After reviewing the 60-day Notice materials and President Taylor’s clarification letter of September 23, 2004, it is evident that the proposed change to the SRA designation requirements are a profound and ill-advised mistake. The 60-day Notice materials do not include a rationale for the changes; however the Taylor letter states that they are intended to have and promote a designation that is relevant in the marketplace, and better meets the needs of clients and appraisers who seek the highest level of professionalism. The proposed changes will not accomplish these objectives; and will only serve to lower the standard of quality associated with this designation.

The relevance of the SRA designation to the marketplace cannot be assessed by analyzing the desires and needs of the greatest common denominator of potential clients. By far, the majority of orders for residential appraisals are generated by the lending industry and mortgage brokers. With a few exceptions, this industry does not value and will not pay more for a higher degree of qualification beyond what is required by law. This portion of the marketplace is primarily motivated by cost and turnaround, and is usually comprised of clients who do not have a material interest in the quality of the appraisal service. Consequently, this segment of clientele has never displayed a true preference for designated appraisers, and there is no reason to expect one in the future. This was especially evident during the latest boom in residential financing where experienced and designated appraisers competed directly (and often unsuccessfully) with new and under-qualified but licensed appraisers, many of whom were trainees. This trend led to a well-documented increase in incompetent appraisals and complaints, but has not altered the process used by the lending industry in the hiring of residential appraisers. What evidence is there to suggest that changing the requirements or increasing the number of SRA designees will have any impact on the priorities of this market or their methods of selecting appraisers?

The SRA designation is valuable to that segment of the market that truly needs an accurate, reliable, and ethical appraisal. This is usually in cases where the appraisal service will directly affect the client and have a significant impact on the resolution of their problem; such as taxes, divorce, estate planning, litigation, condemnation, etc. This is the market that requires the abilities and qualifications of the designated appraiser and the higher degree of professionalism that is gained through the SRA designation process. This is the market that will recognize and pay for expertise that is beyond the average, typical or common. This is the market where the SRA requirements as they exist now are very relevant. And this is the market to which the SRA should be promoted with greater enthusiasm. The expectations of these clients have not changed as a result of licensing, and there is no logical explanation as to how the proposed changes will better suit their needs. If a generalization can be made about the marketplace for residential appraisal services, it can be said that there are those who care about quality and professionalism, and those who do not. The proposed changes are not necessary or beneficial to those who care, and the changes will have no impact on those who do not.

It has been suggested that the motivation behind the changes is to lessen the difficulty in obtaining the designation, and thereby, attract a greater number of new SRA members. The proposed changes will do little to achieve this goal. It has been my experience during a 19-year association with the Appraisal Institute that the main reason colleagues resign their membership or do not pursue an SRA designation is because the fees for membership are deemed too expensive in relation to the perceived return in value of the designation. The proposed changes will not affect the monetary cost of acquiring and maintaining membership; and therefore, do not address the primary reason for the declining enrollment of SRA Associates and Members.

Many colleagues tend to equate the worth of the SRA designation and the cost of membership dues with a comparable gain in business income. This is a misconception; especially when competing for financing appraisal assignments. The monetary and professional gain is accomplished by becoming more marketable and valuable to that portion of the market that has complex appraisal needs and require greater problem solving capabilities beyond the "deminimus" and industry average. It provides the designee with the stature to compete for a more diverse clientele who recognize the value of superior expertise and will pay accordingly. This is where the designee reaps the benefit of undertaking and completing the process. As in any professional endeavor, upward progression in this industry requires work. The SRA designation is intended to recognize persons who aspire to this higher level of professionalism and are willing to prove their competency. It is not to be bestowed on those who are complacent and satisfied with mediocrity or are motivated by a presumed automatic increase in fees. Under the proposed changes, the SRA designation will award Institute membership and recognition to persons who achieve only slightly better than the required minimum. There can be no question that this diminishes the significance of the designation.

The elimination of the demonstration appraisal as a requirement is also a substantial error. The 60-day Notice document indicates that the teaching points of the demo are intended to be covered in the required courses and examinations. This will in effect devalue the quality of the designation process. The demonstration appraisal is the only requirement where an Associate must acquire and prove an understanding and ability to use advanced appraisal concepts and techniques in a real-life situation. It serves as an important "test" that requires the Associate to appraise an actual subject property, using actual market data, and explain the components and conclusions of an appraisal in an actual narrative report. The proposed equivalent of class education and examination cannot replace the value of this project. Courses and examinations rely on valuation scenarios and data that are premeditated, calculated, and are provided to students in uniform course materials. They do not require the Associate to extend their efforts beyond the classroom. Consequently, Associates can gain credit for knowing advanced theories and methods without ever having met the challenge of using them correctly under real-life circumstances. It does not matter whether the typical SRA designee will ever conduct or write such an appraisal report again. There is no doubt that they will certainly use and benefit from the knowledge gained from the experience in their daily practice. To eliminate it as a requirement is to remove a very beneficial educational element of the designation process and devalue the quality of the designation itself.

The value of the Appraisal Institute to the marketplace is created by a publicly held trust and perception that its members possess the highest level of ability and professionalism of any other organization in the appraisal industry. The only way to maintain this public trust is to preserve these high standards. The proposed change to the SRA designation requirements will not improve the stature of the designation or its relevancy to the market, nor will it increase revenue from membership dues. It will only serve to diminish the quality of the designation and the widely held regard that the Appraisal Institute is the leading professional organization in the residential real estate appraisal industry. Lowering the standards for the SRA designation is a considerable step backwards with no apparent benefit. It is a mistake that warrants a diligent and vigorous effort by the membership to overturn its adoption and reinstate the previous requirements.

Anthony C. Mills, MAI, SRA

September 30, 2004