What’s on the Mind of Bank Appraisal Examiners!
In this issue:
- Stronger Appraisal Standards: Bank examiners stress the need for well-supported, high-quality appraisals that meet regulatory expectations.
- Increased Scrutiny for Reviewers: Review appraisers are expected to challenge key assumptions and ensure stronger due diligence.
- Focus on Expenses: Rising insurance costs and other expenses are under heightened review in appraisal reports.
Insights
Bank Examiners Highlight Key Appraisal Issues for 2025
Recent industry meetings between bank chief appraisers and bank examiner policy specialists have brought to light several key issues that appraisers should be aware of in 2025. These discussions reflect the evolving expectations and regulatory scrutiny surrounding appraisals, particularly in the banking sector. Below are the primary points of emphasis that emerged from these meetings.
Appraisal Quality Remains a Top Concern
Bank examiners continue to stress the importance of appraisal quality, underscoring the need for well-supported valuations that withstand regulatory and client scrutiny. Ensuring compliance with professional standards, proper market analysis, and credible adjustments remain critical in maintaining confidence in appraisal reports.The Ongoing Concern Over Engaged Appraisers Not Signing Reports
A recurring complaint in these discussions—brought up annually—is the issue of appraisers engaged for assignments not signing their reports. This raises concerns about accountability, potential outsourcing issues, and the integrity of appraisal reports. Examiners urge banks and appraisal firms to reinforce best practices and ensure that the responsible appraiser is clearly identified in every report.Data Center Appraisal Issues Persist
Data center valuations continue to pose challenges, with bank examiners revisiting concerns from previous years. These properties have unique valuation factors, including high infrastructure costs, evolving technology, and variable market demand. Appraisers working in this niche should stay updated on emerging valuation methodologies and market trends to address examiner expectations.Ongoing Scrutiny of Participation Deals
Participation deals remain an area of focus, as they were last year. The complexity of these deals can introduce valuation challenges and potential risk exposure for financial institutions. Examiners urge appraisers to ensure transparency, provide thorough documentation, and carefully analyze risk factors when handling such assignments.Increased Expectation for Reviewers to Challenge Assumptions
Another significant takeaway is that examiners expect review appraisers to question and push back on key assumptions made in appraisal reports. This aligns with a broader push for stronger due diligence and critical analysis. Appraisers should be prepared for increased scrutiny of their market assumptions, income projections, and comparable selection.Heightened Focus on Expenses, Particularly Insurance Costs
Bank examiners also emphasized the need for greater attention to expenses in appraisal reports, particularly related to insurance. Rising insurance costs have become a growing concern, impacting property valuations and financial risk assessments. Appraisers should ensure that expense projections, including insurance, reflect current market conditions and provide adequate justification.
What This Means for Appraisers
With these continued and emerging concerns, appraisers should take proactive steps to ensure their reports meet heightened expectations. Strengthening report quality, addressing recurring industry concerns, and preparing for increased review scrutiny will help appraisers navigate the evolving regulatory landscape in 2025.
The Appraisal Institute remains committed to supporting its members in adapting to these challenges through education, resources, and advocacy. Stay informed and continue refining your practice to uphold the highest standards of professional appraisal work.
Advocate for the Profession at Legislative Day
As regulatory scrutiny increases, it is more important than ever for appraisers to have a voice in shaping policy. The Appraisal Institute’s first-ever Legislative Day in May offers a unique opportunity for members to engage directly with lawmakers and advocate for issues that impact the profession. Issues to be advanced during the conference include passage of the Portal for Appraiser Licensing (PAL) Act, appraisal management company fee disclosure and creation of an IRS appraisal review panel for noncash charitable contribution appraisals. Attendees will meet with members of Congress to discuss key legislative priorities, including appraisal quality standards, regulatory oversight, and fair compensation. Make your voice heard and help shape the future of the industry—register today!
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Avoiding “Bad” Words: Choosing the right phrasing in narrative sections of your appraisal report
March 20, 2025
12-1pm EST
Appraisers use fact to develop opinions of value, and it is unfortunate, and potentially costly, when an appraiser’s choice of words in narrative sections of an appraisal report are misleading or misconstrued to the point that doubt is cast on the validity of the appraiser’s facts. However, appraisers can take a proactive approach in phrasing their reports to affirm the impartiality of their basis for value determinations and reduce related ROV requests.
Ready to equip you with the tools to write stronger narrative passages in your reports, our panelists will discuss:
- The impact of subjective language
- Wording changes to reduce pushback and increase clarity
- Handling subjective property characteristics
- Connecting descriptions and supporting data
Advocacy Updates
AI Pushes Back Against IRS Proposal That Threatens Appraisers
The Appraisal Institute is taking a strong stand against a proposed rule change that could have serious consequences for appraisers working on estate, gift, and charitable contribution valuations. On March 6, Megan Glosser, MAI, testified before the IRS on behalf of the Appraisal Institute in opposition to changes to Circular 230 that would make it easier for the agency to disqualify appraisers without due process.
Under the proposed rule, the IRS could disqualify appraisers from participating in IRS proceedings without first assessing a penalty or providing an opportunity for independent review. The Appraisal Institute believes this unprecedented expansion of power would undermine professional integrity and discourage qualified appraisers from accepting IRS-related assignments.
“This rule presents a severe threat to the appraisal profession, weakens due process protections, and grants the IRS unchecked power to penalize and disqualify appraisers without appropriate oversight,” Glosser testified.
The Appraisal Institute warned that the proposal could reduce the number of professionals willing to engage in IRS-related work, increase costs and delays for taxpayers, and erode public trust. Given the inherent subjectivity of appraisal work, the risk of arbitrary disqualification could discourage appraisers from taking on assignments requiring professional judgment.
As an alternative, the Appraisal Institute proposed an Appraisal Review Panel, modeled after Canada’s Ecological Gifts Program, to provide fair and independent evaluation of disputed valuations. “This system would save time, reduce disputes, and restore fairness to the appraisal process,” Glosser stated.
To learn more and read AI’s full comment letter to the IRS, click here.
Appraisal Organizations Urge Agencies to Review GSEs’ Waiver Programs
Every ten years, federal bank regulatory agencies must review outdated or unnecessary regulations under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA). The last EGRPRA review led to an increase in the appraisal de minimis threshold to $400,000 for residential appraisals and $500,000 for commercial appraisals. This change was largely driven by concerns from rural community banks about an alleged shortage of appraisers.
The latest EGRPRA review concluded on Monday, and the Appraisal Institute—along with the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and MBREA—submitted a joint letter (link pending) urging the agencies to examine whether the Value Acceptance and ACE programs of Fannie Mae and Freddie Mac align with the intent of Congress when it enacted the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). The letter emphasizes that, while FIRREA permits bank regulators to set a dollar threshold below which appraisals are not required, it does not authorize the broad exemption of entire categories of loans from appraisal requirements. The organizations also highlighted the potential implications of the Supreme Court’s recent decision to end Chevron Deference, which could reshape how federal agencies interpret statutes like FIRREA.
In addition, the appraisal organizations called on regulators to level the playing field for appraisers in cases where an appraisal is not required but an evaluation is needed. Specifically, they urged the agencies to allow appraisers greater flexibility under the Scope of Work Rule in USPAP or to grant an exemption from USPAP when appraisers perform evaluation services.
Lastly, the organizations encouraged regulators to emphasize the importance of obtaining high-quality appraisals and prioritizing appraisers with professional designations that exceed minimum licensing standards.
The EGRPRA review process will continue through 2025, with a series of outreach events planned to gather industry feedback. The Appraisal Institute will remain actively engaged in monitoring the process and advocating against any further weakening of consumer protections related to appraisals. Appraisers and stakeholders are encouraged to stay informed and participate in upcoming discussions.
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Our Community
Memoriam Page Honors Late Members
The Appraisal Institute has established a dedicated In Memoriam page to recognize the passing of members as reported to the organization in the previous month. This initiative serves as a tribute to the contributions and lasting impact of AI members within the valuation profession.
The In Memoriam page will be updated regularly and will provide a space for the AI community to reflect on and remember colleagues who have left a lasting mark on the profession.
We encourage members to visit the page and honor the legacies of those who helped shape the appraisal industry.
Until next week,
Team Appraisal Institute
