Housing and Community Development

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#1 LEGISLATIVE ISSUE FOR 2012
APPRAISAL REFORM

Appraisal Reform must be a front and center issue. Not only were appraisals grossly abused during the boom, but it was these false values that made everyone believe their houses were worth far more than the Wrath of the Free Market that harshly disagreed as the Foreclosures swept America. We watched values spike to amounts we shouldn't see for 30 years according to real estate data, but we all thought we could trade property like a stock and double our money overnight. Not only do we need to eliminate the opportunity for fraud, but we must eliminate the mathematical flaws that reward the weak and punish success, ultimately leaving us with a race to the bottom that is evidenced by the current state of housing today. Housing makes more money than commercial and has led the Building Industry trends for several decades. If we fix housing, the rest of the industry will follow and value is at the center of what's broken. 

It is next to impossible to get Architectural houses built because of the way they are unfairly compared as "equals" to the mass produced cookie cutter housing. An Appraiser simply averages the sales results in an area to determine the "value" of a given house. This is where the project begins. If the builder or homeowner can't get the project to appraise at more than the value it costs to build, then the project dies. This has been one of the main impediments to getting green homes built due to their higher up front costs. I have a nine year sales history in my neighborhood in which all of my houses out sell the massed produced competition of the same size, configuration, and location every single time. Never once have my houses come close to appraising for the cost they would eventually sell for because when you're the top seller, you get averaged with the rest of your less successful competition and thus your value is brought down to the average, while your Community of Competitors has their value brought up to the average. That's sort of anti-capitalist and some may even call it socialist. The anti-profit motive! It pays more to provide a crappy product that doesn't sell as well and the builders want it to stay this way so they don't have to pay for design. Design itself has been deemed to have absolutely ZERO value in the industry and that's why we are perceived in this way. What good are we if all we do is provide a design with ZERO value? Very few homes are built by companies in business for a single project. Most houses are built and designed by companies with business models and rather consistent sales results. All commodities are valued based on their sales at market and the companies begin to develop inherit value for their brand based on how their products resonate with the consumers, yet we don't recognize companies for their hard work in housing. We mindlessly average everyone out and give them all the same value for building a similar sized house in the same location.

Separating the Lot value from the Structure value would eliminate the need to compare houses built by a vast variety of design/ builder that just happen to be in the same area. The Tax Assessor values the Lots in each area. Once you separate the cost of the Location from the Structure, then we can value the Building itself based on the designer and builder's sales histories. If their products resonate with the consumers, then the consumers will pay BMW prices for their products. If the consumers don't respond well to a product, then those houses will not appraise for the same price as the more successful competition. The market should punish those providing bad products rather than reward them as the system does now. 

There seems to be very few of us that recognize this issue as important and that is very sad. The builders don't want this to change and we don't seem to care that our one talent that we have to offer is only considered valuable to every other industry other than Building. If we designed smart phones, cars, running shoes, or purses we'd be considered great people in this society and we'd be making lots of money. Our names would be well known. Since all we can do is design a lousy building...well, we've allowed many think a kid could do that with free shareware. Why pay an Architect to design something we spend 90% of our time inside? Air Jordans and Coach purses are far more important to this society. Maybe a little more Climate Change will change their minds? Perhaps the apprehension is due to the fact that this issue is too big for us to take on as a challenge? Maybe so few of us design houses that we just don't understand how this can be important to Architecture when Architecture seems to be mostly about the commercial sector? Housing made 200% more money than Commercial at the top of the boom and we missed out on the majority of that money because we allow builders to get away with showing an utter disdain for design by mass producing houses unchallenged. I know I'm not the only Architect that can prove that my houses sell for more than the amateurs and the mass producers. A consumer based society cannot argue with market results, so maybe we need to prove it! No entity that I know of cares which builder or designer is selling the most expensive house or comp. The Real Estate resources are only concerned about the "area". We need to change that. 

We need to prove design is valuable.


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Eric Rawlings AIA
Owner
Rawlings Design, Inc.
Decatur GA
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Amen, Eric.

Appraisers need to be trained, licensed and required to keep current through continuing education. They need to be professionally liable for their appraisals and be required to consider both life cycle and quality of life in reaching their appraisals. Each house should be judged on its merits, not those of neighboring houses. 

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Thad Broom AIA
Architect
Thad A. Broom AIA, P.C.
Virginia Beach VA
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Agree.

Bad or poor appraisals was the central core issue of the S & L crisis and failures in the 1980s.  It was done again in the past decade to help create the housing crisis that we still live in.  We don't seem to learn from our mistakes.  Our elected officials that make the laws which we live and practice by need to be held acountable.  Knee jerk reactions are not the correct way to solve problems.

Maybe we need to start all over.  We do need to encourage good people and citizens to run for office and let them know that they will be held accountable and that they not make politics a profession.

Good luck to all of you.  2012 is a good time to start anew.

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Lewis Faulkner AIA
Richardson TX
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Original Message:
Sent: 02-03-2012 15:15
From: Thad Broom
Subject: Legislative Issues 2012

Amen, Eric.

Appraisers need to be trained, licensed and required to keep current through continuing education. They need to be professionally liable for their appraisals and be required to consider both life cycle and quality of life in reaching their appraisals. Each house should be judged on its merits, not those of neighboring houses. 

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Thad Broom AIA
Architect
Thad A. Broom AIA, P.C.
Virginia Beach VA
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