them.

But it absolutely does.

Working RE: Given the outcome of the election, do you think the racial valuation bias issue will go away?

Miller: No, I do not. Trump has said from day one that he will throw out the HUD cases. Still, you have the National Fair Housing Alliance Coalition, a strong and well-funded group with no intention of slowing down or giving up on this. The White House might not be the focus, but the ASC (the Appraisal Subcommittee, a subcommittee of the Federal Financial Institutions Examination Council of the U.S. Congress) is funding advocacy groups targeting the appraisal industry.

Working RE: How can appraisers impact that narrative?

Harrington: Although we focus on racial discrimination, the concepts that we present in this course are applicable to all sorts of discrimination. As far as the impact on the narrative, the most important thing is building awareness and showing people the steps they can take to mitigate bias in their valuation work, while also standing up strong for the valuation process.

Miller: Craig said mitigate. Other courses might say avoid or eliminate. That’s an important distinction, because bias is inherent in being human, we never get rid of it 100%, so what changes our behavior is being aware of it. Other courses are really focused more on how to stay out of trouble. We believe in

providing a holistic approach and getting people to think about this stuff, identify where this could creep in, change their behavior, conveying that to the public, and discussing it with the homeowner. We’re having frank discussions.

A young white woman took one of my courses, and later she was appraising a home in North Minneapolis. The homeowners were a Black couple, and she sensed some tension while she was appraising the house. So she talked to them about the history of bias, talked about how she took my 2-hour intro Valuation Bias course and it opened her eyes on how she approaches this issue.

She said their response was: “We were really apprehensive because we had this young white woman coming to our house. We feel so much better that you explained your process and told us the steps you were taking to think about this.”

We’re bringing this course from a person of color perspective. Other courses out there are not. We really wanted to bring in the diverse viewpoints that might be lacking in other appraisal courses.

Harrington: Interesting you say that.

Most of the courses are written and being taught by old white guys. In our course, I’m the token white guy, everybody else on the development team is a person of color. I think that’s more than just optics. It’s about trying to understand how detrimental racial bias is in valuations from a nonwhite perspective.

One of my grandchildren is Black, but that doesn’t qualify me for understanding what a black person goes through when faced with discrimination. Byron and I have been best friends for 10-15 years, but that doesn’t mean I understand what he’s been through.

Working RE: What steps/initiatives do you believe AI is taking to address the bias issue?”

Miller: I would respond to that by saying that in my opinion we are acknowledging that harm has occurred; but we will defend our members in the profession when they are not at fault.

To be impactful on this issue, it is important to collaborate with other organizations like the ASC, The Foundation (TAF), HUD, Fannie, Freddie, and the Appraiser Diversity Initiative (ADI). There are also scholarships for minority folks to get into the profession, which we haven’t talked about much. We are doing quite a bit of work to bring people into the profession. I might emphasize, we’re trying to bring all people into the profession as well, not just people of color.

We want to be sure we are training the next generation of appraisers to be qualified and informed.

PAREA (Practical Application of Real Estate Appraising), an appraiser experience alternative is one of the touchstones of what AI is doing, and not just offering it, but also giving scholarships for PAREA as well. Currently, AI offers the only PAREA program on the market, and thus far it has shown a lot of success. My understanding is that there are several thousand people on the waitlist to get into the program.

Harrington: AI is doing many things, participating in many projects, and is getting out in front of many things to address racial bias and other types of roadblocks and hindrances, and to encourage more people of color to get into our profession.

We have scholarships for people who are taking our trainee courses.

I was just talking to someone taking it today who was going over a case study. It’s really gratifying to see people come in. PAREA helps with that by removing the need to have a supervisor and being hired by somebody.

This is important in areas where you can easily have people of color who might have trouble finding a supervisor. It opens an additional door for them to get started.

Conclusion Appraisers interested in checking out the course, Valuation Bias: The Invisible Fence of Racial Discrimination, can learn more here: https://www.appraisal institute.org/education/search/valuation-bias-invisible-fence-of-racial-discrimination. WRE

Expanding Horizons in Appraisal Education: A Groundbreaking Partnership Fayetteville State University (FSU), in collaboration with the National Society of Real Estate Appraisers (NSREA) and the National Association of Real Estate Brokers (NAREB), is taking appraisal education to unprecedented heights.

A Partnership for Excellence—This historic alliance allows FSU students to access an enriched curriculum, professional mentorship, and a robust network of industry leaders.

Unparalleled Resources and Opportunities—Students now have access to additional educational resources, professional development workshops, and networking opportunities with trailblazers in real estate.

Broader Horizons in Appraisal Disciplines—NSREA’s partnerships with other professional trade organizations specializing in personal property and business valuation further expand the professional exposure available to FSU students.

A Historically Black College and University (HBCU) Leading the Charge As a premier HBCU, FSU prepares the next generation of appraisers who reflect the diversity and professionalism of today’s real estate landscape.

Visit www.nsrea.org to learn more and become a member!

Winter/Spring 2025 Working RE 33

Appraiser Growth and Profitability: Key Things to Focus On

by Isaac Peck, Publisher

The last few years have been extremely

“You have to understand the fundamentals to really excel in the field, and I am not talking about the fundamentals of appraising, I am talking about the fundamentals of running a business.”

difficult for the majority of appraisers.

Historically low transaction volume has translated into an unprecedented slowdown that has led some appraisers into retirement and others to take on a second job.

Appraisers who have been around for a few market cycles know that the ebb and flow of a market is normal, but that’s little consolation to the pain in the marketplace right now.

For those appraisers who have survived the slowdown thus far and are looking ahead—to 2025 and beyond— and are earnestly asking how they can maintain, diversify and even grow their businesses, Working RE sat down with Dustin Harris, The Appraiser Coach, to discuss exactly that.

Harris has been appraising real estate for almost 30 years. A popular author, speaker, and consultant, in addition to his success as an independent appraiser, Harris owns and operates The Appraiser Coach (www.TheAppraiserCoach.com), where he serves as a mentor to other appraisers, helping them run successful appraisal companies and increase their net worth. His blog is read by over 20,000 appraisers nationwide and his free podcast, The Appraiser Coach Podcast has over 1,000 episodes and can be downloaded on iTunes and Stitcher Radio.

In a world where appraisers often wear many hats, or all hats in their business— strategy, accounting, sales, marketing, financials, customer service, and of course, appraising—it’s easy to lose sight of the forest for the trees in terms of what really matters for the success of your business.

With that in mind, Working RE asked Harris to distill some of the key areas and items that appraisers can focus on to get results in their businesses.

Vision For starters, establishing priorities and key areas of focus is important in and of itself. “Most appraisers don’t think about these types of things,” Harris says.

“Most appraisers do things exactly like their mentor taught them. Honestly, just getting by. ‘Maintaining’ is probably the best word I would use. Businesses don’t work that way. Successful businesses don’t work that way.”

Harris believes that the number one priority for appraisers should be to act as the “Chief Visionary Officer” (CVO) of their business. This involves setting a clear vision for what the business should look like in the next few years. “You have to set the stage for what your business is going to look like in three years, five years, 10 years,” he explains. Even if ten years seems like too far ahead, he says to at least look to the near future. “I like the two- to three-year concept; it’s far enough out that it gives you time to make big changes, but it’s not so far out that you can’t really visualize it,” suggests Harris.

Harris recommends appraisers sit down at least once a year to rethink the vision-story process. “Get away from work, get away from play, away from your phone. Visualize in as much detail as you can what you want your business to look like in the next 12 months,” Harris advises. page 36 8

34 Working RE Winter/Spring 2025

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Understanding Financials Another critical area of focus is understanding financials. This is not something every business owner especially likes to do or is especially good at.

And although accounting can be outsourced, Harris thinks the person with the vision should also know at least the basics about the numbers.

Harris emphasizes the importance of knowing balance sheets and profit and loss (P&L) statements. “If you don’t know how to do a P&L, there are plenty of YouTube videos out there,” he says. “To run a successful business, you have to understand at least the fundamentals of accounting. Yes, it’s boring, but you need to understand where your starting point is and what your profit/loss looks like.”

Harris himself went to school for teaching but now feels that studying marketing and accounting would have been beneficial for his business. He suggests setting up a system that allows for regular financial reviews. “For me, it’s quarterly. It would be better if it were monthly, but I know if I did it monthly it wouldn’t actually happen.

I’ve been doing it quarterly for years and years. I can get a good snapshot of where my business is.”

Mastering the Fundamentals Understanding the fundamentals is essential for success in any field.

Harris has an interesting story from his youth when, playing basketball, his coach made the team practice the basics repeatedly. “We played very little basketball at practice. Instead, the coach had us practice dribbling for 20-30 minutes, free throws for 30 minutes, passing to teammates. Boring, same old stuff over and over again,” he recalled. “You have to understand the fundamentals to really excel in the field, and I am not talking about the fundamentals of appraising, I am talking about the fundamentals of running a business.”

36 Working RE Winter/Spring 2025

For appraisers, this means mastering the basics of their business before attempting to expand or innovate.

“We often go immediately from ‘I’m an appraiser’ to ‘I’m a business owner.’ Those are two very different things. We need to understand the fundamentals of the business,” Harris explained. Systems and procedures are crucial for consistency and success. Harris draws a parallel to McDonald’s, noting how the fast-food chain ensures the same taste worldwide through standardized systems. He also suggests writing stuff down as you do it, in order to update and expand the instructions on how to do the job. “If you do it more than twice a week, it needs to be in your procedure manual.

Written out. Things won’t slip through the cracks,” Harris advises.

Acknowledging that there are plenty of solo appraisers in the field, Harris suggests that even solopreneurs should create systems as if they were going to hire someone else. “You’re the CVO, CFO, CEO, CMO, Appraiser, Technician, inspector/data collection, put that together in such a way where you’ve got titles and job descriptions even though you’re the one doing all of them,” Harris explains. “Outlining all of that helps categorize the different functions and potentially bring people in.”

Human Resources, Networking and Outreach Building a successful business requires surrounding yourself with people who share your vision. “You can’t do it alone,” Harris emphasizes. He points out that the appraisal industry is relationshipbased, and networking is essential for growth. “If you’re going to be successful, you’ve got to be focused on the network,” Harris says.

Harris advises starting with existing relationships and building from there. “Every appraiser can name a real estate agent you’ve had a good interaction with. Start with that individual, build that relationship. Find out if you

can speak in front of those Realtors.

Take them out to coffee, lunch, or dinner,” Harris suggests.

Education is also a powerful tool for building relationships and establishing oneself as an expert. Harris advises appraisers to show up in every available space—not to beg for business, but to educate and invite. He encourages appraisers to share their knowledge through presentations, blogs, social media posts, and videos at every available opportunity. “One of my biggest hit presentations is one I call: ‘What to Do When the Appraisal Comes in Low.’ Realtors ask that question all the time,” Harris shares.

Harris acknowledges that many appraisers are hesitant to speak or present at first. “They’ll say, ‘I’m not a speaker, I’m not an educator, that’s not me.’ But neither is anybody else until they practice it,” he says. He encourages appraisers to develop this talent, noting that there are various ways to educate others.

Networking and Masterminding This brings us to networking and masterminding. Networking and masterminding with other appraisers can bring significant value to solo appraisers. The former term is pretty familiar—reach out to other pros, keep in touch, be part of the conversation, stay aware of who is doing what.

“Most appraisers live in the appraiser cave,” Harris says. “We head down with our work and focus on building our businesses, and we forget to look up. We go do the inspection, start working on the report, try to get it out the door, working late, ignoring our family and everyone around us. Living in our own little world.”

Which brings us to masterminding.

Harris believes that being involved with other appraisers can open one’s mind to new ideas and methods. “Some people would be opposed to that. I don’t want to share my business secrets with this

individual. But expose yourself to new ideas and new ways of doing things,” Harris advises.

For over a decade, Harris has been facilitating mastermind groups for appraisers. “Appraisers come together from all over the country, physically in the same space. We come together quarterly. They all have the same goal in mind, that’s success. It’ll look different for every single appraiser, but they all have that vision of what they want their business to be,” Harris explains.

“Get input, advice, and questions answered. All from other people who have been there done that.”

Networking is an ongoing process.

Harris emphasizes the importance of maintaining regular contact with real estate agents, attorneys, and other professionals. “Networking is about being known and being known as the expert,” Harris says. “It’s not a one-time effort but a continuous process of reaching out, offering help, and staying visible.”

Masterminding, is a key to success, according to Harris. “At the very

least, have a coach (and that doesn’t have to be me—there are many good ones out there). Bounce ideas off of them and grow. They have a different vision.

Try to see the world differently than you do. Gather success stories, ideas, thoughts, answers, connect with other individuals that will help you to grow and expand and be better,” Harris says.

Willing to Change and Grow In the spirit of growth, taking chances, and extending one’s reach, Harris currently has a new workshop advertised on his website, a two-session class devoted to private appraisals, such as private sales, estate settlements, divorce proceedings, or tax appeals rather than mortgage lending, called, “Get Started & Succeed in Private Appraisal Work”.

Harris’s website contains both free and membership-exclusive resources, along with several video testimonials from appraisers thanking Harris for helping them grow.

Harris fervently believes that just because something has always been

done a certain way doesn’t mean it’s the best way or that there isn’t a better approach. “Everyone desires to be better, to have a more successful business. Start to question what you’re currently doing, what the status quo has been. Be willing to change and to grow and to do things differently.

Change is necessary,” he concludes.

There are always unknowns in the appraisal profession, as there are in the housing market as a whole. For Dustin Harris, controlling what you can control, and stacking the deck in your favor by consistent outreach and growth, is the key to success in an often-unpredictable field. By focusing on areas such as strategic planning, financial literacy, systematic operations, relationship building, and continuous outreach, appraisers can invite good results and professional growth. Harris hopes his insights provide a set of guidelines for long-term growth, and implementation of people’s visions, in the appraisal profession. WRE

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Winter/Spring 2025 Working RE 37

Appraiser Diversity Initiative: Training the Next Generation

by Isaac Peck, Publisher

It’s no secret that the appraiser profes-

“Allowing candidates to virtually appraise properties as part of their training increases access for both the candidates and the supervisors evaluating them.”

sion is presently facing two key challenges. First, the profession is not particularly diverse. And second, there is not currently a steady influx of new appraiser trainees to keep the ranks of appraisers full and healthy. The data backs this up.

The Bureau of Labor Statistics reported in 2021 that roughly 96 percent of all appraisers were white. Additionally, the average age of an appraiser is currently in the mid-50s and trending upwards.

While some longtime appraisers are rankled by any discussion of race or diversity in the profession, the lack of diversity in the appraiser space is undeniably a public relations problem. But perhaps more importantly, and more controversially, it represents a challenge to a profession working to stay relevant and valued across communities throughout the United States, amidst an always dynamic and complex housing market.

For the last six years, influential organizations in the appraisal space have been collaborating through a new venture called the Appraiser Diversity Initiative (ADI). The ADI is focused on two things that many stakeholders who care about the health and continuity of the appraiser profession support: (1) helping train and support new entrants into the appraiser profession, and (2) ensuring that a diverse group of people are given the opportunity to join the ranks of the profession.

To better understand ADI, its mission, and what it has accomplished so far, Working RE recently sat down for a conversation with Sharon Malane at the Appraisal Institute.

What is the ADI? In 2018, the National Urban League

(NUL), Fannie Mae, and Freddie Mac, teamed up with the Appraisal Institute (AI) to launch ADI, dedicated to attracting new entrants to the appraisal field while also fostering diversity.

For her part, Malane manages AI’s involvement with ADI, as well as leading the organization’s Diversity, Equity and Inclusion initiatives, its Practical Applications of Real Estate Appraisal (PAREA) alternative training program, veterans’ affairs and university relations. Malane has been in her role at AI for about a year, but she brings twenty-plus years in the nonprofit sector managing big portfolios and projects, like a $350 million real estate portfolio for adult rehab centers.

Malane explains that the goal of ADI is not only to help support entrants to the profession but also to open the door for people from diverse backgrounds to explore the appraiser profession as a career. The lack of diversity in the appraisal profession is a reality that everyone is aware of, and Malane sees the efforts of ADI as a way to address it constructively—to equitably transfer appraisers’ skills and qualities to the next generation. “With older folks now retiring from the profession and winding down their practices,” Malane says, “that opens the doors for the younger generation to be a part of something.

Even though the housing market isn’t great right now, we all know things can change at the drop of a hat. We need to create ways to support entrepreneurship and educate the next generation.”

Malane recently felt that energy while attending an event at Lincoln University, an HBCU in the small town of Oxford, Pennsylvania. “We are one of the few programs in existence that page 40 8

38 Working RE Winter/Spring 2025

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can offer scholarships” for the courses, and Fannie Mae, The National Urban League, and Freddie Mac’s involvement has boosted the news of ADI opportunities. “It’s very exciting to have those platforms, contribute, and assist others in spreading the word about the appraisal profession.”

To that end, Malane talks about the “pillars” of the Diversity Initiative, including scholarships, workshops, advisors, and sponsors. The scholarships are particularly important because they address a key factor in access to appraiser training: resources. The Initiative has awarded over 800 such scholarships.

Increasing access is not just about numerical “diversity.” It’s also about recognizing and opening up new “generations and communities of appraisers,” as AI described its goals in its leadership with the Initiative. This means recruiting and training up appraisers who can identify with the neighborhoods hurt by the lack of diversity in the profession now.

So far, the program seems to be producing results. “There are currently 165 graduates of the ADI Scholars program, 77 of whom are already working in the appraisal profession. We currently have 249 ADI Scholars taking courses with the Appraisal Institute under the Appraiser Diversity Initiative guidelines,” Malane says. “It’s a start.”

ADI currently has 97 scholars searching for supervisor sponsors, with the top five states being Illinois, Texas, Georgia, Ohio, and Florida. Malane says any appraiser who is open to taking on a trainee can email the Appraisal Institute at ADI_Team@appraisalinstitute.org.

HBCU Partnerships In September 2023, AI launched a pilot partnership with 12 colleges and universities, including several Historically Black Colleges and Universities (HBCUs), providing curriculum and resources for students wanting to be trained as appraisers. The program not only teaches materials; it also introduces students to professional appraisers all 40 Working RE Winter/Spring 2025

over the United States in an effort to educate the students about local markets, share the wisdom of experience, and give students a glimpse of their own future if they pursue this career path.

Recruitment efforts often begin on campus. Like many people, students may not know a lot about the profession. “If you look at an appraiser, you may not know what that means, or what they do,” Malane says. “Especially with the younger generation, as they look at the appraiser profession, they often don’t know what that means or what an appraiser does. So, we encounter a lot of curiosity about it. People want to learn more about the profession and learn what it takes to be successful, so they come up and ask these questions.”

PAREA So far, AI is the only organization to develop and introduce PAREA coursework and it has led the way in this alternative path towards appraiser licensure.

While separate from its efforts with ADI, AI’s PAREA program is also a cornerstone of its DEI and long-term industry sustainability efforts.

In 2023, the Appraiser Qualifications Board approved the first full-time PAREA participants in states which had embraced PAREA instead of the traditional supervisor/trainee model of completion. AI has committed more than $2 million to its development of PAREA and is also the recipient of a $500,000 Pathway to Success Grant from the Appraisal Foundation’s Board of Trustees.

PAREA is seen by many as an important step towards general recruitment efforts for the profession and cultivating diversity in the profession primarily because PAREA helps overcome the tough challenge of finding a supervisory appraiser. The traditional model requires aspiring appraisers to find supervisors, something that’s much more difficult for minorities, rural folks, and other groups without ready access to the appraisal establishment. Allowing candidates to virtually appraise properties

as part of their training increases access for both the candidates and the supervisors evaluating them. Currently, 42 states partially or fully accept PAREAbased completion of training.

Program for Veterans These steps, and the results beginning to emerge from them, would be encouraging on their own. Still, Malane hopes to increase opportunities for a group that ought to be a natural source of candidates for the appraisal profession: U.S. military veterans.

Workforce participation for veterans continues to lag behind that of non-veterans, and advocates for veteran employment often point out the need for resources in networking and education.

While there are programs in place to increase veterans’ opportunities for small business startups, “the appraisal profession has not tapped into the veteran market,” Malane says. “At AI, we can inform veterans with resources and assistance and let them know about training and education.” This means participating in career fairs, showing up at events sponsored by the American Legion, Veterans of Foreign Wars and Disabled American Veterans (DAV) chapters, and in veterans’ resource centers at colleges and universities.

“Helping a veteran transition out of the military into the workforce can be very rewarding and worthwhile. We can provide those resources and create a supportive environment for those open conversations.” Malane says this is an organizational goal for ADI in 2025.

As the industry grows more aware of the importance of diversity to its long-term continuity and growth, Malane’s role may grow and evolve, but the core values will remain consistent.

“Helping other people,” Malane says.

“That’s the way I was raised. I believe in helping other people and helping others succeed. I wasn’t afraid to ask for help. It was always available when I needed it. I want to be able to pay it forward, do the same for somebody else.” WRE