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Continuing Education & Licensing

Real Estate “Get Rich” Euphoria May Be Distasteful, But Not The Root Of All Evil

December 11, 2006 | 10:57 am | |

The billboards and announcements proclaiming that you can get rich in real estate, while distasteful to many (self-included – wondering how people that attend these seminars can be so gullible, but it does make them feel good, I suppose), haven’t created much of a cynical backlash, probably based on the values of most Americans, according to a recent Gallup Poll Most Americans Do Not Have a Strong Desire to Be Rich [link expires tomorrow]. In other words, over half of Americans seek more money as a personal goal but does not think badly about people already with wealth.

Of course, this is only a poll, and I wonder if the results wouldn’t have been reversed about two years ago, when real estate was a different animal.

Look at the game show phenomenon [WSJ].

Recently we had “Who Wants to Be a Millionaire” and now there are others:

Next Tuesday, Walt Disney Co.’s ABC unveils “Show Me the Money,” a splashy series hosted by William Shatner. Contestants win money by answering trivia questions and then choosing among 13 female dancers, who carry scrolls containing secret dollar amounts.

It joins the popular game shows “Deal or No Deal” and “1 vs. 100” on General Electric Co.’s NBC. Meanwhile, News Corp.’s Fox has “The Rich List” and CBS is working to remake “Name That Tune,” a program that first aired in 1953.

Get rich seminars seem to be more about energy and optimism than specific investment techniques. Here’s a seminar recap shared by someone who attended one held here in New York this year. (note: I accurately guessed what was said before they shared the substance of the event) :

  • You have to love what you do
  • Be passionate about your efforts
  • Look for hidden value, think differently
  • Surround yourself with smart people
  • Work hard and never give up
  • Work smart and take calculated risks

Of course, there were also some specifics, primarily dealing with tax implications.

I might have missed a few choice ideas but you get the idea. Of course there are always exceptions and those who succeed are who get included in the advertising campaign. I’d be wary of anyone who teaches get rich in real estate seminars for a living. If they were so successful as real estate investors, then why are they teaching you instead of doing deals? Carlton Sheets on the late night infommercials comes to mind. Here’s a great summary of all the supposed real estate gurus.

Trump is the exception. He made his fortune in real estate and keeps working at it and has greatly expanded his efforts, seemingly everywhere in the US these days. He provides the celebrity factor to the Learning Annex efforts and gets paid a fortune for very little time committment. Its a smart investment on his part.

I sort of view these seminars like playing the lottery. The demographics of people that play the lottery on a regular basis are least likely to afford playing it.

Ok, back to the poll…

recent Gallup Panel survey asked a nationally representative sample of American adults for their attitudes about money and wealth. The poll finds that most Americans apparently do not have a strong desire to be rich, although half say making more money is a personal goal. The public tends to think that those who make a lot of money deserve it, but not to think that those who are poor deserve their lot in life. A majority also believes that anyone can get rich. Men, especially younger men, tend to desire to be rich more than women do.

Some other results…

The public does not begrudge rich people — a majority of Americans, 54%, say that those who make a lot of money deserve it. They also believe that almost anyone can get rich if they put their mind to it, by a 53% to 46% margin. At the same time, Americans strongly reject the notion that those who are poor merit their situation — only 14% agree and 85% disagree that “people who are poor deserve it.”

Some other points:

  • 42% of lower-income respondents (residing in households in which the annual income is less than $35,000) say they would be happier if they were rich, the same percentage as respondents in higher-income households ($75,000 or more per year). Thirty-three percent of middle-income respondents (incomes between $35,000 and $75,000) say they would be happier if they were rich.

  • Just 34% of people in upper-income households agree that money is the root of all evil, compared with 48% of those in middle-income households and 52% of those in lower-income households.

  • 23% percent of lower-income respondents say that poor people deserve to be poor, a much higher percentage than found among middle- (12%) or upper-income (5%) respondents.

Of course, with all my cycnism about get rich seminars, I didn’t make a fortune in real estate either.


Home Prices: To Tell The Truth, The Whole Truth And Nothing But the Truth (Sort Of)

December 7, 2006 | 8:15 am | |


I got the idea for this post after trading emails with David Leonhardt of the New York Times the other day as he worked in his interesting Economix column: The Hidden Truth About Home Prices [NYT] and the companion article More on Housing Prices [NYT]

Its very difficult for most consumers, government officials, academia and real estate professionals to get a real world gauge on how a real estate market is actually doing. Tried and true methods all seem to have some sort of flaw and when a market is in transtion, the changes become even more pronounced. And then throw in the source of the information, with the presence of spin, makes the effort even more daunting. Those covering the market, whether it be Big Media and the blogosphere tend to gravitate towards whatever is released that day.

There are two schools of thought on housing stats:

  • Price indexes– These are generally based on repeat sales of the same property over time or an aggregate analysis of housing prices, with some adjusted for seasonal changes and/or inflation.
  • Housing prices – These results are based on an aggregate summary of the sales that transferred during the period and can be skewed by the mix.

You’ve got producers of indexes telling you that prices are less meaningful, yet users of the indexes often view them as a “black box” and don’t grasp how the information was calculated (do we hear “seasonally adjusted?”) Indexes tend to be created for macro markets because the data set needs to be large. Cycnicism has been a detriment to reliance on indexes.

Those that rely on housing prices tout that they are the real thing yet most resources for housing prices tend to be non-economist types, trade groups and real estate firms, because they tend to be easier to generate and report than an index. There are a growing number of market studies put out in the public domain by local real estate brokers and agents (and of course, appraisers) to try to bridge the gap between the national stats and local markets. However these reports are often limited by the size of the data, limited understanding of what the data really means and are clouded by their intentions.

There are generally four sources of housing stat interpretation:

  • Government – namely Commerce/Census/OFHEO
  • Economists – Chicago Mercantile Exchange (Shiller) and other “Starconomists” like Roubini, Zandi (Moody’s) and others.
  • Real estate brokerage trade groups and firms – The National Association of Realtors (NAR) is the primary source of information on national housing and local brokerage firms. Regional MLS systems and brokerage firms are the other primary provider.
  • Online services like, RealtyTrac, ZipRealty release housing stats but generally don’t provide historical trends to include for perspective.
  • Real estate appraisers, consultants and analysts I would fall into this category as well as other housing stats from other markets presented on Matrix. We tend to relay on actual housing prices and interpret them without the trade group or incentivized spin, but its not without its faults either. The data is generally influenced by mix of housing stock that sells so its important that this group bridges the gap between the results and actual conditions.

Local, National and Internet:

  • National housing stats are reported religiously by nearly all national media outlets yet don’t have a link to local markets. What happens in a neighborhood may or may not comparable to national markets and if the results are consistent, its really coincidence. NAR has touted national housing stats as an argument for real estate as a good investment but it doesn’t reflect local volatility.
  • Local housing markets tend to have smaller data sets and are more affected by the mix of what sells. They can have a powerful affect on local moods but are often written by marketing departments as public relations pieces for trade groups and firms with a vested interest in the results and how it affects the bottom line.
  • Internet is an important delivery mechanism for real estate stats, but are often less thought out than traditional sources because many producers of this information don’t have direct real estate experience, but rather have online experience from other industries. This isn’t necessarily a bad thing, because bad habits and bias may not be developed but often, inappropriate uses of month over month stats exagerate certain market conditions.

Pitfalls and/or spins betrays most sources:

  • New home sales – Government stat quality is suspect and not necessarily unbiased. You just have to take a look at the widely quoted housing stats like New Home Sales from the US Commerce Department [pdf]. You just have to read an excerpt from the October release to see what I mean: This is 3.2 percent (±11.2%)* below the revised September rate of 1,037,000, and is 25.4 percent (±10.0%) below the October 2005 estimate of 1,346,000.
  • Median sales price (National Association of Realtors) – There is an emphasis on the national numbers in their series of reports on new and existing home sales. They do break up the country into quadrants, but all real estate is local. They have such an opportunity to gain the public trust but usually provide hard spin to the results and are very inconsistent in the commentary from month to month.
  • Sales price index (OFHEO) – The median sales price includes refinance data and excludes sales with non-conforming loans (mortgages greater than $400,000).
  • Housing price index (Chicago Mercantile Exchange) – Robert Shiller’s repeat sale index lags the market by about 4 months and is targeted towards investors, not consumers. Trading volume is growing but is still too small to really provide a sense of market direction.

Since all politics real estate is local, but reporting of larger data sets is easier but less relevant, its very difficult for the consumer of real estate market information to know what, in fact, the truth is.

At the end of the day, real estate truth is open to interpretation.

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Real Estate Connect NYC 2007: Braving Gotham

November 20, 2006 | 12:01 am | |

Inman News will be entering New York City this January for their next Connect event. The west coast version has long proved to be a must-attend function for real estate professionals and the east coast versions is proving to be as important. I attended last year’s NYC conference and got a lot out of it, especially networking with others. As a panel member I learned that Brad will keep the show rolling, despite any snafus or delays. (Brad: I now know where you do your dry cleaning.)

Useless observation: If the conference is held at the Marriott/Times Square, why does the photo banner look like its taken from Trump International Hotel on a low floor (too far north to be in Time Warner/Columbus Circle)?

But I digress.

This year I am moderating a panel which as an appraiser and valuation consultant, covers a topic that is near and dear to my heart:

VALUATION: New Tools to Set Buyer and Seller Expectations

The panelists are being confirmed now. So far we have:

  • Marty Frame, CIO, Fidelity National Real Estate Solutions
  • Jeff Somers, Director of Partner Services,

Valuation is a real sensitive topic right now because of changing market conditions. Feel free to forward questions or suggestions to me for the panelists, or names of panelists you’d like to see.

I am also really looking forward to meeting individuals whom I have admired their work from a distance plus reconnecting with friends and colleagues…hmmm.. “connecting” now I get it, Real Estate “Connect.”

I find that conferences like these are what make the lightbulb go off in my head. A lot of ideas are thrashed around. Its better than coffee.


[Sounding Bored] Lessons From Cuomo: Don’t Dust Off (Or Add) Regulations, Build A Wall

August 11, 2006 | 1:03 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week go apolitical (briefly) about the lack of understanding over what appraisers are supposed to do.

Well, not literally.

I heard Andrew Cuomo speak many years ago at an Appraisal Institute chapter meeting in New York 10-15 years ago where he was discussing his innovative HELP Homes project, a nonprofit development company, Housing Enterprise for the Less Privileged where he built subsidized housing and had met with great success. His father was governor and Andrew had an impressive presence. I thought to myself, this guy is going places – he’s sharp. This was confirmed when he was appointed Assistant, then Secretary at HUD.

But it would seem to be all downhill after that. Here’s the perspective of conservatives which is not too flattering.

While he was in office, he created the Appraiser Watch Initiative which tied mortgage defaults to appraisers, as if appraisers were responsible for whether a borrower makes their mortgage payment or not. While I understand what he was trying to accomplish, (getting rid of appraisers in collusion with property owners and developers), the reality is that appraisers do not look at the credit history of the borrower as part of their valuation expertise. The initiative angered many in the appraisal profession. The disconnect between reality and government in this example was no less than amazing.

At the same time, HUD seemed to be trying to make appraisers into home inspectors.. Even more amazing.

Fast forward

Cuomo was the keynote speaker at a recent appraisal convention and seemed to say all the right things. There is a certain irony here.

I remember ranting about this HUD stuff to quite a few of my colleagues at the time as a typical example of the disconnect that exists between the purpose of the appraisal function and the constraints appraisers have to work within.

Cuomo’s handling of HUD as it relates to appraisers and the rampant fraud that came with the lack of oversight on his watch has become a campaign issue in the New York’s governor’s race. The article Integrity and Reforms v Fiasco and Embarrassment [NYO] summarizes the politcal battle nicely.

Its reminds me of the advent of appraiser licensing. It was a noble attempt to clean up the profession but a dismal failure. Everyone wants to control and regulate the appraiser.

Controlling appraisers doesn’t solve the fundamental problem.

You need to protect appraisers from the lending industry they work for and depend on. Create a wall of independence so the public is protected, by keeping the appraiser’s judgement influenced by being pressured to survive.

If you don’t keep the appraisal process pure and keep the pressure away from the appraiser, they are unable to deliver an unbiased report. Its against human nature.

The good appraisers are disappearing fast and there’s no way to regulate that.

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[Commercial Grade] If It’s Thursday, This Must BeCanarsie?

July 27, 2006 | 10:51 am |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John talks about the misuse of the word “expert”.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays, one of the smartest guys I know. …Jonathan Miller

I remember going on a job interview many years ago, where the interviewer, the owner of a small fee shop, chewed me out for calling myself “an appraiser” with only two years experience. He snarled that an appraiser is one who gives an “expert opinion” on property value. He scared meI didn’t want to work for him!

Some 20 years later I still vividly recall this interview though, because it recently dawned on me that he was absolutely correct. This business (profession?) is full of state licensed young bucks that appraise a shopping center in one state on Monday, then head hundred of miles away on a Thursday to appraise an office building in a totally different market. Getting paid on a “fee split” basis (time is money!) they race through the market snapping photos of comps that they may have begged off of a local appraiser, then run to town hall to look up the assessments and zoning data.

Experts? Hardly. They are going through the motions of “the appraisal process”, but the majority of these appraisers have neither the experience or market knowledge to render a truly “expert” opinion. I know..I used to be one of themand I can tell you at the end of every assignment I would pray that I didn’t miss anything critical in my market blitz.

The internet has put market data in easy reach of all appraisers..even if they are thousands of miles away. However, there is no substitute for being a real local expert, having the years of experience and intimate knowledge of the local market.

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[Sounding Bored] Using The Pool Cleaner To Get To The Right Price For Your Property

May 30, 2006 | 12:01 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. We will have additional columnists soon (and frankly, as the webmaster, I got jealous of all the cool graphics my colleagues get to use with their posts). This week I discuss whether appraisers are the right choice to help sellers price properties for sale.

Well, not really. Without a real estate broker or real estate appraiser doing the analysis, who else is available to the seller for help pricing their property?

In Doug Heddings recent post, Pricing: Why Not Just Hire an Appraiser? [True Gotham] he argues against using an appraiser for pricing a property. He says:

In theory, that’s a great idea. But over the last seven years, as the market has been rising, appraisals have often fallen short of conditions on the ground–meaning that you’re leaving money on the table if you leave the pricing to an appraiser.

He suggests sticking with a good real estate broker. But what defines a good broker if you are new to the market? While I would recommend Doug as one of the top brokers out there, what if you didn’t know that?

His post was inspired by a recommendation he read in Marshall Loeb’s Marketwatch column Price Your Home Right To Help Speed a Sale.

Doug makes the argument that, since so many appraisers in New York rely on brokers for listing information, why not go to the broker first? Listings are an important component for pricing, especially now with marketing times expanding. However, some appraisers have access to the same listing information (ie, me).

I actually, agree with his argument against using typical appraisers, espcially those that came out of the wordwork during the recent housing boom, but its based on the same argument that could be made against relying on a real estate broker for pricing which, like his anti-appraiser argument, is based on dated stereotypes.

Even Marshall Loebs comments are dated. The idea that we look at 3 or 4 “comps” in the area in the past 6 months is just silly. We look at sales, contracts and listings in the immediate area – properties that would have or will compete with the subject property. Often we have access to more accurate information than the broker does.

I teach real estate appraisal classes to brokers in a variety of venues and I am always struck by the impression our industry makes on real estate brokers. To most brokers, their only interaction with an appraiser is made during a sales transaction, when the bank sends the appraiser, often from outside market areas because they are cheaper, can crank out the report fast, etc. In otherwords, most of the appraisers that brokers interact with are simply form-fillers [Soapbox], and not true appraisers. I sound a bit harsh on this type of appraisers, but this has been a sore-spot of mine for the past decade.

So the bottom line is that all comes down the the individual real estate professional to provide pricing advice. Here are the arguments:

  • Use a broker for pricing – they have an inherent bias toward selling the property built into their relationship with it as a commissioned agent. They are paid only if the property sells. Sellers are often uncomfortable with this fact, whether unfounded or not, for the particular broker to be able to provide unbiased advice. Plus, they may not specialize in a particular market area that they are asked to sell. _Therefore it all comes down to the skills of the individual broker for pricing._
  • Use an appraiser for pricing – many are simply not competent in the particular market they are asked to perform an assignment for. They may not know the individual market as well as a particular broker who specializes in it. When our firm performs appraisals for relocation assignments, in the past we have been rated and +/- 3% of the final sales price even though our results are affected by competancy of the brokers that are asked to sell the property. _Therefore it all comes down the the individual appraiser._

Go with who you think is the most competent and who you feel comfortable with. Both Doug and I are not being self-serving here, because there is no right answer.

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[Commercial Grade] Appraiser Qualifications Board (AQB): Take 2

April 27, 2006 | 9:29 pm |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John talks about going back to the drawing board and re-thinking the AQB.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays, one of the smartest guys I know. …Jonathan Miller

When Congress created the Appraisal Foundation in 1987 in response to the S & L debacle, it seemed like a logical response and perhaps even a major step forward to validating our profession. However, the state licensing system that the Appraiser Qualifications Board (AQB) put into place is, in my opinion, a dismal failure.

I maintain general certification in two states, New York and New Jersey, in addition to my membership in the Appraisal Institute as an MAI. Each state and the Appraisal Institute (AI), however, maintains its own continuing education requirementsdifferent cycles, different number of credit hours and often times different courses accepted for credit. So, if I sit through a seminar given by the AI, New York State may not accept it. Similarly, a course accepted for credit by New York State may not be accepted by New Jersey.

The need to satisfy these various continuing education requirements presents an additional burden on the appraiser, in terms of both time and expense. Not that I have anything against education – my wife is a full-time teacher, and I teach appraisal courses at New York University), but I think the continuing education system for appraisers is highly inefficient and unnecessarily burdensome.

While my appraisal practice is local, national appraisal firms that have assignments all over the country are the ones hit the hardest.

Speaking from experience, most clients want their appraisals within four weeks, and often insist on two or three. If an appraiser is going to another state for that assignment, he/she either needs to maintain on-going certification there or apply for a temporary permit. The temporary permit application process, however, can often take up to 6 to 8 weeks (depending on the state)and it hardly makes sense to maintain certification in all states.

State certification is here to stay, but I would love to see the AQB go back to the drawing board and come up with one uniform set of continuing education requirements to apply to all 50 states, with all states accepting the same courses, and a mechanism to issue a temporary practice permit within one week. Makes sense, doesn’t it?

[webmaster’s note: the current licensing laws have actually reduced the quality of appraisers, so a changing in course requirements are unlikely to be a detriment to appraisal education.]

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[Commercial Grade] Analyze This

April 6, 2006 | 12:01 am |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John opted to talk about how the proliferation of data has changed the appraiser’s role to an analyst (without the couch).

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursday afternoons, one of the smartest guys I know. …Jonathan Miller

In their book Freakonomics, Steven Levitt and Stephen Dubner point out that Information is the currency of the internetit has vastly shrunk the gap between the experts and the public.

This is true. Information is everywhere, and the appraiser’s challenge has evolved into sifting through the volumes of data available on the Internet, rather than finding it in the first place. The Internet has enabled the solo practitioner working out of his/her kitchen the same tools as the national firms with extensive market research departments.

With information so readily available, clients no longer put much of a premium on it. The usual retort to my (incessant) complaints about the declining fees for our services is that, with the Internet, we can research markets much quicker and, therefore, deliver an appraisal more efficiently.

However, I have never viewed my role so much as a purveyor of market data, but rather as a real estate analyst. In the valuation class I teach at NYU, I introduce the above pie chart to illustrate what appraisal typically consists of.

Yes, you need good market data to begin with, but that’s only a portion of what we do. The real value of a good appraiser is the proper analysis of that data and effectively communicating the property’s risk factors to the client.

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[Commercial Grade] An Education of Value

March 23, 2006 | 1:51 pm |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John talks about the declining enrollment in valuation studies.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays, one of the smartest guys I know. …Jonathan Miller

The New York University Real Estate Institute is one of the most respected institutions of real estate education in the country. In fact, its reach is international, attracting students from throughout the world. It has a distinguished faculty (of which I’m proud to say I’m a member) largely drawn from the professional real estate community.

The graduate program offers a MS in Real Estate with a concentration in either Finance & Investment, Asset Management, International Real Estate, Development or Valuation. For the past four years that I’ve been an adjunct there, the number of students graduating with a concentration in Valuation has been about one or two a semester, out of hundreds of graduates. The vast majority tend to concentrate in Finance & Investment or Development.

The Real Estate Valuation and Analysis class that I teach is a required class for all students, regardless of concentration; administration’s philosophy (and rightly so) is that anyone in any real estate discipline should have a basic understanding of valuation. Last spring I also taught an advanced Seminar in Valuation class, which is a requirement for those concentrating in Valuation. I had four students in that class which was apparently large relative to past classes; at times this class has run with only one student.

The University is now considering the elimination of Valuation as a concentration option. To me this is perhaps one of the clearest signs that the new generation of bright motivated young real estate professionals do not see a career in valuation as worth pursuing.

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