Overview of Appraisal Profession
Economics 354X
Larry D. Trede
Professor Emeritus, ISU and
Secretary-Treasurer, Iowa Chapter, ASFMRA
January, 2011
Overview of Appraisal Profession
• Background & History of Appraisal
• History of Rural Appraisal (Iowa State Involvement)
• American Society of Farm Managers and Rural Appraisers
• Uniform Standards of Professional Practice (USPAP)
• Professional Rural Appraisal Qualifications & Licensing
Background & History of Appraisal
• Appraisal profession -- 18th century “thrift institutions” in
England
• 1831 U.S. “building & loan” institutions; rudimentary forms of
appraisals
• Savings & Loan Crisis in 1980s and 1990s
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Rapid growth in residential house in 1950s & 1960s
Deregulation & wider array of “savings products”
“Risky” loans based upon inflated property values
Higher interest rates to slow inflation;
Property values declined; S&Ls failed
Background & History of Appraisal
• Financial Institutions Reform, Recovery, and Enforcement Act
(FIRREA) of 1989
– Established independent agency to oversee 12 Federal Home Loan
Banks
– Established new appraisal standards
• Appraisal Subcommittee (ASC) established to provide oversight & input to The
Appraisal Foundation
• Appraisal Foundation develops Uniform Standards of Professional Appraisal Practice
(USPAP)
– USPAP; minimum standards for all state-certified appraisers
• All appraisers must conform to these standards
• Standards are reviewed periodically (2 years)
History of Rural Appraisal (Iowa State Involvement)
• Depression of 1930s; “windshield” appraisals
• ISU Professor; W.G. Murray
– Refine appraisal methodology
– Started a farm appraisal class
• 1929, ASFMRA founded; discipline of farm management
• 1931, ASFMRA recognized need for farm appraisal
– 1933, “intelligent land appraisal” conference
– 1936, ASFMRA established its ARA program;
• Dr. Murray, chaired committee reviewed 16 candidates
History of Rural Appraisal (Iowa State Involvement)
• 1940s
– Appraisal closely tied to Farm Credit System
– Relied heavily on “income” approach to value
– Encouraging farmers to maintain economic size unit
• 1950s – 1980s
– Continuous rise in farmland values
– Farm appraisal methods shifted more to “market” approach
• Refinement in comparable sales
• More critical analysis of “comparables”
History of Rural Appraisal (Iowa State Involvement)
• 1980s
– “Farm Crisis” with declining land values
– Development of USPAP
– More balanced approach to rural property appraisal
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Stressed 3 approaches to value
More refined methods
Development of “computerized” appraisal programs
More emphasis on “reconciliation” of three approaches
• Today
– Rely heavily upon three approaches to value
– Continuous emphasis on conforming to USPAP
American Society of Farm Managers & Rural Appraisers
ASFMRA & Iowa Chapter
• ASFMRA Objectives
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Professional development & education
Improve ethics, standards, and quality of services
Promote profession of farm mgt & rural appraisal
Provide accreditation program
• Membership
– 2,010 members (33 state chapters)
– 45% accredited, 40% associate, 3% affiliate, 3% academic, 9% others
American Society of Farm Managers & Rural Appraisers
ASFMRA & Iowa Chapter
• Iowa Chapter, ASFMRA
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Objectives parallel objectives of ASFMRA
182 members
59 AFMs, 14 ARAs, 14 Dual (AFM/ARA)
60 State Certified General Appraisers
Work responsibilities
• Farm Management -- 101 members
• Rural Appraisal -- 74 members
• Consulting -- 36 members
(Many members are involved in one or more of these)
Uniform Standards of Professional Practice
(USPAP)
• Assures “quality control” standards -- all appraisers
• Administered by The Appraisal Foundation
– Appraisal Standards Board (ASB)
– Appraisal Qualifications Board (AQB)
• Prescribes standards but not appraisal methods
• USPAP contains 10 Standards
– Covers development of appraisals
– Covers valuation methods used
– Covers specific practices, writing, and reporting
Professional Rural Appraiser
Qualifications & Licensing
• State Certified General Appraiser (Iowa)
– Approved by Iowa Real Estate Appraiser Examining Board
– Required to do appraisals for federal lending agencies and others
• Requirements – State Certified General Appraiser (Iowa)
– Minimum of Bachelors Degree (any field of study)
– 300 hours of Qualifying Education (conform to AQB criteria)
– 3,000 hours of work experience in no less than 30 months (1500 hours
in non-residential appraisal work)
• Maintain a documented log
• Work with supervisor
• May be required to interview to defend work experience
Professional Rural Appraiser
Qualifications & Licensing
• Apply for Certified General Real Property Exam
• Pass the Certified General Real Property Appraiser Exam
• Complete Work Product Review (WPR) process
– Submit work log
– 3 appraisals (randomly selected) reviewed by Board
– Appraisals may be reviewed by outside consultant
• Submit Application
Accredited Rural Appraiser (ARA)
American Society of Farm Mgrs. & Rural Appraisers
(ASFMRA)
• ARA Requirements (ASFMRA)
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4-year college degree or equivalent
Complete and pass ASFMRA required courses
5 years of real estate appraisal experience
Submit one demonstration report
Submit six (6) actual appraisal for committee review
Complete and pass ARA accrediting exam
Information Sources
• “Savings & Loan Crisis,” Wikipedia, the Free Encyclopedia,
www.wikipedia.org/wiki/savings_and_loan crisis
• “Financial Institutions, Reform, Recovery, and Enforcement Act of
1980,” Wikipedia, the Free Encyclopedia,
www.wikipedia.org/wiki/Financial_Institutions_Reform,_Recovery,_
and_Enforcement_Act_of_1989
• “Land Management and Valuation, 1929-2004,” ASFMRA, Denver,
Colorado, www.asfmra.org
• Iowa Real Estate Appraisal Examining Board,
www.state.ia.us/government/com/prof/appraiser/home
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Overview of Appraisal Profession Larry Trede