Appraisers unionize to rattle AVMs
December 3, 2002
AFL-CIO-sponsored union wants to save appraisers from extinction
Inman News Features
William Sentner thinks too much technology has invaded the appraisal industry. He's determined to put a stop to it and he's using his position as president of the national appraisers labor union to take aim at lenders' use of automated valuation models that he blames for cutting into appraisers' incomes.
Sentner, 64, wants to reposition appraisers and secure their future in the real estate transaction. To further that mission, he turned four years ago to the American Federation of Labor-Congress of Industrial Organizations—the national labor union better known by its AFL-CIO initials. The union helped Sentner, a Cherry Hill, N.J., appraiser, establish the American Guild of Appraisers, which is Guild 44 of the Office and Professional Employees International Union within the AFL-CIO.
The appraiser union wants to influence legislation that will protect the interests of appraisers, provide work for appraisers, educate AFL-CIO membership about appraisers and offer benefits to appraiser members and their families.
The existence of a union in real estate is unusual. But Sentner said the AFL-CIO has the muscle to knock down what he perceives as lenders' control of the appraisal process. He thinks the union, which has 13 million members, also has a voice loud enough to be heard on Capitol Hill. But he won't disclose how many appraisers have joined the union.
The most contentious issue is automated valuation models known as AVMs.
Sentner thinks the union can help enforce regulation of AVMs and help appraisers establish greater independence from lending institutions that he accuses of manipulating appraisers into producing false reports.
"There's nobody else to defend the appraiser and if the appraiser isn't defended he's going to go the way of Dodo bird because he's going to be compromised 100 percent," Sentner said.
Sentner said federal law requires that an appraiser certify the value of real estate purchased with a federally related loan of $250,000 or more. That threshold potentially eliminates an appraiser from 90 percent of residential real estate transactions now that the national median existing-home price is hovering around $161,000, according to Sentner. He wants the amount eliminated or at least lowered so more appraisals would be required.
Sentner said lenders have adopted AVMs to fatten their own wallets at the expense of the overall integrity of valuation databases. He claims 81 percent of AVM valuations are off by 5 percent, and he believes that fudge factor can skew entire databases over time as more inaccurate figures are entered and relied upon to formulate home values.
"Automated valuations (should) be scrutinized by a licensed certified appraiser who is familiar with the neighborhood," said Sentner. He added that if the appraiser knows the neighborhood is "spotty" or "not too good," he can authorize a physical inspection of the home and arrive at a more reliable figure.
The appraisers union also wants to fight perceived pressure from lenders to produce home valuations that meet the loan requirement.
"Appraisers are subject to largely unchecked and unrelenting pressure to perform appraisals dishonestly," Sentner wrote in a letter to the U.S. Department of Housing and Urban Development criticizing its proposed changes to the Real Estate Settlement Procedures Act.
He said in the letter that appraisers who resist the pressure to fabricate or fudge home valuations often do so to the detriment of their appraisal practice—risking little or no future business from the lender and earning a reputation as an appraiser who "won't play ball."
The appraisers union wants to engage the AFL-CIO in efforts to educate consumers about the value of an appraisal. The group is organizing a speakers bureau to make presentations at union meetings about the role of an appraiser in a home sale or purchase.
The appraisers union also claims to have rattled a few cages and scored a few victories on other matters.
Sentner touts having had a hand in California Gov. Gray Davis' veto of SB 1866, which would have moved the state's Office of Real Estate Appraisers from the Business, Transportation and Housing Agency, where it exists as a stand-alone function, into an office within the Department of Corporations.
Proponents said the legislation would save the state money and was needed due to the declining number of licensed appraisers. But Sentner said it would have placed the appraisal board into a "second-class citizenship" within a commission that also oversees lenders.
The appraisers' union also claims to have had a hand in the passage of the Sarbanes-Oxley Act and now is supporting legislation that Sentner said would hold lenders accountable for "pressuring" appraisers to produce valuations required to close deals.
"We have been busy taking on causes we feel are winnable and that directly affect the pocketbooks of appraisers throughout the country and that make their life a little bit easier," he said.
Copyright: Inman News Service