Overview of Appraisal Profession

1. Overview of Appraisal Profession Economics 354X Larry D. Trede Professor Emeritus, ISU and Secretary-Treasurer, Iowa Chapter, ASFMRA January, 2011

2. 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

3. 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 • 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

4. 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)

5. 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

6. 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”

7. History of Rural Appraisal (Iowa State Involvement) • 1980s • “Farm Crisis” with declining land values • Development of USPAP • More balanced approach to rural property appraisal • 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

8. American Society of Farm Managers & Rural AppraisersASFMRA & Iowa Chapter • ASFMRA Objectives • 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

9. American Society of Farm Managers & Rural AppraisersASFMRA & Iowa Chapter • Iowa Chapter, ASFMRA • 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)

10. 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

11. Professional Rural AppraiserQualifications & 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

12. Professional Rural AppraiserQualifications & 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

13. Accredited Rural Appraiser (ARA)American Society of Farm Mgrs. & Rural Appraisers (ASFMRA) • ARA Requirements (ASFMRA) • 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

14. 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