Qualified and Competent in an Appraisal Assignment– Do they mean the same?

This is Diana with ABC-The Appraiser’s Business Companion.  This morning I attended through “live-streaming”, the meeting of the Appraisal Standards Board where the Second Exposure Draft was discussed.  Prior to their comments on the Second Exposure and their decisions after considering the comments, Mr. John Brenan spoke on behalf of the AQB bringing a status report of their activities.  One of the issues he reported was the increase of people getting into the profession.  The challenge with entry level appraisers is with their supervisors who are limited in their teaching based on what they know and have experienced.  He discussed the future and where education for appraisers was heading.  He raised the issue, what do appraisers and the public understand about being qualified versus being competent?

Many residential appraisers who live and work in rural markets have often been perplexed as to why they aren’t allowed to appraise small agricultural parcels or small livestock farms.  Who better to know the market than those who live there and are skilled at appraisal?  In some states that type of appraisal assignment could be performed by the local residential appraiser, in other states, such as Texas, that would not be allowed.  It has nothing to do with whether or not the appraiser possesses geographic competency and they certainly are comfortable in analyzing the property type, many of them grew up on similar agricultural parcels.  The analytical methodologies are somewhat straightforward in many of the residential appraisers reasoning.  They believe its what the acre can sell for and why.  If you know the market and the production capability of the land, its ability or ratio of land per animal unit and you know how to analyze the market and its prices paid for comparative units, what more could the public ask for?  These reasonings are sound and have merit because they speak to an individual’s competency.  Why then is the residential certified rural appraiser prevented from appraising small rural farms?  The answer is, they are not qualified.  What does it mean to be qualified?

The question can begin with a more specific question.  What does it mean to be statutorily qualified?  To be statutorily qualified is to possess, by legal statute, the legal right to do something.  That legal allowance comes with a legal accountability.  I knew a man, one who had absolutely no appraisal experience, who studied the books appraisers are asked to study and without stepping onto the first property, past an entry level exam for appraisers.  I knew of a woman, whom I tutored, who was a licensed real estate agent, who wanted to take the general certification exam to become general certified but had not one day of appraisal experience.  I explained how passing the exam wouldn’t be sufficient.  She studied hard, she took the test, passed the exam, lied about her hours of pre-license education, produced a fake log and with the help of a few political friends, managed to obtain her general certification and then tried to actually get on the board.  Both of these individuals were statutorily qualified but they lacked competence.

Having knowledge and skill is important, so is experience.  There is a famous quote, “Failure is the condiment that gives success its flavor.” ― Truman Capote.    Experience is necessary because it affords you application of your knowledge.  I love to cook, I bake dinner rolls and cinnamon rolls and outdo most bakeries when I do so.  Many of my family members ask me to give them the recipe.  I always share it and they always come back with, “mine didn’t taste like yours”.  The reason is there is no constant temperature, no constant humidity in residential properties.  Baking bread requires knowing how the dough is supposed to feel before you stop kneading and let it rise, the first and the second time.  The time to prepare can and will vary by at least 30 minutes.  Competency is more than knowledge of a recipe or having the tools to enhance the bread making process.  Its understanding that variables can affect the outcome.  So, it is with the practice of appraising.

The AQB is looking at developing simulation models so that knowledgeable appraisers, much like doctors or lawyers, can go through a simulation process to obtain experience from what is proven and has been tested to provide the myriad of experiences appraisers need in order to know what they need to know.  As I write this article, they are working on two simulation models, 1) How to Measure Accurately and 2) How to select sales that are comparable from various resources including when sources are limited.  When I heard about that future thinking I considered how many of us seasoned appraisers would also like to take those simulation courses.   I think even the competent and statutorily qualified could benefit from the collective experience.  Imagine, all having the same information, all being taught with consistency and having the ability, through simulation, to practice what they learned.

Being competent is not the same as being qualified.  We need both and we need to know when we don’t possess all that we need to possess.  That’s called ethics.

This is Diana Jacob and you’ve just had a tip from ABC-The Appraiser’s Business Companion.