a

GAO

United States General Accounting Office

Report to Congressional Requesters

May 2003 REGULATORY 

PROGRAMS

Opportunities to 

Enhance Oversight of 

the Real Estate 

Appraisal Industry

GAO-03-404
Title XI created a complex oversight structure for real estate appraisals and 

appraisers that involves private, state, and federal entities. Two private 

entities establish uniform rules for real estate appraisals and set minimum 

criteria for certifying appraisers. State regulatory agencies certify appraisers 

based on these criteria. The federal financial regulators oversee financial 

institutions’ use of appraisals, and a federal agency, the Appraisal 

Subcommittee, monitors and coordinates the functions of the parties 

involved in regulating appraisals and appraisers. 

All of these entities except the federal financial regulators identified 

potential impediments to carrying out their Title XI responsibilities. The two 

private entities stated that fund limitations could impede their ability to 

ensure that development of standards and qualifications evolve with 

changing conditions. State agencies said that funding shortfalls hindered 

their ability to enforce compliance. Appraisal Subcommittee staff reported 

that rule-making authority and additional enforcement sanctions could 

facilitate its oversight of state compliance with Title XI. 

Industry participants raised concerns about aspects of the Title XI regulatory 

system for appraisers. They cited differences in state regulation that affect 

both lenders and appraisers, gaps in Title XI’s coverage—for example, 

transactions of less than $250,000 do not require an appraisal—high fees and 

burdensome processes for having appraiser education courses approved, 

and weak enforcement and complaints processing. Some industry 

participants felt that states, traditionally involved in regulating professions, 

alone should regulate the appraisal industry. Others felt that the current 

structure needed a significant overhaul to become effective. 

Title XI Regulatory Oversight Structure and Entities 

REGULATORY PROGRAMS

Opportunities to Enhance Oversight of 

the Real Estate Appraisal Industry 

www.gao.gov/cgi-bin/getrpt?GAO-03-404.

To view the full report, including the scope 

and methodology, click on the link above. 

For more information, contact David G. Wood 

(202) 512-8678 or woodd@gao.gov. 

Highlights of GAO-03-404, a report to 

Congressional Requesters 

May 2003 

Since the passage of Title XI of the 

Financial Institutions Reform, 

Recovery, and Enforcement Act of 

1989, the appraisal and mortgage 

lending industry has changed 

dramatically. Some have 

concluded that the law is obsolete 

because the problems Title XI was 

intended to address—the risk to 

federal deposit insurance funds and 

the lack of uniform standards and 

qualifications—no longer exist. 

Others argue that the law’s purpose 

and scope should be expanded. To 

help Congress better understand 

these issues, GAO looked at the 

roles of the private, state, and 

federal entities that oversee the 

appraisal industry, the challenges 

Title XI presented to these entities, 

and industry participants’ concerns 

about the effectiveness of the Title 

XI regulatory structure. 

Among other things, the Chairman 

of the Appraisal Subcommittee 

should: 

• develop and apply consistent 

criteria for determining and 

reporting states’ compliance 

levels with Title XI; 

• explore potential options for 

assisting states in carrying out 

their Title XI activities, 

particularly for investigating 

appraiser complaints; and 

• explore alternatives for 

providing future Title XI grant 

funding to the Appraisal 

Foundation and its two boards. 
Page i GAO-03-404 Real Estate Appraisal Industry Oversight

Contents

Letter 1

Results in Brief 3

Background 6

Title XI Created a Complex Appraiser Regulatory Oversight 

Structure 7

Private, State, and Federal Entities Cited Potential Impediments to 

Fulfilling their Title XI Roles 18

Industry Participants Raised Various Concerns about the Title XI 

Oversight Structure 23

Conclusions 36

Recommendations 37

Agency Comments 38

Appendixes

Appendix I: Survey of State Regulatory Agencies (results included) 42

Appendix II: Scope and Methodology 53

Appendix III: List of Agencies and Groups Contacted 55

Federal Agencies 55

Government Sponsored Enterprises 55

Private Organizations 55

State Appraiser Regulatory Agencies 56

Private Consultants 60

Appendix IV: National Registry Database of the Appraisal 

Subcommittee 61

Appendix V: Evolution and Use of Automated Valuation Models 67

Three Types of AVM Models Are Currently Used 67

Data Sources for AVMs Vary in Completeness and Reliability 68

AVMs Have Both Advantages and Disadvantages 69

Guidance and Regulations on Using AVMs Are Relatively New 70

Appendix VI: The Appraiser Qualifications Board’s Process and Fees for 

Approving Appraiser Education Courses and Certifying 

Instructors 72

AQB’s Course Approval Program 72

AQB’s USPAP Instructor Certification Program 73

Options Provided by AQB for Approving Distance Education 

Courses 75

Relative Costs of AQB Course Approval and Instructor Certification 

Programs 75
Contents

Page ii GAO-03-404 Real Estate Appraisal Industry Oversight

State Fees for Course and Instructor Approval 77

Appendix VII: Federal Financial Institutions Examination Council’s Legal 

Advisory Group Opinion 78

Appendix VIII: Comments from the Appraisal Subcommittee 87

Appendix IX: Comments from the Appraisal Foundation 91

Appendix X: Comments from Fannie Mae 93

Appendix XI: Comments from Freddie Mac 97

Appendix XII: Comments from Department of Housing and Urban 

Development 99

Appendix XIII: GAO Contacts and Acknowledgments 101

GAO Contacts 101

Acknowledgments 101

Tables Table 1: Title XI Roles and Responsibilities for Appraisal Standards 

and Appraiser Qualifications 9

Table 2: State Appraiser Licensing Requirements 26

Table 3: Active Appraiser Licenses, by State and Type 62

Table 4: Disciplinary Actions, by State (Active and Inactive 

Licensees) 65

Table 5: Approval Service Fees, by Service Provider as of February 

2003 76
Contents

Page iii GAO-03-404 Real Estate Appraisal Industry Oversight

Abbreviations

AQB Appraiser Qualifications Board 

ASB Appraisal Standards Board

AVM Automated Valuation Model

ECAFS Education Council for Appraisal Foundation Sponsors

FDIC Federal Deposit Insurance Corporation 

FHA Federal Housing Administration 

FIRREA Financial Institutions Reform, Recovery, and Enforcement Act 

of 1989 

FRS Federal Reserve System 

GSE Government Sponsored Enterprises 

HUD Department of Housing and Urban Development 

IDECC International Distance Education Certification Center

NCUA National Credit Union Administration 

OCC Office of the Comptroller of the Currency 

OTS Office of Thrift Supervision 

USPAP Uniform Standards of Professional Appraisal Practice

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Page 1 GAO-03-404 Real Estate Appraisal Industry Oversight

United States General Accounting Office

Washington, D.C. 20548

A

May 14, 2003 Letr

The Honorable Paul S. Sarbanes

Ranking Minority Member

Senate Committee on Banking, 

Housing, and Urban Affairs

United States Senate

The Honorable Zell Miller

United States Senate

Recent predatory mortgage lending cases, involving fraudulent and inflated 

appraisals, have highlighted the need for accurate real estate appraisals in 

preventing losses to the federal government and significant financial harm 

to individual consumers. When making mortgage loans, lenders need an 

objective and accurate assessment of the value of properties used as 

collateral to help avoid losses in the event that borrowers do not repay the 

loans. Congress enacted Title XI of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989 (FIRREA) in response to concerns 

that faulty and fraudulent appraisals played a major role in the savings and 

loans crisis of the 1980s. Title XI provisions address both the quality of 

appraisals and the qualifications of appraisers. Specifically, Title XI 

requires that real estate appraisals used in connection with federally 

related transactions be performed (1) in writing, in accordance with 

uniform professional standards, and (2) by individuals whose competency 

has been demonstrated and whose professional conduct is subject to 

effective supervision.1

To ensure that the purpose of the legislation was carried out, Title XI 

created a regulatory structure to monitor and oversee the real estate 

appraisal industry. Among other things, it established a federal entity called 

the Appraisal Subcommittee to monitor the Title’s implementation. Title XI 

provides for national uniformity in appraisal standards and minimal 

national qualification requirements for some, but not all, appraisers. The 

Title XI regulatory structure was set up primarily to protect federally 

1

As defined in Title XI, federally related transactions are real estate transactions involving 

financial institutions regulated by the federal government. These include banks, thrifts, and 

credit unions. Real estate transactions of mortgage bankers, brokers, pension funds, and 

insurance companies are not included.
Page 2 GAO-03-404 Real Estate Appraisal Industry Oversight

insured depository institutions from losses and by extension the federal 

deposit insurance funds.

Because of your concerns about the effectiveness of the current regulatory 

structure, you requested that we assess the appraisal oversight structure 

established in response to Title XI. As agreed with your offices, this report 

describes (1) the specific responsibilities under Title XI of the private, 

state, and federal entities that oversee the appraisal industry and the way 

these entities perform their roles; (2) factors that these entities identified 

as potential impediments to carrying out their Title XI responsibilities; and 

(3) concerns expressed by regulatory entities and industry participants 

about the effectiveness of the existing regulatory structure. 

To answer these questions, we reviewed FIRREA and its legislative history; 

interviewed representatives of the private, state, and federal entities 

involved in the Title XI regulatory scheme; and, using a mailed 

questionnaire, surveyed appraiser regulatory agencies in the 50 states, the 

District of Columbia, and 4 U.S. territories.2

 A copy of the questionnaire, 

including summary responses to each question, can be found in appendix I. 

Additionally, we contacted industry participants, including trade groups 

that represent appraisers and lenders; Fannie Mae and Freddie Mac, two 

government-sponsored enterprises (GSE) that establish standards for 

appraisals used in connection with mortgages that they purchase; the 

Department of Housing and Urban Development (HUD), which establishes 

requirements for appraisals used in connection with mortgages it insures; 

representatives of appraiser education providers; and academic experts on 

issues related to real estate appraisals. We also obtained and reviewed 

records of the Appraisal Subcommittee’s state oversight activities, as well 

as information on appraisers maintained in the subcommittee’s national 

registry database. We conducted our work between March 2002 and March 

2003 in accordance with generally accepted government auditing 

standards. Appendix II provides a detailed discussion of our scope and 

methodology, and appendix III contains a list of the entities that we 

contacted.

2

The territories included in our survey are Guam, Northern Mariana Islands, Puerto Rico, 

and the Virgin Islands. The only other U.S. territory—American Samoa—does not have a 

regulatory oversight structure for appraisers because real estate there can only be inherited. 

In this report, the term “states and territories” refers to the 50 states, the District of 

Columbia, and the 4 territories.
Page 3 GAO-03-404 Real Estate Appraisal Industry Oversight

Results in Brief Title XI created a complex regulatory system that relies upon the actions of 

private, state, and federal entities to help assure the quality of appraisals 

and the qualifications of appraisers used in federally related transactions.

• The two private entities—the Appraisal Standards Board and Appraiser 

Qualifications Board—respectively establish (1) uniform rules for 

preparing and reporting real estate appraisals and (2) minimum 

qualification criteria for certified real estate appraisers. Certified real 

estate appraisers are one of the two categories of appraisers listed in 

Title XI, the other being licensed real estate appraisers.

• Title XI defers to the states with respect to the minimum qualification 

criteria for the licensed appraisers. In addition, Title XI relies on the 

states to (1) implement the certification and licensing of all real estate 

appraisers and (2) monitor and supervise compliance with appraisal 

standards and requirements. To assure the availability of certified and 

licensed appraisers, all of the states and territories have adopted 

structures to regulate and supervise the appraisal industry. These 

structures typically consist of a state regulatory agency coupled with a 

board or commission to establish education and experience 

requirements, license and certify appraisers, and monitor and enforce 

appraiser compliance.

• The federal financial institution regulators—defined in Title XI as the 

Federal Reserve System (FRS), Federal Deposit Insurance Corporation 

(FDIC), Office of the Comptroller of the Currency (OCC), Office of 

Thrift Supervision (OTS), and National Credit Union Administration 

(NCUA)—are responsible for ensuring that federally insured depository 

institutions comply with Title XI requirements. To meet these 

responsibilities, the regulators have (1) adopted rules and policies 

specifying transactions for which regulated financial institutions are 

required to obtain an appraisal by a certified or licensed appraiser, (2) 

developed examination procedures to ensure that regulated financial 

institutions are in compliance with Title XI, and (3) appointed agency 

representatives to the Appraisal Subcommittee.

• The Appraisal Subcommittee is responsible for monitoring the 

implementation of Title XI by all parties—private, state, and federal. The 

subcommittee monitors the efforts of the federal financial institution 

regulators in developing and adopting appraisal-related regulations and 

policies, conducts periodic reviews of each state’s licensing and 
Page 4 GAO-03-404 Real Estate Appraisal Industry Oversight

certification program, and provides grants to the Appraisal Foundation 

to support the Title XI-related activities of its two boards—Appraisal 

Standards Board and Appraiser Qualifications Board. 

The private, state, and federal entities involved in the Title XI regulatory 

structure described a number of factors that they believe could constrain 

their ability to perform more effectively and efficiently. For example, 

officials of the Appraisal Standards Board and the Appraiser Qualifications 

Board told us that insufficient federal grant funding may impede their 

ability in the future to ensure that standards and qualifications evolve with 

changing conditions, such as how to appraise contaminated or polluted 

properties. State appraiser agencies—which are funded at the state level—

reported resource limitations as the primary impediment in carrying out 

their oversight responsibilities. For example, of the 54 states and territories 

that responded to our survey, 26 reported that the current number of 

investigators was insufficient for meeting its regulatory responsibilities, 37 

cited a need for increasing the staff directed at investigations, and 22 cited 

a need for more resources to support litigation. Officials of the five federal 

financial institution regulators reported no major impediments to 

accomplishing their Title XI responsibilities. The Appraisal Subcommittee 

reported that rule-making authority and additional enforcement sanctions 

could facilitate its oversight of state compliance with Title XI. 

Subcommittee officials stated that the only enforcement action they can 

take under Title XI is to decertify a state, which would prohibit all licensed 

or certified appraisers from that state from performing appraisals in 

conjunction with federally related transactions. Subcommittee officials 

stated that using this sanction would have a devastating effect on the real 

estate markets and financial institutions within the state. However, the 

Appraisal Subcommittee stated that it has always been able to achieve 

states’ compliance under the current enforcement and regulatory structure.

In addition to the impediments described above, officials of the regulatory 

agencies, appraiser trade groups, education providers, mortgage industry, 

HUD, and the GSEs raised concerns about the Title XI regulatory structure. 

However, there was no clear consensus regarding the need for or impact of 

possible changes. Some industry participants stated that a growing number 

of real estate transactions, such as those placed through mortgage brokers 

and those involving dollar amounts below the threshold level established 

by the federal financial institution regulators, are not universally subject to 

Title XI appraisal requirements. In addition, some industry participants 

cited concerns with the lack of a national qualification standard for the 

licensed real estate appraiser category. Education providers and appraiser 
Page 5 GAO-03-404 Real Estate Appraisal Industry Oversight

trade groups expressed concerns about the Appraiser Qualifications 

Board’s fees and requirements for instructor certification and course 

approval. Federal and state regulatory officials expressed concern about 

the apparent reluctance of lending institutions to make referrals or 

complaints regarding questionable appraisals they identify. HUD and GSE 

officials expressed concerns about a lack of consistent and effective 

enforcement actions by the states on referred cases and the adequacy of 

the Appraisal Subcommittee’s oversight of state programs. This report 

makes recommendations to the Appraisal Subcommittee intended to 

enhance the effectiveness of the existing regulatory structure.

We received written comments on a draft of this report from the Appraisal 

Subcommittee, the Appraisal Foundation, HUD, Fannie Mae, and Freddie 

Mac. In addition, we received technical comments from the federal 

financial institutions regulators, who indicated that their overall comments 

had been incorporated into those provided by the Appraisal Subcommittee. 

The Appraisal Subcommittee agreed to take action on our recommendation 

to develop and apply consistent criteria for determining and reporting 

states’ compliance with Title XI, and did not comment on our 

recommendation for greater coordination with HUD, Fannie Mae, and 

Freddie Mac on referrals of problem appraisers. Concerning the remaining 

two recommendations, the Appraisal Subcommittee

• agreed that additional funding for the states would improve compliance 

with Title XI, but stated that the Subcommittee is not the answer to that 

issue. Because the recommendation is to explore additional funding as 

well as other options for assisting the states, we did not revise it.

• agreed that the Appraisal Foundation faces future grant funding 

constraints, but stated that using the Subcommittee’s surplus is not a 

long-term solution. We modified the report to emphasize that we are 

recommending that the subcommittee explore options, including 

drawing on the subcommittee’s surplus, if necessary, for addressing 

future Appraisal Foundation grant shortfalls.

HUD agreed with our recommendation for greater coordination on 

referrals of problem appraisers to state appraiser agencies. Both Fannie 

Mae and Freddie Mac expressed concern about this recommendation, 

commenting that they are not regulatory entities. We revised the wording of 

our recommendation to emphasize the role that HUD, Fannie Mae, and 

Freddie Mac can play in helping the subcommittee carry out its oversight 

responsibilities.
Page 6 GAO-03-404 Real Estate Appraisal Industry Oversight

Background An appraisal is a decision-making tool used to facilitate a real estate 

transaction. The primary role of appraisals in the loan underwriting 

process is to provide evidence that the collateral value of the property is 

sufficient to avoid losses on loans if the borrower was unable to repay the 

loan. Consumers often mistakenly assume that appraisals are intended to 

validate the purchase price of the property in question. Furthermore, 

appraisals are sometimes confused with home inspections, which are 

intended to warn consumers about serious defects in the home being 

purchased that should be repaired. In a loan transaction, the lender rather 

than the borrower engages the appraiser and this usually occurs after the 

borrower has agreed to purchase the property. The primary intent of the 

appraisal reforms contained in Title XI was to protect the federal deposit 

insurance funds--and, by extension, mortgage lenders--from avoidable 

losses.

An appraisal is an opinion of the value of a property as of a specific date. 

Appraisers generally consider the property’s value from three points of 

view—cost, income, and comparable sales—and determine an estimated 

value based upon weighing the three valuation methods. The cost approach 

is based on an estimate of the value of the land plus what it would cost to 

replace or reproduce the improvements minus the physical deterioration, 

functional obsolescence, and economic obsolescence. The income 

approach is of primary importance in ascertaining the value of income 

producing properties and is an objective estimate of what a prudent 

investor would pay based upon the net income the property produces. The 

comparable sales approach compares and contrasts the property under 

appraisal with recent offerings and sales of similar property. This approach 

is usually considered the most appropriate valuation approach for 

estimating the value of residential real estate property.

In 1986, the House Committee on Government Operations issued a report 

concluding that faulty and fraudulent appraisals were an important 

contributor to the losses that the federal government suffered during the 

savings and loan crisis.3

 In response, Congress incorporated provisions in 

Title XI of FIRREA that were intended to ensure that federally related 

transactions had appraisals that were (1) performed by real estate 

3

Impact of Appraisal Problems on Real Estate Lending, Mortgage Insurance, and 

Investment in the Secondary Market, H.Rep. 99–891 at 4–6 (Sept. 25, 1986), House 

Committee on Government Operations, 99th Congress, 2nd session.
Page 7 GAO-03-404 Real Estate Appraisal Industry Oversight

appraisers that had met minimum qualifications criteria and (2) conducted 

in compliance with uniform standards.

In addition to those identified in Title XI, there are other federal and 

government sponsored entities that have roles with respect to oversight of 

the real estate appraisal industry. Among these entities, the most important 

with respect to appraisal oversight issues are the HUD’s Federal Housing 

Administration (HUD/FHA) and the two large GSEs that purchase 

residential loans in the secondary market—Fannie Mae and Freddie Mac. 

HUD/FHA uses appraisals to determine a property’s eligibility for mortgage 

insurance and to estimate the value of a property for mortgage insurance 

purposes. Certified and licensed appraisers wishing to perform appraisals 

for HUD/FHA loans must first be placed on the FHA Roster of Appraisers, 

which requires the appraiser to pass a HUD/FHA examination on appraisal 

methods and meet other eligibility requirements. Both Fannie Mae and 

Freddie Mac consider appraisals or evaluations of the property value as a 

vital part of their risk analysis for loans that they purchase. For those loans 

for which Fannie Mae and Freddie Mac require an appraisal, the lender is 

required to use an appraiser that is state licensed or certified in accordance 

with the provisions of Title XI.4

 Fannie Mae and Freddie Mac largely hold 

the lender responsible for the selection and quality control of the appraiser. 

As such, Fannie Mae and Freddie Mac do not maintain a list of approved 

appraisers. 

Title XI Created a 

Complex Appraiser 

Regulatory Oversight 

Structure

Various private, state, and federal entities play a role with respect to the 

Title XI regulatory structure (table 1). Private entities—the Appraisal 

Standards Board (ASB) and the Appraiser Qualifications Board (AQB)—

establish minimum standards over the development and reporting of real 

estate appraisals and minimum qualification criteria for certified 

appraisers. States conduct the certification and licensing of appraisers, 

including setting education and experience requirements that, at minimum, 

must meet AQB criteria for certified appraisers and enforcing compliance 

with appraisal standards. FRS, FDIC, OCC, OTS, and NCUA—hereinafter 

referred to as the federal financial institution regulators—issue appraisal 

requirements for the financial institutions under their jurisdiction and 

4

Both Fannie Mae and Freddie Mac allow lenders the options to use an inspection or 

evaluation instead of a traditional appraisal, on loans that they determine to be low-risk 

based on their automated loan underwriting systems. In the case of Freddie Mac, certain 

low risk loans may be eligible for delivery to Freddie Mac with no appraisal or inspection.
Page 8 GAO-03-404 Real Estate Appraisal Industry Oversight

monitor compliance with their regulations. Lastly, the Appraisal 

Subcommittee has primary responsibility for monitoring and reviewing the 

actions of the private, state, and federal entities as they relate to Title XI.
Page 9 GAO-03-404 Real Estate Appraisal Industry Oversight

Table 1: Title XI Roles and Responsibilities for Appraisal Standards and Appraiser Qualifications

Private State Federal

Appraisal

Standards Board

(ASB)

Appraiser 

Qualifications Board 

(AQB)

Appraiser 

regulatory 

agencies

Financial 

institution 

regulatory agencies

Appraisal 

Subcommittee

Appraisal standards

Standard setting

Develop standards for the 

performance of real estate 

appraisals.

Promulgate 

regulations that 

establish appraisal 

standards, which 

meet or exceed ASB’s 

standards, for 

federally insured 

depository 

institutions.

Implementation/Monitoring

Enforce compliance 

with appraisal 

standards and 

requirements.

Monitor and enforce 

compliance by 

federally insured 

depository institutions 

with appraisal 

regulations.

Monitor and review the 

Appraisal Foundation’s 

practices, procedures, 

activities, and 

organizational structure.

Monitor policies, 

practices, and 

procedures of states to 

determine consistency 

with Title XI 

requirements.

Monitor appraisal 

requirements 

established by federal 

financial institution 

regulatory agencies.

Make grants to the 

Appraisal Foundation to 

defray the costs of the 

Appraisal Standards 

Board’s Title XI 

activities.
Page 10 GAO-03-404 Real Estate Appraisal Industry Oversight

Source: GAO.

Appraiser qualifications

Standard setting

Develop minimum 

qualification criteria for 

certified real estate 

appraisers.

Set qualifications 

criteria for 

certification, which 

meet or exceed 

AQB’s criteria, and 

licensing of 

appraisers.

Establish additional 

qualification criteria 

as may be necessary 

or appropriate to carry 

out their statutory 

responsibilities.

Implementation/Monitoring

Transmit to the 

Appraisal 

Subcommittee a 

roster of appraisers 

who have been 

licensed or certified.

Collect from 

appraisers and 

transmit to the 

Appraisal 

Subcommittee a $25 

annual registry fee.

Enforce compliance 

with standards, 

requirements, and 

procedures 

prescribed by Title XI.

Prescribe categories 

of federally related 

transactions that 

should be appraised 

by a state certified 

appraiser and those 

that can be performed 

by either a state 

certified or licensed 

appraiser.

Monitor and enforce 

compliance by 

federally insured 

depository institutions 

with appraisal 

regulations.

Monitor qualification 

criteria set by states for 

the certification and 

licensing of individuals 

qualified to perform 

appraisals in connection 

with federally related 

transactions.

Maintain a national 

registry of state certified 

and licensed appraisers 

eligible to perform 

appraisals in federally 

related transactions.

Monitor and review the 

Appraisal Foundation’s 

practices, procedures, 

activities, and 

organizational structure.

Make grants to the 

Appraisal Foundation to 

defray the costs of the 

Appraiser Qualifications 

Board’s Title XI 

activities.

(Continued From Previous Page)

Private State Federal

Appraisal

Standards Board

(ASB)

Appraiser 

Qualifications Board 

(AQB)

Appraiser 

regulatory 

agencies

Financial 

institution 

regulatory agencies

Appraisal 

Subcommittee
Page 11 GAO-03-404 Real Estate Appraisal Industry Oversight

Appraisal Foundation and 

Its Two Boards Establish 

Appraisal Standards and 

Minimum Appraiser 

Certification Criteria

The Appraisal Foundation, a nonprofit educational organization composed 

of groups from the real estate industry, provides the organizational 

framework for the ASB and AQB to carry out their Title XI-related 

responsibilities.5 It was founded in 1987 by eight leading professional 

appraisal organizations in the United States to foster professionalism in 

appraising. The ASB and the AQB establish minimum standards for 

developing and reporting an appraisal and the minimum criteria for the 

certified appraiser category in connection with federally related 

transactions.

The ASB, which is responsible for setting standards for appraisals, is 

composed of six appraisers who are appointed for 3-year terms by the 

Board of Trustees of the Appraisal Foundation. The ASB’s minimum 

standards for appraisals are contained in the Uniform Standards of 

Professional Appraisal Practice (USPAP). Under Title XI, these minimum 

standards apply to all federally related transactions. The standards cover 

both the steps appraisers must take in developing appraisals and the 

information the appraisal report must contain. The Foundation sells copies 

of USPAP but provides a copy of each updated version, free of charge, to 

the state regulatory agencies. 

The AQB, which is composed of five appraisers who are appointed for 3-

year terms by the Board of Trustees of the Appraisal Foundation, 

establishes the minimum education, experience and examination 

requirements for state-certified real estate appraisers (set out in Real 

Property Appraiser Qualification Criteria and Interpretations of the 

Criteria). In addition, the AQB performs a number of ancillary duties 

related to real property and personal property appraiser qualifications. The 

AQB’s criteria cover four categories of appraisers—certified general, 

certified residential, licensed, and trainee—each with specific education, 

experience, examination, and continuing education requirements. Title XI 

does not require states to adhere to AQB criteria for licensed appraisers or 

for trainees. 

Both the ASB and the AQB regularly evaluate USPAP and the appraiser 

qualification criteria to determine whether revisions are needed. According 

5

The 2002 sponsors of the Appraisal Foundation consisted of eight appraisal organizations, 

four affiliate organizations (representing primarily the users of appraisal services), and one 

international appraisal organization. In addition, over 80 organizations, corporations, and 

government agencies are affiliated with the Appraisal Foundation.
Page 12 GAO-03-404 Real Estate Appraisal Industry Oversight

to the Appraisal Foundation, both boards solicit comments from 

appraisers, users of appraisal services, and the public before making final 

changes. Since the AQB set its original criteria in 1991, for example, it has 

issued numerous interpretations and approved two revisions of its criteria. 

As of January 2003, it was reviewing comments on a third draft of Real 

Property Appraiser Qualification Criteria. 

State Agencies Oversee the 

Licensing and Certification 

of Real Estate Appraisers 

Under Title XI, states may establish their own agencies to certify and 

license appraisers. At the time of our review, all 50 states, the District of 

Columbia, and 4 of the U.S. territories had established such agencies, 

which typically oversee the activities of appraisers for all types of 

transactions, including those that are federally related. Of the 54 state and 

territorial agencies responding to our survey, 30 reported operating as 

independent bodies, while 23 reported to another state agency or 

department.6,7 In addition, survey respondents reported that they used 

boards or commissions as well as state employees to carry out Title XI 

activities.8

All the agencies had established programs for certifying appraisers. 

Licensing requirements, however, differed. Some states did not require 

licenses unless appraisers planned to work with federally related 

transactions. Other states required appraisers to be either licensed or 

certified to perform a real estate appraisal, even for transactions that are 

not federally related. State agencies’ licensing and certification programs 

typically included temporary and reciprocal licensing programs. An 

appraiser must, in general, obtain some type of license—temporary or 

reciprocal if not a standard state license—in all states where they want to 

perform appraisals for federally related transactions.9

 

6

We did not receive a response to our survey from the Virgin Islands.

7

The state of Wisconsin had a hybrid organizational structure composed of an independent 

board that handled the complaint process (including taking disciplinary action) and a state 

agency reporting to the Department of Regulation and Licensing that issued appraiser 

licenses.

8

California and Guam reported that they did not use boards or commissions for appraiser 

oversight.

9

Reciprocity allows appraisers to use a license from their home state to obtain a license in 

another state without taking examinations or meeting additional requirements.
Page 13 GAO-03-404 Real Estate Appraisal Industry Oversight

In addition to conducting licensing and certification activities, all survey 

respondents indicated that they approve courses for appraisers’ education 

or training, enforce state regulations concerning appraisals, and investigate 

complaints. Over half of the states reported that they had adopted appraisal 

standards in addition to those set by the ASB, and nearly 70 percent 

reported that they had introduced additional qualifications.

Although the states are responsible for the certification and licensing of 

appraisers under Title XI, the Appraisal Subcommittee has a role in 

ensuring that state qualifications satisfy Title XI objectives. Title XI directs 

federal agencies not to accept state certifications and licenses if the 

subcommittee issues a written finding that: 

• the state certifying and licensing agency has failed to recognize and 

enforce the standards, requirements, and procedures of Title XI;

• the state agency does not have enough authority to carry out its 

functions under Title XI; or

• the state agency does not make decisions on appraisal standards and 

qualifications or supervise appraiser practices in a way that carries out 

the purposes of Title XI. 10

In addition, Title XI requires states to provide the Appraisal Subcommittee 

with the names of those appraisers who become certified or licensed in 

accordance with Title XI and to collect from them an annual registry fee 

that goes to the subcommittee.

Federal Regulators 

Determine Which 

Transactions Require 

Appraisals and Establish 

Compliance Standards for 

Depository Institutions

Title XI requires the federal financial institution regulators to ensure that 

real estate appraisals used in connection with federally related transactions 

are performed in accordance with standards developed by the ASB.11 In 

addition, Title XI requires that the federal regulators prescribe the 

categories of federally related transactions that should be appraised by a 

state certified appraiser and those that should be appraised by a licensed 

appraiser. Under the statute, state certified appraisers generally must be 

used in connection with federally related transactions for all commercial 

1012 U.S.C. § 3347(a), (b) (2000).

1112 U.S.C. § 3339 (2000).
Page 14 GAO-03-404 Real Estate Appraisal Industry Oversight

real estate transactions greater than $250,000 and all residential 

transactions in excess of $1,000,000.12 All other federally related 

transactions, unless subject to an exemption as authorized under Title XI, 

may utilize a state-licensed appraiser.13

Under Title XI, the federal financial institution regulators may establish a 

threshold level at or below which a certified or licensed appraiser is not 

required. As of December 30, 2002, each of the five regulatory agencies had 

set their appraisal threshold at $250,000.14 Thus, financial institutions have 

the option of obtaining either an appraisal or some other form of an 

evaluation of the property’s value for mortgage loans of $250,000 or less. 

The regulators have issued guidelines to the institutions under their 

jurisdiction that specify the requirements for evaluating real estate 

collateral for those transactions that do not require an appraisal. 

The federal financial institution regulators require that all appraisals for 

federally related transactions conform, at a minimum, to USPAP, that they 

be written, and that they contain sufficient information and analysis to 

support the institution’s decision to engage in the transaction. Regulatory 

agencies may take informal and formal enforcement actions, including 

memorandum of understanding, removal, prohibition, and cease and desist 

orders, and imposing civil money penalties against institutions that violate 

their appraisal regulations. These actions can apply to contract (fee) 

appraisers as well as appraisers who are employees of the institutions and 

institution-affiliated parties. Moreover, pursuant to the FDIC Improvement 

12The $1,000,000 threshold does not apply to 1-4 unit, single family residential appraisals 

unless the size and complexity of the transaction requires a State certified appraiser. Also, 

under Title Xl the federal financial institution regulators are responsible for determining 

whether other types of transactions warrant the use of a certified appraiser. See 12 U.S.C. § 

3342 (2000).

13Although the States are responsible for establishing and administering licensing 

qualifications, Title XI authorizes the federal financial institution regulators to establish 

additional qualification criteria. 

14The threshold amount is contained in regulations of the respective agencies that set forth 

the circumstances under which an appraisal by a state certified or licensed appraiser is 

required or not required. See 12 C.F.R. § 34.43 (2002)(OCC), 12 C.F.R. § 225.63 (2002)(FRS), 

12 C.F.R. § 323.3 (2002)(FDIC), 12 C.F.R. § 564.3 (2002)(OTS), and 12 C.F.R. § 722.3 

(2002)(NCUA).
Page 15 GAO-03-404 Real Estate Appraisal Industry Oversight

Act of 1991, the federal financial institutions regulators can take action 

against institution-affiliated parties such as an appraiser.15

According to representatives of the regulatory agencies, regulators 

typically review an institution’s compliance with appraisal regulations 

during examinations of business risk management policies and practices, 

during targeted examinations (for example, of real estate transactions and 

practices), or during reviews of lending transactions. If regulators detect 

violations or deficiencies, they may take enforcement action or address it 

within discussions with the institution’s management for corrective action 

if they believe it affects the institution’s safety and soundness. 

Appraisal Subcommittee 

Monitors Title XI Regulatory 

Activities

Title XI established the Appraisal Subcommittee as the principal federal 

agency responsible for monitoring the activities of the other components of 

the real estate appraisal industry oversight structure. Specifically, the 

subcommittee is responsible for:

• monitoring and reviewing the practices, procedures, activities, and 

organizational structure of the Appraisal Foundation—including making 

grants in amounts that it deems appropriate to the Appraisal Foundation 

to help defray costs associated with its Title XI activities;

• monitoring the requirements established by the states, territories, and 

the District of Columbia and their appraiser regulatory agencies for the 

certification and licensing of appraisers;

• monitoring the requirements established by the federal financial 

institution regulators regarding appraisal standards for federally related 

transactions and determinations of which federally related transactions 

will require the services of state-licensed or state-certified appraisers;

• maintaining a national registry of state-licensed and state-certified 

appraisers who may perform appraisals in connection with federally 

related transactions; and

1512 U.S.C. § 1813(q) (2000).
Page 16 GAO-03-404 Real Estate Appraisal Industry Oversight

• transmitting an annual report to Congress regarding the activities of the 

subcommittee during the preceding year. 16

The Appraisal Subcommittee has six board members and seven staff 

members. The board members are designated by the heads of the five 

financial institution regulatory agencies that collectively make up the 

Federal Financial Institutions Examination Council—OCC, FRS, FDIC, 

OTS, and NCUA—and HUD. The subcommittee funds its activities through 

a portion of the fees assessed by the states against individual appraisers for 

licensing and certification.17

According to subcommittee officials, the subcommittee monitors the 

Appraisal Foundation by attending all significant meetings and events 

associated with its Title XI activities and reviewing all proposed changes or 

additions to its appraiser qualifications criteria or USPAP-related 

documents. In addition, the subcommittee reviews the Appraisal 

Foundation’s grant requests to ensure that the requested funds will only be 

used for activities related to Title XI. The subcommittee evaluates the 

foundation’s initiatives to determine whether they are eligible for 

reimbursement; the initiatives must be reasonable and not arbitrary or 

capricious.

The subcommittee monitors the federal financial institution regulators 

primarily through informal channels. For example, all six Appraisal 

Subcommittee board members are involved in the offices responsible for 

appraisal regulation in their individual agencies and provide input from the 

subcommittee informally to the agencies. The subcommittee also provides 

technical assistance on proposed regulations on appraisal issues. One 

official told us that the issues subject to subcommittee monitoring in this 

regard are few and tend not to change often. He stated that the only change 

he could recall in nearly 7 years was the NCUA's recent decision to raise 

the minimal threshold for transactions requiring appraisals from $100,000 

to $250,000 to match the levels of the other regulatory agencies.

Monitoring state appraiser regulatory agencies requires performing on-site 

field reviews of state agency programs and maintaining close 

16See 12 U.S.C. § 3332(a) (2000).

17Title XI authorizes the Appraisal Subcommittee to charge an annual registry fee of not 

more than $25. However, the Federal Financial Institutions Examination Council may 

approve fees up to $50 per year. As of March 31, 2003, the annual registry fee was $25.
Page 17 GAO-03-404 Real Estate Appraisal Industry Oversight

communications with, among others, appraisers, state and federal 

agencies, and users of appraisal services. The subcommittee has two 

primary review cycles for states—3 years and 18 months. Most states are 

scheduled on the 3-year cycle, and states are moved to an 18-month cycle if 

more frequent on-site visits are warranted—generally because of concerns 

identified during the prior field review. According to the Appraisal 

Subcommittee, its field review manual is intended to insure consistent 

review and policy applications from state to state. The reviews cover open 

and closed complaints; approved and disapproved education providers and 

courses; state statutes and regulations on certifying and licensing 

appraisers; minutes of board meetings; appraiser registries and fees; 

temporary practice and reciprocity; and topical issues such as predatory 

lending, fraud, and illegal real estate flipping.18 The letters that summarize 

the results of the state field reviews identify concerns, discuss whether the 

previous review’s concerns have been resolved, and make general 

conclusions about the state’s compliance with Title XI and Appraisal 

Subcommittee policy statements. The state field review letters are posted 

on the subcommittee’s Web site.

We reviewed the Appraisal Subcommittee’s state field review letters from 

1992 to 2002. While the letters provide some information to the state 

regulatory agencies, we found no evidence of transparent criteria for how 

the subcommittee determined and reported states’ compliance levels. For 

example, state field review letters were sometimes inconclusive about 

whether the state regulatory program was in compliance. When the letter 

contained a determination of compliance, the rationale for this decision 

was not always given. For example, some states with identified concerns 

were deemed compliant, while others with identified concerns were 

deemed noncompliant. Developing and applying consistent criteria to 

assess states’ compliance with Title XI requirements could increase the 

usefulness of (1) the letters issued to the states in identifying best practices 

and how one state measures against other states and (2) the annual reports 

that the Appraisal Subcommittee provides to Congress on the 

implementation of Title XI.

18Illegal real estate flipping is a scheme where a real estate speculator buys a house, usually 

in a poor neighborhood, and obtains an inflated appraisal and other fraudulent financial 

documents to trick a lender into making a loan that exceeds the fair market value. The 

house is sold again at an inflated price to a second buyer. The seller has then made a large 

profit on the inflated value of the property. If the second buyer defaults on the loan, the 

mortgage lender may not be able to recoup the amount of the loan and will therefore absorb 

a loss. 
Page 18 GAO-03-404 Real Estate Appraisal Industry Oversight

Under Title XI, the subcommittee is also required to maintain a registry of 

state-certified and -licensed appraisers who are eligible to perform 

appraisals for federally related transactions.19 The registry database is 

designed to allow users to determine (1) whether an appraiser is eligible to 

perform such appraisals and (2) whether the appraiser has been subjected 

to disciplinary action. In addition to eligibility information, the database 

includes information about the number of active and inactive licenses, the 

types of licenses, and any disciplinary actions taken by states against 

appraisers. Appendix IV contains a detailed description of the database and 

summary information regarding the number of appraisers by license type 

and enforcement actions reported by the states.

Private, State, and 

Federal Entities Cited 

Potential Impediments 

to Fulfilling their Title 

XI Roles 

The private, state, and federal entities involved in the oversight of the real 

estate appraisal industry identified a number of factors that they believe 

could constrain their ability to fulfill their Title XI responsibilities. ASB and 

AQB officials stated that an impediment that they may face in the future is 

inadequate federal funding, which would hinder their ability to ensure that 

appraisal standards and qualification criteria keep pace with changes in the 

mortgage industry and marketplace. State appraiser agencies reported that 

they often lack funding to revise their regulations with every USPAP update 

and to cover the increasing cost of administering the licensing and 

certification processes. The federal financial institution regulators did not 

identify any major impediments to fulfilling their Title XI responsibilities, 

but they did state that reaching consensus on regulatory standards was 

difficult because of the number of entities involved in the appraisal 

industry. Appraisal Subcommittee officials reported that rule-making 

authority and additional enforcement sanctions could facilitate its 

oversight of state compliance.

The Appraisal Standards 

and Appraiser 

Qualifications Board Cited 

Concerns about Federal 

Funding 

The ASB and AQB reported that financial challenges arise when federal 

grant funding falls short of their needs. Since 1991, the Appraisal 

Subcommittee has allocated a total of over $9 million in grants to the 

Appraisal Foundation to defray the costs of the ASB’s and AQB’s Title XIrelated activities. For most of this time the allocations have been less than 

what the ASB and AQB have requested. For example, the ASB and AQB 

requested a total of over $9 million in grant money between 1994 and 2003, 

1912 U.S.C. §3332(a)(3).
Page 19 GAO-03-404 Real Estate Appraisal Industry Oversight

but less than $7 million was approved. However, the Appraisal Foundation 

also has other sources of revenue other than the grants it receives from the 

Appraisal Subcommittee. For example, the $870,373 grant that the 

Appraisal Foundation received during calendar year 2001 represented 

approximately 36 percent of the Appraisal Foundation’s total revenue of 

$2.4 million for that year. (The largest source of revenue for the Appraisal 

Foundation in 2001 was $1.1 million from publication sales.) Further, in 

commenting on a draft of this report, the Appraisal Subcommittee noted 

that the ASB and AQB had not used all of the grant funds provided in past 

years.

The Appraisal Subcommittee told us that it did not have the current-year 

funds to fully meet the ASB’s and AQB’s grant requests over the past 3 

years. However, the Appraisal Subcommittee had a $3.7 million surplus as 

of December 2001. According to Appraisal Subcommittee officials, the 

surplus was built up in its early years of operation when its revenues 

exceeded its expenses and grants to the ASB and AQB. Subcommittee 

officials stated that in recent years its expenses have increased—primarily 

due to inflation and expenses associated with its monitoring activities—

and that this in turn has limited the amount of funds available for grants to 

the ASB and AQB from current-year funds. They explained that it has not 

been the Appraisal Subcommittee’s policy to use the surplus to provide 

grants to the ASB and AQB. When the ASB’s and AQB’s initial grant 

requests have exceeded the difference between the Appraisal 

Subcommittee’s current-year revenues minus its expenditures, the 

Appraisal Subcommittee has requested that the Appraisal Foundation 

adjust its grant requests accordingly. 

Appraisal Subcommittee officials also stated that inflation and other 

factors will likely continue to raise the boards’ expenses by up to 5 percent 

per year. Given that the number of appraisers has remained static for the 

last several years, subcommittee officials did not anticipate their revenues, 

which are based primarily on licensing and certification fees, to increase. 

As a result, future grants to the ASB and AQB are expected to fall unless 

the subcommittee uses its surplus, raises the $25 fee that states collect 

from appraisers on the subcommittee’s behalf, or both. 

According to ASB and AQB officials, future funding shortfalls may limit the 

activities they believe enhance the quality, timeliness, and usefulness of 

standards and qualifications. For example, the AQB chair commented that 

additional funding is needed to update their “body of knowledge,” which 

outlines the concepts, theories, paradigms, and applications of the real 
Page 20 GAO-03-404 Real Estate Appraisal Industry Oversight

property appraisal profession and delineates the skill necessary to practice. 

The AQB believes that updating its body of knowledge is necessary to keep 

pace with changes in the marketplace. Likewise, ASB and AQB officials 

stated that funding is needed to ensure that its education and professional 

standards keep pace with trends and issues such as the lack of terrorism 

insurance and polluted properties and how they might impact a property’s 

value. According to ASB and AQB officials, the ultimate impact of funding 

shortfalls could be a weakening in the protections intended by Title XI 

because appraisal standards and appraiser qualifications may not keep 

pace with changes in the marketplace. 

States Cited Funding 

Limitations and Frequent 

USPAP Updates as 

Impediments

Most of the states identified funding and staffing deficiencies as the most 

serious challenges they faced in carrying out their Title XI duties. Of those 

states that reported challenges, about two-thirds of the states said that they 

needed additional funding to conduct investigations, and over threequarters said that they needed additional staff. The states also reported that 

the frequency of USPAP updates was an administrative burden and created 

challenges in investigating and enforcing complaints of USPAP violations. 

Based on our survey of state and territorial regulators of the appraisal 

industry, the average state agency had about 3 staff members, who were 

responsible for overseeing almost 2,000 appraisers. Many of these state 

agencies reported that they needed to share resources—administrative 

staff, office space, investigators, or all three—with other state agencies in 

order to perform their Title XI duties. The survey results indicated that 

investigations of complaints about problem appraisers suffered most from 

these shortages. The majority of states sharing resources were sharing 

investigators, who often had no real estate appraisal experience. In one 

agency newsletter, a state official explained that without adequate funding 

states could not effectively administer their appraiser certification 

programs and investigate and dispose of disciplinary cases in a timely 

manner. According to an official from another state, the agency knows that 

more enforcement and faster turnaround times are needed in investigating 

complaints but is hindered by its limited resources. According to Appraisal 

Subcommittee officials, their general counsel analyzed whether the 

subcommittee could provide grants to the states to help provide funding for 

their Title XI activities and determined that it lacked the necessary legal 

authority. 

Seventy percent of state appraiser regulatory agencies responding to our 

survey indicated that USPAP updates are too frequent. One state reported 
Page 21 GAO-03-404 Real Estate Appraisal Industry Oversight

that frequent changes to USPAP have made processing complaints difficult 

because staff had to review so many versions of USPAP to determine 

whether complaints were valid. Another state pointed out that regulating 

appraisers was difficult when the appraisal standards changed so 

frequently. According to ASB officials, USPAP has been in place for only 15 

years, and annual updates have been needed because so many changes 

have occurred in the appraisal industry. Moreover, they told us that many of 

the changes that have been incorporated into USPAP are a result of 

requests from state regulators. The officials explained that over the years 

the ASB has experimented with different formats for updating USPAP but 

has found that issuing an annual publication has been the best way to 

ensure that everyone is using the same standards. The ASB and the 

Foundation are currently working on developing a future publishing 

schedule of having USPAP issued biennially. In addition, ASB officials 

stated that they have recently started providing state regulators 

complimentary newsletters highlighting ASB and AQB activities and noting 

any changes, modifications, or clarifications to USPAP or appraiser 

qualifications criteria. Some states have found the annual updates to be a 

legislative burden in terms of getting the new regulations adopted, but the 

majority of states reported that they had been able to update their real 

estate appraisal regulations or rules in 6 months or less.

Federal Financial Institution 

Regulators Did Not Identify 

Any Major Impediments

The federal financial institution regulators indicated that they have not 

encountered any major impediments to fulfilling their Title XI 

responsibilities. However, some of the federal financial institution 

regulators stated that the number of different entities involved in the Title 

XI oversight structure sometimes made resolving issues difficult and 

hindered efforts to develop a common approach to examining structural 

issues. They noted that faulty and fraudulent real estate appraisals have 

been associated with losses incurred by federally insured financial 

institutions—such as in the case of illegal real estate flipping—and have 

resulted in financial harm to individual consumers. However, all of the 

regulators stated that real estate appraisals have not been a major factor in 

the failure of depository institutions since the passage of Title XI.
Page 22 GAO-03-404 Real Estate Appraisal Industry Oversight

Appraisal Subcommittee 

Stated That Rule-Making 

Authority and Enforcement 

Options Could Facilitate Its 

Oversight of States

As discussed earlier, the Appraisal Subcommittee is responsible for 

monitoring states’ compliance with Title XI. According to subcommittee 

officials, the lack of rule-making authority and limited enforcement powers 

make achieving the uniformity and standardization intended by Title XI 

more difficult. In addition, the officials noted that because the 55 state 

appraiser regulatory agencies took a variety of approaches to implementing 

Title XI, expanding the subcommittee’s function to allow it to issue 

regulations would help ensure greater consistency among the states in 

credentialing appraisers and enforcing the most current version of USPAP. 

However, giving the Appraisal Subcommittee rule-making authority would 

also change the subcommittee’s role under Title XI from a monitoring to a 

regulatory function.

The Appraisal Subcommittee has issued 10 policy statements to “assist the 

states in the continuing development and maintenance of appropriate 

organizational and regulatory structures for certifying, licensing, and 

supervising real estate appraisers.”20 For example, Statement 5 indicates 

that states should not require temporary practitioners—appraisers from 

other states with temporary licenses—to affiliate with in-state appraisers 

and recommends that states forward information about disciplinary 

actions against visiting appraisers to the appraisers’ home states. However, 

adherence to these recommendations varies across states. Our survey 

indicated that 98 percent of respondents adhered to the nonafiiliation 

policy but that less than 50 percent were notifying home states about 

disciplinary actions. 

Subcommittee officials stated that currently the only enforcement action 

they can take under Title XI is to decertify a state. Decertification prohibits 

all licensed or certified appraisers from that state from performing 

appraisals in conjunction with federally related transactions. Because this 

action is so severe and could significantly affect a state’s real estate market, 

the subcommittee has never used it, and its impact has not been tested. In 

addition, the decertification action can be taken only for the limited 

purposes specified in Title XI and is subject to proof requirements and 

judicial review.21

20Appraisal Subcommittee, Policy Statements Regarding State Certification and Licensing 

of Real Estate Appraisers (Washington, D.C: Sept. 22, 1997, as amended).

21See 12 U.S.C. § 3347(b),(c) (2000).
Page 23 GAO-03-404 Real Estate Appraisal Industry Oversight

During our review, the Appraisal Subcommittee noted that its oversight of 

the states could be strengthened if it had more enforcement authority—for 

example, the authority to assess monetary penalties or to require that a 

state stop an activity or practice. However, in commenting on a draft of this 

report, the subcommittee stressed that it has always been able to ensure 

that states are complying with Title XI within the current supervisory and 

enforcement structure. 

Industry Participants 

Raised Various 

Concerns about the 

Title XI Oversight 

Structure

Representatives of federal and state regulatory agencies, appraiser trade 

groups and education providers, and the mortgage industry expressed 

various concerns and conflicting viewpoints about the Title XI regulatory 

structure. Some of the industry participants cited the concern that Title XI 

left the minimum qualification criteria for licensed real estate appraisers to 

the states resulting in the lack of a national standard and gaps in Title XI’s 

regulatory coverage, particularly the exclusion of certain types of financial 

institutions and mortgage brokers who increasingly account for a large 

volume of loan originations. Second, some cited concerns about a lack of 

uniformity among the states in (1) licensing and certification practices, (2) 

requirements for approving educational activities, and (3) complaint 

referrals and enforcement activities, especially for suspected problem 

appraisers. These perceived gaps in the Title XI oversight structure are, in 

part, reflective of the primary intent of Title XI, which was to protect the 

federal deposit insurance funds rather than individual consumers. There 

was no clear consensus regarding the need for or impact of possible 

changes to the existing Title XI regulatory structure.

Industry Participants Cited 

Lack of National Licensing 

Criteria

Participants in the real estate appraisal industry expressed concern that 

licensed real estate appraisers, unlike certified appraisers, do not have to 

meet national qualification criteria. According to many of the groups we 

contacted, Title XI’s most significant shortcoming is the provision that 

leaves the criteria for licensed appraisers to each state, including decisions 

such as how often appraisers should be licensed and whether they should 

be licensed at all. Under Title XI, a “state-licensed appraiser” is defined as 

“an individual who has satisfied the requirements for state licensing in a 

state or territory.”22 In contrast, certified appraisers must meet certification 

2212 U.S.C. § 3345(c) (2000).
Page 24 GAO-03-404 Real Estate Appraisal Industry Oversight

criteria that adhere to the AQB’s requirements.23 While Title XI contains this 

mandate for certified appraisers, it contains no reference to licensing 

requirements for licensed appraisers. Moreover, Title XI specifies that the 

subcommittee will not set requirements for licensing and that any 

subcommittee recommendations are nonbinding.24 However, the federal 

financial institutions regulators have the authority to issue additional 

qualification requirements as needed to carry out their statutory 

responsibilities.25

Some groups believe that this provision has led to a lack of uniform 

qualifications in licensing across the country (for example, in education 

and experience) and may also have helped to create an environment 

conducive to mortgage fraud. According to an official from the Appraisal 

Subcommittee, Title XI’s intent was to ensure that appraisers for federally 

related transactions met minimum requirements for experience and 

education and had been examined in order to ensure a minimum level of 

competency. Under the current system, individuals in some states can 

qualify for an appraiser license without having satisfied any educational 

requirements or met any criteria for work experience and without having 

passed any examinations.

Officials from the Appraisal Subcommittee reported that while most states 

have adopted statutory or regulatory provisions requiring licensed 

appraisers to meet AQB recommended criteria, six states do not have a 

state-licensed appraiser category, and six have licensing requirements that 

are less stringent than the AQB’s. As a result, subcommittee officials said, 

some licensed appraisers may not meet recommended qualifications 

criteria. For example, in 2002, one state passed legislation that eliminated 

the experience requirement for its licensed appraisers; and, in 2001, 

another state revised its licensing criteria to comply with AQB 

requirements but at the same time “grandfathered” in several hundred 

licensed appraisers. As a result, lenders and homebuyers who rely on proof 

of licensing when hiring appraisers may not know what kind of criteria, if 

any, the appraisers were required to meet. The Appraisal Subcommittee 

2312 U.S.C. § 3345(a) (2000).

2412 U.S.C. § 3345(e) (2000).

2512 U.S.C. § 3345(d) (2000).
Page 25 GAO-03-404 Real Estate Appraisal Industry Oversight

and other industry participants view the issue as a growing problem, since 

licensed appraisers are likely to perform the majority of residential 

appraisals. 

According to two regulatory officials, problems related to the lack of 

uniformity in licensing appraisers are compounded by the fact that Title XI 

also makes licensing voluntary at the state level. Voluntary licensing means 

that the state does not have a legislative requirement that appraisers be 

licensed or certified. However, the volunteer states do provide the 

opportunity for an appraiser to become licensed or certified to perform 

federally related transactions. These regulators, as well as one appraiser 

trade group, view voluntary licensing as a serious flaw in the industry’s 

regulatory structure and a probable contributor to mortgage fraud. 

Moreover, voluntary licensing may indirectly place the onus on financial 

institutions to ensure that appraisers for federally related transactions have 

the appropriate qualifications. According to officials from the Appraisal 

Subcommittee, state licensing requirements for appraisers falls into one of 

three categories—voluntary, mandatory for federally related transactions, 

and mandatory (table 2). As of March 2003, 10 states were classified as 

being in the voluntary licensing category, and one federal financial 

institution regulator reported that most of the mortgage fraud problems it 

has encountered have occurred in states where licensing is voluntary. His 

views were echoed in an earlier Federal Bureau of Investigation testimony 

at a special congressional hearing on predatory lending in March 2000.26

According to this testimony, the most egregious property flipping problems 

have occurred in states where licensing is voluntary for transactions that 

are not federally related.

26Form of Real Estate Fraud Known As Flipping: Hearing before a Subcommittee of the 

Senate Committee on Appropriations, March 27, 2000, Baltimore, Maryland.
Page 26 GAO-03-404 Real Estate Appraisal Industry Oversight

Table 2: State Appraiser Licensing Requirements

Source: Appraisal Subcommittee.

a

According to a subcommittee official, under this requirement appraisers who are not licensed or 

certified could perform appraisals in connection with federally related transactions without violating 

state law, but the federally regulated financial institution using that appraiser's services could be 

subjected to federal regulatory action.

b

Under state law, federally related transactions should include transactions involving the Federal 

Housing Administration and the two government-sponsored enterprises, Fannie Mae and Freddie Mac.

Industry Participants Were 

Concerned That Title XI 

Does Not Cover Many 

Transactions

Industry participants also voiced concerns about the fact that Title XI does 

not cover financial institutions and mortgage brokers that are not subject 

to federal regulation. When Title XI was enacted, federally regulated 

lending institutions made most mortgage loans. Today, other financial 

institutions, such as mortgage bankers and finance companies, account for 

a substantial share of the mortgage marketplace. Many of these financial 

institutions that are not federally regulated, as well as an increasing portion 

of regulated financial institutions, use mortgage brokers to originate loans, 

so that these brokers now originate about 50 percent of all mortgage loans. 

These entities and individuals may have state licenses, but they are not 

monitored by federal or state entities through, for instance, examinations 

State licensing requirement Description of requirement States

Voluntarya State law does not require appraisers to be 

state licensed or certified. A person wanting to 

perform appraisals connected with federally 

related transactions may choose to become 

state licensed or certified.b

Alaska, Indiana, Iowa, Kentucky, Louisiana, 

Massachusetts, North Dakota, Ohio, Oklahoma, 

and Wyoming (10)

Mandatory for federally related 

transactions only

State law requires all appraisers connected 

with federally related transactions to be state 

licensed or certified. Persons performing 

appraisals in transactions that are not federally 

related need not be licensed or certified. 

Arkansas, California, Colorado, Florida, Georgia, 

Hawaii, Illinois, Kansas, Maryland, Montana, New 

Hampshire, New York, Vermont, Wisconsin, and 

Guam (15)

Mandatory State law requires all persons performing any 

kind of appraisal activity for any kind of real 

estate transaction to be state licensed or 

certified.

Alabama, Arizona, Connecticut, Delaware, 

District of Columbia, Idaho, Maine, Michigan, 

Minnesota, Mississippi, Missouri, Nebraska, 

Nevada, New Jersey, New Mexico, North 

Carolina, Oregon, Pennsylvania, Rhode Island, 

South Carolina, South Dakota, Tennessee, 

Texas, Utah, Virginia, Washington, West Virginia, 

Northern Mariana Islands, Puerto Rico, and 

Virgin Islands (30)
Page 27 GAO-03-404 Real Estate Appraisal Industry Oversight

or audits.27 Appraisers have anecdotally reported that these originators 

pressure them the most to appraise properties at or near the purchase price 

to assure that the mortgage transaction will occur.

As previously noted, the federal financial institution regulators have set the 

minimum for transactions requiring appraisals at $250,000. Some industry 

participants have said that this threshold and any increases to it undercut 

efforts to protect consumers. These groups believe that oversight of real 

estate appraisals should be geared toward the interests of consumers, who 

should be able to expect an unbiased, objective third-party opinion of the 

value of real property offered as security for a loan. However, Title XI was 

enacted in response to the impact of appraisal problems on federally 

insured depository institutions, and federal financial institution regulators 

have identified few problems or risks to depository institutions associated 

with loans valued below the $250,000 threshold. For transactions of less 

than $250,000, federal financial institution regulators allow lenders to use 

either an evaluation—a simpler assessment of a property’s market value. 

For example, the results of a computerized valuation known as an 

automated valuation model (AVM) could be used as the basis for an 

evaluation. 28 The two groups holding some of the largest portfolios of 

residential real estate mortgages, Fannie Mae and Freddie Mac, 

increasingly are using AVMs in place of traditional appraisals. However, 

because an evaluation or AVM is not considered an appraisal, it is not 

subject to the same standards and does not require a licensed or certified 

appraiser. Appendix V describes the basic types of AVMs and the benefits 

and concerns that have been associated with them. 

Industry Participants Cited 

Differences Among State 

Licensing Programs

Representatives of various groups we contacted expressed some concerns 

about differences in the standards that states have set for temporary, 

reciprocal, and general licenses. The differences noted by these groups 

focused on the lack of uniformity in the implementation of Title XI 

27Fannie Mae officials noted that when an appraisal is required for a mortgage that will be 

delivered for sale to the GSE, mortgage brokers must use appraisers that are state-licensed 

or certified in accordance with Title XI.

28An evaluation is generally performed by an individual who does not need a license or 

certification. For more information on real estate evaluations, see U.S. General Accounting 

Office, Bank and Thrift Regulation: Better Guidance Is Needed for Real Estate 

Evaluations, GAO/GGD-94-144 (Washington, D.C.: May 23, 1994). In addition, the federal 

financial institutions regulators issued Interagency Appraisal and Evaluation Guidelines on 

October 27, 1994. 
Page 28 GAO-03-404 Real Estate Appraisal Industry Oversight

requirements. According to these groups, the lack of uniformity between 

states in the implementation of Title XI has created difficulties for lenders 

and appraisers who operate in multiple states. 

Industry participants cited a lack of uniformity in the way states grant 

temporary and reciprocal licenses. Because credentials from one state may 

not be recognized by another, appraisers often have to carry multiple state 

licenses. Title XI requires states to recognize on a temporary basis real 

estate appraisers who have been certified or licensed by another state if 

certain conditions are met and encourages states to develop reciprocity 

agreements that readily authorize appraisers who are licensed by and in 

good standing with their home state to perform appraisals in other states.29

The Appraisal Subcommittee has issued policy statements on temporary 

practice and encouraging reciprocity. However, our survey indicated that 

state regulatory agencies continue to vary widely on these issues. For 

example, of the 53 states and territories that responded to this question, 40 

issued temporary licenses for single assignments, 16 allowed an appraiser 

only one temporary license at a time, and 15 limited the number of 

temporary licenses an appraiser could receive annually. Six of the 54 

respondents to our survey indicated that visiting appraisers are required to 

pass a state exam in order to receive a reciprocal license. This practice is 

not only inconsistent with the spirit of Title XI but also with the Appraisal 

Subcommittee’s guidance recommending that states accept licenses or 

certification from other states meeting AQB requirements. In addition, a 

representative from a banking trade group told us that lenders are 

dissatisfied with state reciprocal licensing requirements, which make it 

difficult to use the same appraisers in multiple jurisdictions or states. The 

trade group representative added that some states are more restrictive than 

others. According to our survey, 23 states and territories require a 

reciprocity agreement with the state or territory issuing an appraiser’s 

original license before issuing a reciprocal license. The inability to readily 

obtain a license in another state may be especially problematic during 

periods of heavy refinancing, when some states may need more appraisers. 

Further, the states do not use uniform appraiser classifications or fee 

requirements. The Appraisal Subcommittee recognizes four licensing 

categories in its National Registry of Appraisers—licensed, certified 

general, certified residential, and transitional license. We found that the 

number of categories for licensed and certified appraisers used by the 

2912 U.S.C. § 3351(a),(b) (2000).
Page 29 GAO-03-404 Real Estate Appraisal Industry Oversight

states and territories ranged from two to seven and included such non-AQB 

classifications as residential real property appraiser and limited general 

appraiser. The states’ license fees also varied by the type of license or 

certification sought and the number of years it covered. Individual states 

set fees for certifying and licensing appraisers, with annual fees ranging 

from $22 to $450 and initial licensing terms of from 1 to 4 years. For the 55 

state agencies with a certified general appraiser classification, we found 

that 22 states had a 1-year term with fees ranging from $120 to $450, 28 

states had 2-year terms and fees from $44 to $680, and 3 states had 3-year 

terms with fees from $150 to $470. One state had a 4-year term but did not 

provide information on its fees.30

The results of our analysis of license renewal fee requirements were 

similar. Specifically, for the certified general appraiser classification, we 

found that 19 states had a 1-year term with fees ranging from $105 to $400, 

29 states had 2-year terms with fees from $100 to $610, and 6 states had 3-

year terms with fees from $225 to $470. We also found that these provisions 

varied depending on the category of license or certification sought. For 

example, the renewal term for a licensed real property appraiser 

(residential) ranged between 1 to 4 years across states, while the renewal 

term for a licensed real property appraiser (general) ranged from 1 to 2 

years. 

Industry Participants 

Expressed Concerns about 

the Costs and Lack of 

Uniform Approval 

Processes for Appraiser 

Education Courses

Several state regulators and education providers expressed concerns about 

the expenses and lack of uniformity in the processes associated with 

approving instructors and courses for appraisers’ continuing education. A 

representative of an appraisers’ trade group noted that gaining approval for 

a course and an instructor in one state does not necessarily translate into 

approval in other states. As a result, the trade group spent around $30,000 

having courses for a July 2000 training conference approved in all 

jurisdictions. He added that one-fourth of the states require certified 

checks, notarized documents, or both to initiate the course approval 

process. These participants believe that the added cost and procedures 

involved in acquiring approval in each state is overly burdensome. 

AQB officials told us that the board has set up a voluntary national system 

for approving courses and that these concerns had influenced their project. 

30The remaining state’s program charged a certified general appraiser $45 in even-numbered 

years and $90 in odd-numbered years. 
Page 30 GAO-03-404 Real Estate Appraisal Industry Oversight

AQB and Appraisal Foundation officials said that their efforts were not 

intended to usurp the states’ authority. According to the AQB, the course 

approval program was designed to be a convenience for both course 

providers and state regulators while helping to ensure quality appraisal 

courses. However, AQB’s course and instructor approval programs have 

met opposition in some quarters. For example, some state officials and 

other industry participants stated that requiring AQB approval for all 

USPAP refresher courses and instructors and restricting course materials 

and examinations to AQB publications—for which AQB charges a royalty 

fee—represent a conflict of interest. However, AQB officials stated that any 

educational provider may submit a USPAP course for consideration to be 

deemed equivalent to the national USPAP courses and added that, to date, 

four educational providers have submitted courses which have been 

approved as equivalent to the national USPAP courses. In addition, some 

education providers have stated that the fees charged by the AQB for its 

course and instructor approval are excessive. On the other hand, some 

state and federal financial institution regulators believe that the Appraisal 

Foundation and its boards possess expertise and resources the states do 

not have and thus are needed to ensure that the quality of appraiser 

education and training is not compromised. Appendix VI contains 

information on the fees charged by the AQB for its course and instructor 

approval programs.

Similarly, some states and educators have expressed concern that the AQB 

and Appraisal Subcommittee have encroached upon state authority in 

setting certain appraisal standards and appraiser qualifications. For 

example, the regulatory agency and an education provider in one state 

objected to certain AQB education requirements for certified appraisers, in 

particular a requirement that education providers be certified through the 

AQB’s instructor certification program. As part of its industry monitoring 

function, the Appraisal Subcommittee reviewed those standards and 

determined that the AQB had acted appropriately in adopting them. The 

Appraisal Subcommittee has also instructed states to rescind approvals of 

distance education courses for certified real property appraisers if the 

courses or their providers did not conform to AQB criteria.31 The state 

appraiser regulatory agency and education provider contended that the 

31Distance education does not require that the student be physically present in the same 

location as the instructor. Common delivery systems used in distance education involve 

technology such as video, computer-based training, and the Internet to bridge the 

instructional gap.
Page 31 GAO-03-404 Real Estate Appraisal Industry Oversight

education provider standards exceed the scope of the AQB’s responsibility 

as contemplated by Title XI and that the Appraisal Subcommittee, by 

recognizing and affirmatively applying those standards, acted beyond its 

monitoring authority.

In light of those assertions, the Appraisal Subcommittee requested a legal 

opinion from the Legal Advisory Group of the Federal Financial Institutions 

Examination Council on (1) the scope of AQB’s authority to adopt 

education-related standards for certified appraisers; (2) the scope of the 

Appraisal Subcommittee’s responsibility in monitoring the AQB; and (3) the 

Appraisal Subcommittee’s authority to oversee state regulators’ 

implementation of AQB standards.32 In a June 2002 opinion, the Legal 

Advisory Group concluded that the AQB’s and Appraisal Subcommittee’s 

actions appeared to be consistent with and authorized by Title XI. Referring 

to the legislative history of Title XI, the Legal Advisory Group opinion 

stated that with Title XI Congress intended to create consistent 

certification standards for appraisals nationwide and that Congress relied 

on the AQB to set minimum appraiser certification criteria. A copy of this 

decision can be found in appendix VII. 

Industry Participants Cited 

a Need for Improvement in 

the Referral Process for 

Problem Appraisers

Participants in the real estate appraisal industry described the process of 

referring questionable appraisals or appraisers to state regulatory 

authorities as needing improvement, saying that few referrals were being 

made. Title XI instructs federal agencies or federal instrumentalities to 

report any action of a state-certified or -licensed appraiser that represents a 

violation of Title XI requirements to the appropriate state agency.33

According to an Appraisal Subcommittee official, a referral is basically a 

notice to the state agency that a potential violation exists that warrants 

investigation. 

State regulatory officials also said that they had received few referrals from

lenders and bank regulators. The state officials believed this problem was a 

serious one and felt that institutions engaging appraisers should be 

responsible for referring appraisers to agencies for investigation and 

disciplinary action. Our survey of state regulators suggests that lenders and 

32The Legal Advisory Group consists of the general or chief counsels of the FDIC, FRS, OCC, 

OTS, and NCUA.

3312 U.S.C. § 3348(c). 
Page 32 GAO-03-404 Real Estate Appraisal Industry Oversight

federal agencies are referring few problem appraisers. Results of the 

survey showed that the greatest percentage of complaints came from 

consumers and other appraisers. Likewise, Appraisal Subcommittee staff 

reported that based on their state reviews, lenders and bank regulators are 

not actively making referrals and that when they do, the referrals are often 

incomplete or unspecific. 

Federal financial institution regulators have an official interagency policy 

encouraging depository institutions to make referrals. But officials from 

the regulatory agencies told us that the institutions often follow the advice 

of their legal departments and simply stop using offending appraisers 

rather than reporting them because of the potential for lawsuits. In 

addition, one regulatory official stated that regulations on confidentiality 

and disclosure prevented them from providing information discovered 

during an examination unless a criminal act had occurred.

However, both HUD and Fannie Mae have made referrals to state 

regulatory agencies. HUD, for example, has made such referrals, even 

though it has internal systems in place for disciplining problem appraisers. 

HUD imposes administrative sanctions—usually removing the problem 

appraisers from the FHA Register for a specified time—and then notifies 

the state licensing or certification agency in writing of its action. During 

calendar year 2002, HUD made 112 referrals to state regulatory agencies. In 

the referrals, HUD provided the state agency with the appraiser’s license or 

certification number, the reason for removal, and copies of the original 

appraisal(s) and HUD’s review. Officials from Fannie Mae, which made 860 

referrals to 45 different state regulatory agencies between August 2001 and 

August 2002, commented that the agency had revised its referral program 

to better meet state regulatory agencies’ information needs for processing a 

referral. Fannie Mae officials informed us that they provided a complete 

copy of each questionable appraisal report and an appraisal review 

performed by another state-licensed or –certified appraiser in the same 

state to help identify the appraisal deficiencies for the state’s review and 

investigation. The officials also noted that it was difficult to refer 

questionable appraisals to the different state agencies due to the lack of 

consistent processes and procedures for accepting, reviewing, and 

investigating questionable appraisal reports.

In the case of both HUD and Fannie Mae, neither entity was routinely 

providing the Appraisal Subcommittee with copies or listings of the 

referrals made to the states. According to Appraisal Subcommittee 

officials, information on referrals made to the states would aid them in 
Page 33 GAO-03-404 Real Estate Appraisal Industry Oversight

their field reviews of the states’ responsiveness to complaints about 

appraisers. According to Fannie Mae officials, they provided the Appraisal 

Subcommittee with 27 cases (involving 13 different states) in May 2002, 

along with the states’ responses, to demonstrate lack of effective 

enforcement actions by some of the states. Fannie Mae discontinued 

sharing information on referrals with the Appraisal Subcommittee due to 

its perception that the subcommittee did not take action on the specific 

referrals.

Industry Participants Noted 

Variations in State 

Regulatory Agencies’ 

Enforcement of Title XI 

Requirements 

Some industry participants reported a lack of uniformity in processing 

complaints and taking disciplinary actions against those problem 

appraisers that were referred to state regulatory authorities and cited this 

issue as an obstacle to an effective enforcement program. Furthermore, the 

state agencies told us that while they have enforcement structures in place, 

some agencies have questioned their ability to mount effective 

enforcement programs because of funding shortfalls; as noted earlier, many 

states responding to our survey reported funding inadequacies. In general, 

the complaint process entails filing a complaint alleging a violation, 

conducting an investigation, determining whether a violation occurred, and 

rendering an outcome, including any disciplinary actions. Industry 

participants’ concerns about the enforcement process included differences 

in state requirements and practices for filing a complaint, the quality and 

timeliness of investigations, and complaint outcomes. 

Several entities reported that states’ complaint filing requirements ranged 

from simple to onerous. For example, some states require simply that 

complainants submit information on an allegation, while other states 

accept complaints only on a specific form. Further, some states required 

that complaint documents be notarized or that complainants provide 

witnesses and testify against appraisers. Some industry participants also 

stated that the length of time needed to resolve a complaint was too long—

for example, one state required 1 to 2 years—potentially allowing the 

appraiser to continue what might be fraudulent or questionable practices. 

Some groups also cited statutes of limitations as a major obstacle in 

penalizing appraisal violators. For example, statutes in at least three states 

prohibit both investigations into and punitive actions for unlawful appraisal 

activities that allegedly took place more than 3 to 5 years earlier. Finally, at 

least one complainant reported concerns about the expertise of 

investigators, noting that investigators in the Attorney General’s office 

handling a case of mortgage fraud may not be knowledgeable about the 

appraisal profession.
Page 34 GAO-03-404 Real Estate Appraisal Industry Oversight

In addition to concerns about the complaint process, industry participants 

reported misgivings about outcomes, including disciplinary actions and 

feedback. For example, Fannie Mae officials commented that they had 

been dissatisfied with some state decisions on punitive actions and with 

the lack of feedback on actions that had actually been taken. The officials 

added that some states do not penalize appraisers for multiple violations if 

the appraisers have already been disciplined or do not tell complainants 

what action was taken. The Fannie Mae officials reported that they have 

observed a lack of consistent and effective investigation and enforcement 

by some of the states. As an example, they noted that some states appeared 

to perform meaningful investigations and took appropriate actions while 

other states appeared unwilling to investigate similar cases with 

comparable support and documentation. According to the officials, Fannie 

Mae is considering discontinuing the practice of sending referrals to 

several states because, in their view, the state regulatory agencies have 

failed to act on them. HUD officials echoed this view, saying that states 

typically do not take action when they are notified that an enforcement 

action has been taken against an appraiser. In those rare instances when a 

state does take an action, it often refuses to disclose this information to 

HUD, citing privacy concerns. However, Appraisal Subcommittee officials 

told us that in many states, state law might prohibit the disclosure of 

actions that are not a matter of public record. Another industry participant 

reported that there is little incentive to make referrals given the fact that 

there is no assurance that the state will take action.

According to Appraisal Subcommittee officials, a number of states have 

told them that the referral information that Fannie Mae and HUD have 

provided to the states is frequently in a format or manner that they cannot 

readily absorb or use. For example, some of the states indicated that they 

received over a hundred referrals from Fannie Mae as one group, which 

overwhelmed the states’ ability to review and investigate the referrals in a 

timely basis. Other states stated that the referrals were for real estate 

transactions for which the state’s statute of limitations had already expired. 

Fannie Mae officials indicated that their referrals consistently include a 

copy of the questionable appraisal and an appraisal field review performed 

by a state-licensed or –certified appraiser in the same state. Fannie Mae 

recommended that the states adopt the one-unit residential appraisal field 

review report as sufficient documentation for referred appraisals of oneunit properties. 34

34Fannie Mae Form 2000 and Freddie Mac Form 1032, dated December 2002.
Page 35 GAO-03-404 Real Estate Appraisal Industry Oversight

We analyzed data states submitted to the Appraisal Subcommittee and 

found that the number of disciplinary actions taken differed widely. For 

example, one state reported taking only a single disciplinary action against 

an appraiser, while two other states accounted for over 25 percent of the 

4,360 disciplinary actions reported as of October 31, 2002.35

Industry Participants 

Indicated No Clear 

Consensus Regarding the 

Need for Changes to the 

Title XI Regulatory 

Structure

There was no clear consensus among the industry participants that we 

contacted regarding the need for or impact of possible changes to the 

existing Title XI regulatory structure. For example, our survey did not 

indicate a clear consensus among state regulatory agencies on the impact 

of eliminating various aspects of the current Title XI regulatory oversight 

structure. However, one state appraiser agency official said that Title XI 

had achieved its intended purpose of protecting federal interests and that 

federal involvement in the oversight of the real estate appraisal industry is 

no longer needed. Another representative of a state appraiser agency stated 

that Title XI needed to be dramatically amended to correct deficiencies in 

the current appraisal oversight structure.36

Among the various representatives of trade groups, education providers, 

and other industry participants that we contacted, there were differing 

opinions as to what, if any, changes were necessary to Title XI. Likewise, 

the responses to the survey that we sent to the state appraiser agencies did 

not indicate a clear consensus regarding states’ views of the impact of 

eliminating some of the central aspects of the Title XI regulatory structure. 

For example, 22 states and territories (41 percent) said that eliminating the 

Appraisal Subcommittee would help in regulating appraisers, while 17 (31 

percent) responded that eliminating the subcommittee would be a 

hindrance. The remaining states felt that not having the subcommittee 

would neither help nor hinder regulation. The states responded more 

positively to the ASB and AQB, with 31 and 23 states, respectively, 

indicating that eliminating them would hinder efforts to regulate 

appraisers.

However, some officials from state appraiser agencies have expressed 

strong viewpoints regarding the need for changes to Title XI. For example, 

an official from one of the state appraiser regulatory agencies noted that of 

35See appendix IV.

36See appendix I, question 21.
Page 36 GAO-03-404 Real Estate Appraisal Industry Oversight

over 30 regulated professions, only the appraisal profession has federal 

oversight. According to this official, Title XI has resulted in the 

establishment of state appraiser regulatory agencies in each of the states 

and the adoption of minimum appraisal standards and appraiser 

qualification criteria, thus protecting federal interests in regulating the 

appraisal industry. This official stated that the states are now in a position 

to oversee the real estate appraisal industry without any federal 

involvement, much as they do other professions. He suggested that 

Congress eliminate the Appraisal Foundation and the AQB and make the 

ASB independent and self-supporting. 

An official from another state regulatory agency said that to correct the 

present system’s problems, Congress would need to completely restructure 

the Title XI structure. He also recommended eliminating the Appraisal 

Subcommittee and the Appraisal Foundation, replacing them with a new 

board at the federal level. The new board would represent the appraisal 

industry more broadly and have strong Congressional accountability. In 

addition, he recommended that the minimum standards for appraisals and 

appraiser qualifications be amended only every 5 years, if needed. He also 

suggested that Congress clearly designate the states as having sole 

responsibility for administering and enforcing Title XI. 

Conclusions Title XI brought about significant changes in the real estate appraisal 

industry. According to federal financial institution regulators, real estate 

appraisals have not been a major factor in the failure of federally insured 

financial institutions since the passage of Title XI. However, opportunities 

exist to enhance the effectiveness of the current regulatory system to help 

ensure that federally related transactions are based on accurate 

assessments of the value of properties used as collateral for loans.

Developing and applying consistent criteria to assess states’ compliance 

with Title XI requirements could increase the usefulness of the letters that 

the Appraisal Subcommittee provides to the states based on its field 

reviews as well as the annual report that the Appraisal Subcommittee 

provides to Congress on the Title XI program. Further, the Appraisal 

Subcommittee’s field reviews of the states could be enhanced if HUD and 

the government sponsored enterprises provided the subcommittee with 

information on referrals made to the states on questionable appraisals and 

problematic appraisers. Similarly, the Appraisal Subcommittee could help 

HUD and Fannie Mae ensure that referral information on problem 
Page 37 GAO-03-404 Real Estate Appraisal Industry Oversight

appraisals is provided to the state appraiser agencies in a format and 

manner that facilitates appropriate follow-up action by the states.

Achieving Title XI’s purpose depends in part on the ability of ASB and AQB 

to ensure that appraisal standards and qualification criteria for appraisers 

are reflective of changes in the real estate mortgage industry and 

marketplace; these entities’ ability, in turn, depends in part on the amount 

of funding provided to them annually by the Appraisal Subcommittee. 

Achieving Title XI’s purpose also depends on actions taken by the states. 

The lack of funding and resources cited by state appraisal regulatory 

agencies suggests that some states may be unable to adequately enforce 

appraiser compliance with the minimum standards envisioned by Title XI. 

At the same time, the Appraisal Subcommittee—the primary federal entity 

in the oversight structure created by Title XI—has accumulated an 

operating surplus of almost $4 million, generated from the fees levied and 

collected by the states on behalf of the federal government.

Recommendations To improve its monitoring of the implementation of Title XI, we 

recommend that the Chairman of the Appraisal Subcommittee

• develop and apply consistent criteria for determining and reporting 

states’ compliance levels with Title XI requirements; 

• explore potential options for funding or otherwise assisting states in 

carrying out their Title XI activities, particularly the investigation of 

complaints against appraisers; and

• explore alternatives for providing future grant funding, including 

drawing on its surplus if necessary, to the Appraisal Foundation and its 

two boards in support of their Title XI activities.

To improve the process for referring problem appraisals by entities that 

oversee or use real estate appraisals to the state appraiser agencies for 

possible enforcement actions, we recommend that the Chairman of the 

Appraisal Subcommittee work with the Chairmen of Fannie Mae and 

Freddie Mac and the Secretary of the Department of Housing and Urban 

Development to help ensure that referrals of problem appraisals (1) are 

provided to states in a format that is useful to the state appraisal agencies 

and (2) facilitate the subcommittee’s efforts to monitor decisions made by 

states regarding the supervision of appraiser practices.
Page 38 GAO-03-404 Real Estate Appraisal Industry Oversight

Agency Comments We requested and received written comments on a draft of this report from 

HUD, Fannie Mae, Freddie Mac, the Appraisal Foundation, and the 

Appraisal Subcommittee that are presented in appendixes VIII through XII. 

In addition, we requested comments from FDIC, FRS, OCC, OTS, and 

NCUA who indicated that their comments had been incorporated into 

those provided by the Appraisal Subcommittee. The entities provided a 

variety of written comments. The principal comments and our response are 

summarized below. Technical comments have been incorporated into the 

report where appropriate.

HUD concurred with our recommendation that the Chairman of the 

Appraisal Subcommittee work with HUD, Fannie Mae, and Freddie Mac on 

referrals of problem appraisals to states for follow-up and appropriate 

enforcement. However, HUD pointed out that it is already involved in the 

work of the subcommittee, as a HUD representative serves as a member of 

the subcommittee. Our draft report noted that the six Appraisal 

Subcommittee Board members are designated by the heads of the five 

financial institution regulators and by HUD. Both Fannie Mae and Freddie 

Mac expressed concern about this recommendation, commenting that they 

are not regulatory entities. We did not intend to imply that these entities 

have a regulatory role under Title XI. Rather, we directed the 

recommendation to the Appraisal Subcommittee, which is responsible for 

monitoring state activities under Title XI. However, both Fannie Mae and 

Freddie Mac review the quality of certain appraisals for loans that they 

purchase and can refer problematic ones to the states for action. Therefore, 

the two government-sponsored enterprises are in a unique position to 

provide expertise, information, and lessons of experience to the 

subcommittee. As Fannie Mae noted in its comments, it has “extensive 

experience in referring unacceptable appraisals to state agencies” and has 

observed both a lack of uniformity in state processes and a lack of 

consistent and effective enforcement actions by state licensing or 

regulatory boards. We have revised the wording of our recommendation to 

emphasize the role that HUD, Fannie Mae, and Freddie Mac can play in 

helping the subcommittee carry out its oversight responsibilities.

Fannie Mae also commented that, based on its experience in referring 

unacceptable appraisals, issues of format have not impeded the states from 

taking effective enforcement action. However, as our draft report noted, 

Appraisal Subcommittee staff involved in field reviews reported that (1) 

referrals are often incomplete or unspecific and (2) according to state 

officials, referrals that Fannie Mae and HUD provided to the states 
Page 39 GAO-03-404 Real Estate Appraisal Industry Oversight

frequently were in a format or manner that they could not readily absorb or 

use. We recognize that, by itself, providing referrals in a more useful format 

will not guarantee more, or more consistent, state enforcement actions. 

Our draft report noted that several factors affect the extent of state 

enforcement efforts, including state-level funding and staffing shortages 

and a scarcity of referrals from lenders and bank regulators. However, we 

continue to believe that improving the referral process could help achieve 

the objectives of Title XI. As our draft report also noted, Fannie Mae has 

revised its referral program to better meet state regulatory agencies’ 

information needs. Consequently, we did not change our recommendation.

In our draft report, we noted that we found no transparent criteria in the 

subcommittee’s field review letters for the reporting of states’ compliance 

with Title XI. In its comment letter, the Appraisal Subcommittee agreed 

that it did not have a formalized rating system that would provide each 

state with an overall rating. However, the Appraisal Subcommittee noted 

that it employs “an informal [rating] system (i.e., Tier 1 and Tier 2) based on 

a state’s overall compliance with Title XI.” The Appraisal Subcommittee 

stated that it had previously considered developing a rating system that 

would allow for comparisons across states and had concluded that such a 

rating system would not assist its Title XI enforcement efforts. However, 

the Appraisal Subcommittee stated in its comment letter that it would 

review this issue again based on our recommendations.

Our draft report expressed a concern of the Appraisal Foundation’s two 

boards (the ASB and AQB): that shortfalls in federal grant funding provided 

by the Appraisal Subcommittee have limited activities that the two boards 

believe enhance the quality, timeliness, and usefulness of standards and 

qualifications. In commenting on our draft report, the Appraisal 

Foundation clarified that federal grant shortfalls could impede the boards’ 

future ability to ensure that standards and qualifications continue to keep 

up with changing industry conditions. Similarly, the Appraisal 

Subcommittee chair commented that in the past the Appraisal Foundation 

has not used all of the funds provided in the federal grants. Our draft report 

noted that the foundation has other sources of revenue and that the 

subcommittee expected future grants to the two boards to decline unless 

the subcommittee took certain actions. We revised our report to clarify that 

the two boards view federal grant funding shortfalls as a potential future 

impediment to their Title XI activities.

Our draft report also characterized the Appraisal Subcommittee’s lack of 

rule-making authority and limited enforcement powers as impediments to 
Page 40 GAO-03-404 Real Estate Appraisal Industry Oversight

the subcommittee’s ability to carry out its Title XI responsibilities. The 

basis for this characterization was statements made by subcommittee 

officials. For example, in its April 11, 2002, written responses to GAO 

questions, the Appraisal Subcommittee stated, 

“Federal oversight [over state appraisal authorities] could be more effective ... if the ASC 

were given rule-making authority, which could be used to establish mandatory state 

reporting mechanisms. Finally, oversight could be strengthened if the ASC had more 

administrative options when addressing noncompliant states. ... The ASC should have 

additional authorities, such as ’cease and desist’ authority and monetary penalties.” 

In commenting on the draft report, the Appraisal Subcommittee agreed that 

general rule-making authority might facilitate its Title XI enforcement and 

that its enforcement options are “limited in number.” But the 

subcommittee also stated that the lack of this authority has not been an 

impediment to achieving compliance. We modified our report to clarify the 

Appraisal Subcommittee’s views and noted that, according to the 

subcommittee, it has always been able to achieve state compliance within 

the current Title XI regulatory and enforcement structure. The Appraisal 

Subcommittee further noted that its policy statements are its formal 

interpretations of Title XI and stated that these should be given deference, 

citing a February 2000 GAO decision. In that decision, we determined that 

the Appraisal Subcommittee reasonably interpreted one provision in Title 

XI relating to a state’s collection and submission of appraiser fees to the 

subcommittee.

In response to our recommendation that the subcommittee explore options 

to assist the states in carrying out their Title XI responsibilities, the 

Appraisal Subcommittee commented that while overall state compliance 

with Title XI would be improved if states had more funding, it did not see 

the subcommittee as the answer to that issue. The letter noted that the 

Appraisal Subcommittee’s only method of obtaining additional funds to 

provide to the states is to increase the national registry fee assessed against 

each appraiser. We agree that the states are in a better position to identify 

needs and to address fee and revenue issues to resolve those needs. 

However, our recommendation addressed exploring options in addition to 

providing funding to help states carry out their Title XI activities. For 

example, the Appraisal Subcommittee could encourage several states to 

pool investigative resources or use other options to help address temporary 

shortages of trained investigators in one state. Alternatively, the Appraisal 

Subcommittee could use its field review reports to identify funding gaps as 

an issue negatively affecting states’ ability to comply with Title XI’s 

provisions. Consequently, we did not change our recommendation.
Page 41 GAO-03-404 Real Estate Appraisal Industry Oversight

We are sending copies of this report to the Chairman and Ranking Member 

of the Senate Committee on Banking, Housing, and Urban Affairs; the 

Chairman and Ranking Minority Member of the House Committee on 

Financial Services; the Secretary of the Department of Housing and Urban 

Development; the Chairman of the Board of Governors of the Federal 

Reserve System; the Chairman of the Federal Deposit Insurance 

Corporation; the Comptroller of the Currency; the Director of the Office of 

Thrift Supervision; the Chairman of the National Credit Union 

Administration; the Chairman and Chief Executive Officer of Fannie Mae; 

the Chairman and Chief Executive Officer of Freddie Mac; the Chairman of 

the Appraisal Subcommittee; and the Executive Vice President of the 

Appraisal Foundation. We will also provide copies to others on request. 

This report will be available at no charge on our home page at 

http://www.gao.gov.

If you or your staff have any questions about this report, please contact me 

at (202) 512-8678 or Harry Medina at (415) 904-2000. Key contributors are 

listed in appendix XIII. 

David G. Wood

Director, Financial Markets

and Community Investments
Page 42 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix I

Survey of State Regulatory Agencies (results Apendxies

included) ApendxiI

The U.S. General Accounting Office, an agency of the 

Congress, is studying the regulation of real estate appraisers 

by the states. As part of this study, we are surveying officials 

of agencies that regulate real estate appraisers in each of the 

states, territories, and the District of Columbia. 

To assist us, we ask that you complete and return this 

questionnaire to us within the next two weeks. When 

responding, you may consult with others, if you think it will 

help you give a more accurate answer. The questionnaire 

should take an hour or less to complete. The questionnaire 

asks you to provide information about... 

• the agencies that are involved in the regulation of real 

estate appraisers in your state, 

• the relationship between the Appraisal Foundation and 

your agency, 

• the education and training of real estate appraisers in 

your state, and 

• the disciplinary actions your state takes when appraisers 

are found to have committed violations. 

Please return the questionnaire to us in the enclosed preaddressed business reply envelope. Alternatively, you may 

fax your completed questionnaire to us to the attention of 

David Noguera on (415) 904-2111. 

If you have any questions or comments about this 

questionnaire, please call David Noguera on (415) 904-2172 

or Harry Medina on (415) 904-2220. In the event that the 

business reply envelope is misplaced, or your fax fails to get 

through, please return the questionnaire to: 

U.S. General Accounting Office 

Attn: David Noguera 

301 Howard Street, Suite 1200 

San Francisco, CA 94105 - 2252

SURVEY RESULTS

-based on responses from 54 of 55 state 

agencies, unless otherwise stated1

1. Please enter the name, title, telephone number and e-mail 

address of the person completing this questionnaire. 

____________________________________ 

Name 

____________________________________ 

Title

____________________________________ 

(Area Code) Telephone Number 

____________________________________ 

e-mail address 

Oversight of Real Estate Appraisers 

Note: Agency includes Board or Commission.

2. Is your agency...? (Check one.)

1. [ 23 ] An independent state agency 

2. [ 30 ] A state agency that reports to another agency 

3. [ 1] Other (Please specify.)

1

 The one state not included in these results is the US 

Virgin Islands, which did not complete a survey. 
Appendix I

Survey of State Regulatory Agencies (results 

included)

Page 43 GAO-03-404 Real Estate Appraisal Industry Oversight

3. Which, if any, of the entities listed below are part of your 

organization? (Check all that apply)

1 [ 52 ] State appointed Board or Commission 

2. [ 53 ] Agency with state employees 

3. [ ] Other (Please specify.)

(If you did not check choice 1, go to Question 12.)

Board of Directors or Commission 

4. Currently, how many seats are filled on your board or 

commission? (Enter number.) BASED ON 52 

RESPONDENTS

____Md. 7______ seats filled 

5. Currently, how many seats are not filled on your board 

or commission? (Enter number. If none, enter “0.”)

 ____Av. 0.24______ seats not filled 

6. How many current members of your board have some 

experience in the real estate profession? (Enter number. 

If none, enter “0.”)

 ____Md. 5___ members with real estate experience 

7. How many members left the board or commission during 

your most recently completed fiscal year? (Enter 

number. If none, enter “0.”)

 ___Md. 1_____ members who left the board or 

 commission 

8. Currently, how many board or commission members 

receive a stipend or per diem payment for their services? 

(Enter number. If none, enter “0.”)

 ___Av. 5.52_____ members who receive a stipend or per 

 diem payment 

9. How many years is a board or commission member’s 

term? (Enter number or check box.)

____Md. 3________ years Or [ ] It varies 

10. Are board or commission members appointed at different 

times, that is, are their terms staggered? (Check one.)

1. [ 1 ] No

2. [ 51 ] Yes 

11. How often does the board or commission meet? (Check 

one.) RESULTS BASED ON 52 RESPONDENTS 

1 [ ] Once a week or more 

2. [ 24 ] Once a month 

3. [ 10 ] Once every other month 

4. [ 10 ] Once every three months 

5. [ 8 ] Other (Please specify.)

 __________________________________ 

More Information about your Agency 

12. About how many full-time equivalent (FTE) staff does 

your agency devote to regulating real estate appraisers, 

including contractors’ staff? (Enter number.)

RESULTS BASED ON 52 RESPONDENTS 

_Md. 2 Range: 28.25____ FTEs 

13. Does your agency share resources with other state 

agencies? (Check one.)

1. [ 19 ] No (If “no,” go to question 15 on 

 the next page.)

2. [ 35 ] Yes 
Appendix I

Survey of State Regulatory Agencies (results 

included)

Page 44 GAO-03-404 Real Estate Appraisal Industry Oversight

14. Which, if any, of the resources listed below does your 

agency share with other state agencies? (Check all that 

apply.) PERCENTAGES BASED ON Q13 

RESPONSES 

1. [ 26 ] Support staff 48% 

2. [ 27 ] Office space 50% 

3. [ 21 ] Investigators 39% 

4. [ 26 ] Office equipment, such as telephones or 

 copy machines 48% 

5. [ 33 ] Attorneys 61% 

6. [ 2 ] Other (Please specify.).4%

 _______________________________ 

15. Currently, how many appraisers are listed with your 

agency, excluding trainees? (Enter number.)

___Md.1,291.5 Range: 9,345 _______ appraisers listed 

Definition 

Federally related transaction refers to any real estaterelated financial transaction that (1) a federal financial 

institutions regulatory agency engages in, contracts for, or 

regulates; and (2) requires the services of an appraiser. 

16. Of those appraisers, about what percentage are eligible to 

perform federally related transactions (FRTs)? (Enter 

the percentage.)

_Md. 100% Range: 97_____% eligible to perform FRTs 

17. Listed below are some tasks that might be performed by 

a state agency that regulates real estate appraisers. 

Which, if any, of those tasks does your agency perform? 

(Check all that apply.)

1. [ 29 ]Introducing standards for the way appraisals 

 should be conducted in addition to those set by 

 the Appraisal Standards Board (ASB) 

2. [ 37 ]Introducing qualifications for appraisers in 

 addition to those established by the Appraisal 

 Qualifications Board (AQB) 

3. [ 30 ] Monitoring or supervising licensed and 

certified appraisers, for example, conducting 

unannounced investigations 

4. [ 54 ]Approving courses for appraisers’ education or 

 training 

5. [ 54 ]Enforcing state regulations concerning 

 appraisals 

6. [ 54 ]Investigating complaints 

7. [ 12 ] Other (Please specify.)

 ______________________________________
Appendix I

Survey of State Regulatory Agencies (results 

included)

Page 45 GAO-03-404 Real Estate Appraisal Industry Oversight

The Appraisal Foundation 

18. Listed below are some activities conducted by the Appraisal Foundation (AF), the Appraisal Standards 

Board (ASB) and the Appraiser Qualifications Board (AQB). How effective or ineffective have each of 

those activities been at improving the quality of appraisers in your state? (Check one box in each row.)

 Very 

effective

(1) 

Effective

(2) 

As effective 

as

ineffective 

(3) 

Ineffective 

(4) 

Very 

Ineffective 

(5) 

1. Setting standards for the way appraisals should 

be conducted 

6 29 15 4 

2. Establishing the qualifications needed to become 

an appraiser 

4 29 16 4 1 

3. Setting requirements for appraisers’ continuing 

education 

5 22 16 9 2 

4. Approving courses for appraisers’ education or 

training 

3 17 17 13 4 

5. Determining the qualifications needed by 

instructors who teach courses to appraisers 

3 14 22 9 6 

6. Other (Please specify.) 

 ________________________________ 

 1 1 2 

Regulating Appraisers 

19. Typically, about how many months does it take your state to adopt the Uniform Standards of Professional 

Appraisal Practice (USPAP) after the ASB updates it? (Check one.)

1. [ 25 ]Less than a month 

2. [ 13 ]1 to 3 months 

3. [ 7 ] 4 to 6 months 

4. [ 1 ] 7 to 9 months 

5. [ 3 ] 10 to 12 months 

6. [ 5 ] More than 12 months 

20. Is your agency or the state legislature responsible for adopting USPAP? (Check one.)

RESULTS BASED ON 50 RESPONDENTS 

1. [ 35 ]Our agency 

2. [ 15 ]The state legislature 
Appendix I

Survey of State Regulatory Agencies (results 

included)

Page 46 GAO-03-404 Real Estate Appraisal Industry Oversight

21. Listed below are some suggestions for possible changes in the ways real estate appraisers are regulated. 

Considering each suggested change separately, please indicate whether that change would help or hinder your 

state’s ability to regulate appraisers. (Check one box in each row.)

Would this change help or hinder your state’s ability to regulate appraisers? 

Help greatly 

(1) 

Help

somewhat 

(2) 

Help as much 

as hinder 

(3) 

Hinder 

somewhat 

(4) 

Hinder 

greatly 

(5) 

1. Eliminating the oversight role 

presently carried out by the Federal 

Financial Institutions Examination 

Council (FFIEC) 

13 11 15 9 6 

2. Eliminating the oversight role 

presently carried out by the 

Appraisal Subcommittee (ASC) 

13 9 15 12 5 

3. Updating the USPAP less 

frequently

24 14 13 1 2 

4. Eliminating the ASB’s role in 

establishing minimum standards for 

appraisals

4 6 13 18 13 

5. Eliminating the AQB’s role in 

setting minimum qualifications for 

appraisers

10 11 10 13 10 

6. Placing representatives of state 

government on the ASC’s board 

20 14 12 3 5 

7. Placing representatives of state 

government on the AQB 

20 13 12 4 5 

8. Placing representatives of state 

government on the ASB 

18 12 15 4 5 

9. Opening the meetings of the ASC, 

AQB and ASB to the public 

23 13 15 1 2 

10. Other (Please specify.)

 a._______________________ 

7 

b._______________________ 

2 

22. Which, if any, of the actions listed below are needed by your agency to improve its ability to regulate appraisers? 

(Check all that apply.)—RESULTS BASED ON 49 RESPONDENTS 

1. [ 33 ] Increasing the funding needed to conduct investigations 

2. [ 37 ] Increasing the staff needed to conduct investigations 

3. [ 16 ] Notifying lenders of appraisers who have violated regulations 

4. [ 26 ] Hiring more investigators with experience conducting real estate appraisals 

5. [ 22 ] Increasing the amount of resources needed to support the litigation process 

6. [ 24 ] Processing complaints in a more timely fashion 

7. [ 9 ] Other (Please specify.)

 _____________________________________________________________________________
Appendix I

Survey of State Regulatory Agencies (results 

included)

Page 47 GAO-03-404 Real Estate Appraisal Industry Oversight

Temporary Licenses and Reciprocity 

23. How much is the fee for a temporary license to conduct 

appraisals in your state? (Check one.)

1. [ 3 ] No fee

2. [ 13 ] $50 or less 

3. [ 14 ] $51 to $100 

4. [ 23 ] $101 to $150 

5. [ 1 ] More than $150 

24. Which, if any, of the actions listed below are required of 

applicants for temporary licenses to conduct appraisals in 

your state? (Check all that apply.)

RESULTS BASED ON 53 RESPONDENTS 

1. [ 37 ] Disclose all criminal convictions

2. [ 46 ] Reveal all disciplinary actions taken 

against them by government entities 

3. [ 52 ] Agree to abide by all of the rules set by our 

 state for appraisals

4. [ 43 ] Agree to cooperate with any investigation 

 initiated by our state 

25. Listed below are some limitations that might be attached 

to a temporary license for an appraiser. Which, if any, of 

those limitations are attached to a temporary license in 

your state? (Check all that apply.)

1. [ 41 ] The temporary license can be used for only 

one assignment

2. [ 16 ] An appraiser can be issued only one 

 temporary license at a time 

3. [ 15 ] Only a limited number of temporary 

licenses can be issued to an appraiser within a given 

 year 

4. [ 1 ] Appraisers holding such licenses must have an 

 appraiser permanently licensed in our state sign 

 off on the appraisal(s) 

5. [ 5 ] Other (Please specify.)

 ____________________________________ 

6. [ 4 ] None of the above 

26. Consider the temporary license issued to an appraiser in 

your state. What is the maximum period of time such a 

license would be valid? (Check one.)

RESULTS BASED ON 53 RESPONDENTS 

1. [ ] 30 days or less

2. [ 1 ] 31 to 60 days 

3. [ 3 ] 61 to 90 days 

4. [ ] 91 to 120 days 

5. [ ] 121 to 150 days 

6. [ 20 ] 151 – 180 days 

7. [ 9 ] More than 180 days 

8. [ 20 ] Good for the duration of the assignment 
Appendix I

Survey of State Regulatory Agencies (results 

included)

Page 48 GAO-03-404 Real Estate Appraisal Industry Oversight

27. Consider an individual who resides in another state and 

is issued a temporary license to conduct appraisals in 

your state. Suppose that individual commits a violation 

in your state that warrants disciplinary actions. 

Which, if any, of the actions listed below would your 

state take? (Check all that apply.)

1. [ 52 ] Our state would take disciplinary action

2. [ 26 ] Our state would refer the matter to the state in 

which the individual resides for disciplinary 

action 

28. In your state, about how many business days does it take 

to issue a temporary license after the application is 

completed? (Check one.)

1. [ 10 ] Less than one business day

2. [ 22 ] 1 to 2 business days 

3 [ 6 ] 3 to 4 business days 

4. [ 12 ] 5 to 6 business days 

5. [ 4 ] More than 6 business days 

29. Is an appraiser’s license from another state ever used as 

the sole basis for granting a license in your state? 

(Check one.)

1. [ 7 ] No (If “no,” go to question 31 on the 

next page.)

2. [ 47 ] Yes 

30. Listed below are some conditions that might have to be 

met for a state to use an appraiser’s license from another 

state as the sole basis for granting a license. Which, if 

any, of those conditions have to be met in your state? 

(Check all that apply.) 47 STATES ELIGIBLE TO 

ANSWER THIS QUESTION, ONLY 46 DID 

1. [ 32 ] The appraiser from another state must agree 

in writing to follow all the regulations 

established by our state 

2. [ ] The appraiser’s license must be issued by a 

state that shares geographic borders with our 

state

3. [ 23 ] Our state must have a reciprocity agreement

with the state that issued the original license, 

that is, the state from which the license 

originates must be willing to accept an 

appraiser’s license from our state as the sole 

basis for granting a license 

4. [ ] The appraiser must state that he or she will be 

performing continuous appraisals in our state 

5. [ 38 ] The requirements for the appraiser’s current 

license must meet or exceed those of the AQB 

6. [ 42 ] The appraiser from another state must pay 

licensing or certification fees that are 

comparable to in-state appraisers 

7. [ 8 ] The appraiser from another state must consent 

to a background check 

8. [ 19 ] Other (Please specify.)

 ____________________________________ 
Appendix I

Survey of State Regulatory Agencies (results 

included)

Page 49 GAO-03-404 Real Estate Appraisal Industry Oversight

Education and Training of Appraisers 

31. To which, if any, of the institutions listed below are 

educational providers required to pay a fee in order to 

have their courses approved in your state? (Check all 

that apply.)

1. [ 9 ] Appraiser Qualifications Board (AQB) 

2. [ 10 ] College or University 

3. [ 7 ] American Council on Education 

4. [ 9 ] International Distance Education Certification 

 Center 

5. [ 24 ] Our agency 

6 [ 5 ] Other (Please specify.)

 ___________________________________ 

7. [ 17 ] None of the above

32. Consider the qualifications required by the AQB for 

appraisers who conduct FRTs involving single-family 

residential properties. How adequate or inadequate are 

those qualifications to ensure that appraisers perform 

those kinds of FRTs competently? (Check one.)

1. [ 31 ] Adequate 

2. [ 14 ] Undecided 

3. [ 9 ] Inadequate 

Definition 

Distance education refers to education in which there is a 

separation in time or place between instructor and student. 

33. In your opinion, to what extent is distance education 

currently being used as a part of the training of real 

estate appraisers? (Check one.)

RESULTS BASED ON 53 RESPONDENTS 

1. [ 1 ] To a very great extent

2. [ 1 ] To a great extent 

3. [ 15 ] To a moderate extent 

4. [ 26 ] To some extent 

5. [ 10 ] To little or no extent 

34. Listed below are some difficulties officials might have 

with using distance education as a part of the training of 

real estate appraisers. Which, if any, of those difficulties 

do you have with using distance education as a part of 

the training of real estate appraisers? (Check all that 

apply.)

RESULTS BASED ON 51 RESPONDENTS 

1. [ 16 ] Have no difficulties using distance education 

2. [ 23 ] Does not offer enough personal contact with 

 instructors

3. [ 8 ] Accreditation standards are not as high as for 

 classroom-based education 

4. [ 17 ] Other (Please specify.)

Agency Revenues, Expenses and Resources 

Definition 

Revenues are funds collected through fees, fines and 

penalties. 

35. Is your agency funded entirely by revenues, entirely by 

appropriations from your state, or through a combination 

of both? (Check one.)

RESULTS BASED ON 53 RESPONDENTS 

1. [ 35 ] Entirely by revenues 

2. [ 12 ] Entirely by state appropriations 

3. [ 5 ] By both revenues and state appropriations 

4. [ 1 ] Other (Please specify.)

RESULTS FOR Q36 & Q37 ARE BASED ON 46 

RESPONDENTS

36. What was the total amount of funds available to your 

agency in your most recently completed fiscal year? 

(Enter amount.)

$ Md. 281,000 Range: 17.2 million funds available in 

your most recently completed fiscal year 

37. What were your agency’s total expenses in your most 

recently completed fiscal year? (Enter amount.)

$ Md. 302,000 Range: 13.2 million expenses in your 

most recently completed fiscal year 
Appendix I

Survey of State Regulatory Agencies (results 

included)

Page 50 GAO-03-404 Real Estate Appraisal Industry Oversight

38. In your opinion, how sufficient or insufficient is each of 

the dimensions listed below in enabling your agency to 

meet its regulatory responsibilities? (Check one box in 

each row.)

 Sufficient 

(1) 

Undecided 

(2) 

Insufficient 

(3) 

1. Its current 

 staff size 

18 9 27 

2. Its current 

 resources, 

 other than 

 staff 

25 15 14 

3. Its current 

 regulatory 

 authority 

41 6 7 

Automated Valuation Models (AVMs)

39. Of all of your state’s real estate transactions in the last 

calendar year, about what percentage were 

conducted...(Enter the percentages or check the box.)

RESULTS BASED ON 53 RESPONDENTS 

 % 

using AVMs? 

using appraisals? 

using evaluations? 

Don’t know 93 

 100% 

Complaints Against Appraisers 

40. In the last calendar year, about how many complaints 

against appraisers did your agency receive? (Enter 

number.)

___Md. 47.5 Range: 430__ complaints 

41. Of those complaints, about what percentage were against 

appraisers who were not listed with your agency? (Enter 

the percentage.) RESULTS BASED ON 52 

RESPONDENTS

_____Md. 0.5% Range: 100____% complaints against 

unlisted appraisers 

42. Consider the number of complaints your agency received 

against appraisers in the last calendar year. About what 

percentage of those complaints were received from each 

of the types of institutions or individuals listed below? 

(Enter the percentages.) RESULTS BASED ON 49 

RESPONDENTS

_Md. 0% Range: 40% from banking regulators 

_Md. 5% Range: 85% from banks and thrifts 

_Md. 10% Range: 55% from Fannie Mae, Freddie Mac 

or similar institutions 

_Md. 30% Range: 95% from consumers 

_Md. 20% Range: 88% from other appraisers 

_Md. 1% Range: 10% from real estate agents 

_Md. 6% Range: 50% from mortgage brokers 

_Md. 10.5% Range: 40% from others 

 100% 

43. Again consider the number of complaints your agency 

received against appraisers in the last calendar year. Of 

those complaints, what percentage resulted in... 

RESULTS BASED ON 46 RESPONDENTS 

 % 

referrals to other state agencies for action? Md. 0 

Range: 15 

investigations that are still open? Md. 30 

Range: 97 

investigations that have been resolved? Md. 63.5 

Range: 99 

 100% 

44. In the last calendar year, was the number of complaints 

against appraisers in your state greater than, about the 

same as, or fewer than the number of complaints in 

calendar year 1999? (Check one.)

RESULTS BASED ON 51 RESPONSES 

1. [ 12 ] Far greater than in calendar year 1999 

2. [ 16 ] Greater than in calendar year 1999 

3. [ 11 ] About the same as in calendar year 1999 

4. [ 11 ] Fewer than in calendar year 1999 

5. [ ] Far fewer than in calendar year 1999 

6. [ 1 ] Don’t know 
Appendix I

Survey of State Regulatory Agencies (results 

included)

Page 51 GAO-03-404 Real Estate Appraisal Industry Oversight

Disciplinary Actions

45. In the last calendar year, was the number of violations of 

regulations by appraisers in your state greater than, about 

the same as, or fewer than the number of violations in 

calendar year 1999? (Check one.) RESULTS BASED 

ON 50 RESPONDENTS 

1. [ 7 ] Far greater than in calendar year 1999 

2. [ 18 ] Greater than in calendar year 1999 

3. [ 15 ] About the same as in calendar year 1999 

4. [ 8 ] Fewer than in calendar year 1999 

5. [ 1 ] Far fewer than in calendar year 1999 

6. [ 1 ] Don’t know 

46. Which, if any, of the types of actions listed below does 

your state take when appraisers commit violations? 

(Check all that apply.) RESULTS BASED ON 53 

RESPONDENTS

1. [ 50 ] Require more education 93% 

2. [ 46 ] Issue letters of warning or admonition 85% 

3. [ 36 ] Place appraisers on probation 67% 

4. [ 50 ] Place appraisers on suspension 93% 

5. [ 40 ] Impose monetary fines 74% 

6. [ 52 ] Revoke appraisers’ licenses or 

certifications 96% 

7. [ 13 ] Other (Please specify.) 24%

47. In the last calendar year, about how many disciplinary 

actions did your state take against appraisers found to 

have committed violations? (Enter number.) RESULTS 

BASED ON 52 RESPONDENTS 

__Md. 11.5 Range:245__________ disciplinary actions 

48. Does your state report all the disciplinary actions it takes 

against appraisers to the ASC? (Check one.) RESULTS

BASED ON 52 RESPONDENTS 

1. [ 39 ] Yes (If “yes,” go to question 54 on 

 the next page.) 

2. [ 13 ] No 

49. Consider the number of disciplinary actions taken by 

your state against appraisers in the last calendar year. Of 

those actions, about what percentage were not reported 

to the ASC? (Enter the percentage.) 13 ELIGIBLE TO 

RESPOND, BUT ONLY 11 DID 

__Md. 33 Range: 100___% of actions not reported to ASC 

50. Now consider those actions taken by your state against 

appraisers in the last calendar year that were not reported 

to the ASC. About what percentage were... (Enter the 

percentages.) 13 ELIGIBLE TO RESPOND, BUT 

ONLY 11 DID 

 % 

required periods of education? Md. 70 Range: 80 

letters of warning or admonition? Md. 85 Range: 90 

probationary periods? Md. 70 Range: 60 

suspensions? Md. 0 Range: 39 

monetary fines? Md. 33 Range: 90 

revocations of licenses or 

certifications? 

Md. 0 Range: 28 

other? (Please specify.) 

________________________

Md. 75 Range: 50 

 100% 

51. Does your state have a statute that prevents your agency 

from reporting to the ASC certain types of disciplinary 

actions taken against appraisers? (Check one.)

1. [ 12 ] No (If “no,” go to question 54 on 

 the next page.) 

2. [ 1 ] Yes 

52. In the space below, please cite the number and name of 

that statute. (Enter code, number or name.) 1 STATE 

ANSWERED THIS QUESTION 

Statute # _________________________ 

 Name of Statute __________________________ 

53. Again consider those actions taken by your state against 

appraisers in the last calendar year that were not reported 

to the ASC. Of those actions, about what percentage 

were not reported because of that law? (Enter the 

percentage.) 1 STATE ANSWERED THIS QUESTION 

 Md. 5 Range: 0% of actions not reported to ASC 

 because of that law 
Appendix I

Survey of State Regulatory Agencies (results 

included)

Page 52 GAO-03-404 Real Estate Appraisal Industry Oversight

ASC and the National Registry 

54. Is the ASC’s current fee for enrolling in the National 

Registry too high, about right, or too low? (Check one.)

RESULTS BASED ON 53 RESPONDENTS 

1. [ 20 ] Too high

2. [ 22 ] About right 

3. [ ] Too low 

4. [ 11 ] Don’t know 

55. Listed below are some ways in which state real estate 

regulatory agencies might make use of the National 

Registry. In which, if any, of those ways does your 

agency make use of the National Registry? (Check all 

that apply.) 

RESULTS BASED ON 53 RESPONDENTS

1. [ 44 ] To find out if disciplinary actions were taken 

against an appraiser in other states 

2. [ 44 ] To verify that applicants from other states 

are licensed or certified in those states 

3. [ 40 ] To notify other states and the ASC of 

appraisers against whom disciplinary actions 

have been taken in our state 

4. [ 2 ] Other (Please specify.)

______________________________________ 

5. [ 3 ] We do not use the registry 

56. If you have any comments about the current appraiser 

regulatory system, or any other topics mentioned in this 

questionnaire, please write or type them below or on a 

separate piece of paper. 22 STATES PROVIDED 

COMMENTS 

Thank you for your cooperation 
Page 53 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix II

Scope and Methodology ApendxiI

To describe the specific responsibilities under Title XI of the private, state, 

and federal entities that oversee the real estate appraisal industry, we 

reviewed Title XI and its legislative history to identify the specific 

responsibilities assigned to each entity. We interviewed representatives of

private entities and federal officials and surveyed state regulatory agencies 

to obtain information on how they interpreted their responsibilities under 

Title XI. In addition, we attended a conference sponsored by an association 

of state regulatory agencies on the agencies’ role in Title XI’s oversight 

structure. Finally, we reviewed the literature, issue papers, and documents 

by industry participants, experts, and observers on Title XI and the 

regulatory structure for appraisers. 

To describe how the entities carry out their duties under Title XI, we: 

• obtained information from the Appraisal Foundation and its two boards, 

the Appraisal Standards Board and the Appraiser Qualifications Board 

on Title XI-related activities such as (1) submitting grant proposals to 

the Appraisal Subcommittee for Title XI-related activities, (2) providing 

information to the Appraisal Subcommittee on Title XI-related activities, 

(3) establishing minimum standards for conducting appraisals and 

qualifications for appraisers, and (4) disseminating information on 

revisions to these standards and qualifications.

• surveyed the 55 state regulatory agencies for appraisers to gather 

information on the agencies’ organizational structures, specific tasks, 

staff size, licensing and certification practices and fees, revenues and 

expenditures, and complaint and enforcement activity. We also analyzed 

survey results to determine whether any trends existed or significant 

issues were reported. 

• obtained and reviewed federal financial regulators’ policies, procedures, 

regulations, and advisory opinions with respect to oversight of the 

appraisal industry and information on enforcement activities related to 

complaints and referrals arising from noncompliance with the Uniform 

Standards of Professional Appraisal Practice or Title XI. 

• obtained and reviewed Appraisal Subcommittee annual reports, state 

field review reports, and grants to the Appraisal Foundation. We also 

performed selected analyses of information contained in the Appraisal 

Subcommittee’s National Registry of Appraisers database. 
Appendix II

Scope and Methodology

Page 54 GAO-03-404 Real Estate Appraisal Industry Oversight

To describe factors that private, state, and federal entities identified as 

impediments to carrying out their Title XI roles and responsibilities, we 

interviewed officials representing the various entities. In addition, we 

analyzed the results of our survey of state regulatory agencies, contacted 

several state officials about the written comments included in their survey 

responses, and reviewed correspondence and an agency newsletter we 

received from state regulatory officials. 

To describe and identify other concerns about the effectiveness of the 

current regulatory structure in achieving the purposes of Title XI, we 

interviewed officials representing regulatory entities, industry participants, 

and industry observers. Specifically, we interviewed (1) private and federal 

entities cited in Title XI; (2) officials from the Department of Housing and 

Urban Development, Fannie Mae, and Freddie Mac; and (3) groups 

representing mortgage lenders, appraisers, appraiser education providers, 

and academic experts on issues related to appraisals. We also reviewed 

congressional hearings and prior GAO reports on appraisal reform and 

federal and state regulatory objectives. Finally, we downloaded 

information on appraisal issues from the Internet, including 

correspondence, reports, and issue papers prepared by industry 

participants and observers. 

We performed our work from March 2002 through March 2003 in 

accordance with generally accepted government auditing standards. 
Page 55 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix III

List of Agencies and Groups Contacted ApendxiI

Federal Agencies • Appraisal Subcommittee of the Federal Financial Institutions 

Examination Council (ASC) 

http://www.asc.gov/

• Board of Governors of the Federal Reserve System (FRB)

http://www.federalreserve.gov/

• Federal Deposit Insurance Corporation (FDIC)

http://www.fdic.gov/

• National Credit Union Administration (NCUA)

http://www.ncua.gov/

• Office of the Comptroller of the Currency (OCC)

http://www.occ.treas.gov/

• Office of Thrift Supervision (OTS)

http://www.ots.treas.gov/

• United States Department of Housing and Urban Development (HUD)

http://www.hud.gov/

Government 

Sponsored Enterprises

• Federal National Mortgage Association (Fannie Mae)

http://www.fanniemae.com/

• Federal Home Loan Mortgage Corporation (Freddie Mac)

http://www.freddiemac.com/

Private Organizations • American Bankers Association (ABA)

http://www.aba.com/default.htm

• American Society of Appraisers (ASA)

http://www.appraisers.org/

• Appraisal Foundation (AF)

http://www.appraisalfoundation.org/

• Appraisal Institute (AI)

http://www.appraisalinstitute.org/
Appendix III

List of Agencies and Groups Contacted

Page 56 GAO-03-404 Real Estate Appraisal Industry Oversight

• Experian

http://www.experian.com/consumer/index.html

• FNC Inc.

http://www.fncinc.com/

• International Association of Assessing Officers (IAAO)

http://www.iaao.org/

• Lee and Grant Company

http://www.leeandgrant.com/

• Mortgage Bankers Association of America (MBA)

http://www.mbaa.org/

• National Association of Realtors (NAR)

http://www.realtor.org/rodesign.nsf/pages/HomePage?OpenDocument

• Peter S. Barash Associates

• UC Berkeley Fisher Center for Real Estate and Urban Economics

http://groups.haas.berkeley.edu/realestate/Fisher/fisherinfo.asp

State Appraiser 

Regulatory Agencies

• Alabama Real Estate Appraisers Board

http://reab.state.al.us

• Alaska Board of Certified Real Estate Appraisers

http://www.dced.state.ak.us/occ/papr.htm

• Arizona Board of Appraisal

http://www.appraisal.state.az.us

• Arkansas Appraiser Licensing & Certification Board

http://www.state.ar.us/alcb

• California Office of Real Estate Appraisers

http://www.orea.ca.gov

• Colorado Board of Real Estate Appraisers

http://www.dora.state.co.us/real-estate/appraisr/appraisr.htm
Appendix III

List of Agencies and Groups Contacted

Page 57 GAO-03-404 Real Estate Appraisal Industry Oversight

• Commonwealth of the Northern Mariana Islands

• Connecticut License Services Division

http://www.dcp.state.ct.us/licensing/realestate.htm

• Delaware Council on Real Estate Appraisers

http://www.state.de.us/research/profreg/realesapp.htm

• District of Columbia, Occupational & Professional Licensing 

Administration

Offline: 12/19/02 http://www.dcra.org/bplaboards.shtm

• Florida Division of Real Estate

http://www.state.fl.us/dbpr/re/freab_welcome.shtml

• Georgia Real Estate Appraisers Board

http://www2.state.ga.us/grec/greab/greabmain.html

• Guam Department of Revenue & Taxation

• Hawaii Real Estate Appraisers Section

http://www.state.hi.us/dcca/pvl/areas_real_estate_appraiser.html

• Idaho State Certified Real Estate Appraisers Board

http://www2.state.id.us/ibol/rea.htm

• Illinois Office of Banks and Real Estate, Appraisal Division

http://www.obre.state.il.us/REALEST/APPRAISAL.HTM

• Indiana Real Estate Appraiser Licensure & Certification Board

http://www.in.gov/pla/bandc/appraiser/

• Iowa Real Estate Appraiser Examining Board

http://www.state.ia.us/government/com/prof/realappr.htm

• Iowa Real Estate Appraiser Examining Board

http://www.state.ia.us/government/com/prof/realappr.htm

• Kansas Real Estate Appraisal Board

http://www.ink.org/public/kreab/
Appendix III

List of Agencies and Groups Contacted

Page 58 GAO-03-404 Real Estate Appraisal Industry Oversight

• Kentucky Real Estate Appraisers Board

http://www.kyappraisersboard.com

• Louisiana Real Estate Commission

http://www.lreasbc.state.la.us/

• Maine Board of Real Estate Appraisers

http://www.state.me.us/pfr/olr/categories/cat37.htm

• Maryland Commission of Real Estate Appraisers & Home Inspectors

http://www.dllr.state.md.us/license/occprof/reappr.html

• Massachusetts Board of Registration of Real Estate Brokers & 

Salespeople

http://www.state.ma.us/reg/boards/ra/default.htm

• Michigan Board of Real Estate Appraisers

http://www.michigan.gov/commerciallicensing

• Minnesota Department of Commerce

http://www.state.mn.us/cgibin/portal/mn/jsp/home.do?agency=Commerce

• Mississippi Real Estate Appraiser Licensing & Certification Board

http://www.mrec.state.ms.us/

• Missouri Real Estate Appraisers Commission

http://www.ded.state.mo.us/regulatorylicensing/professionalregistration

/rea

• Montana Department of Labor & Industry, Business Standards Division

http://discoveringmontana.com/dli/bsd/license/bsd_boards/rea_board/b

oard_page.htm

• Nebraska Real Estate Appraiser Board

http://linux1.nrc.state.ne.us/appraiser

• Nevada Real Estate Division

http://www.red.state.nv.us

• New Hampshire Real Estate Appraiser Board

http://www.state.nh.us/nhreab/
Appendix III

List of Agencies and Groups Contacted

Page 59 GAO-03-404 Real Estate Appraisal Industry Oversight

• New Jersey Board of Real Estate Appraisers

http://www.state.nj.us/lps/ca/nonmed#real11

• New Mexico Real Estate Appraisers Board

http://www.rld.state.nm.us/b&c/real_estate_appraisers_board.htm

• New York Division of Licensing Services

http://www.dos.state.ny.us/lcns/appraise.html

• North Carolina Appraisal Board

http://www.ncappraisalboard.org

• North Dakota Real Estate Appraiser Qualifications & Ethics Board

http://www.governor.state.nd.us/boards/boards-query.asp?Board_ID=92

• Ohio Division of Real Estate

http://www.com.state.oh.us/odoc/real/appmain.htm

• Oklahoma Real Estate Appraiser Board Division

http://www.oid.state.ok.us/agentbrokers/realestate.html

• Oregon Appraiser Certification & Licensure Board

http://www.oregonaclb.org

• Pennsylvania State Board of Certified Real Estate Appraisers

http://www.dos.state.pa.us/bpoa/cwp/view.asp?a=1104&q=432589

• Puerto Rico Department of State Board of Examiners Division

no website

• Rhode Island Division of Commercial Licensing & Regulation

http://www.dbr.state.ri.us/real_estate.html

• South Carolina Professional & Occupational Licensing Real Estate 

Appraisers Board

http://www.llr.state.sc.us/POL/RealEstateAppraisers/

• South Dakota Appraiser Certification Program

http://www.state.sd.us/dcr/appraisers/appraiser.html

• Tennessee Real Estate Appraiser Commission

http://www.state.tn.us/commerce/treac
Appendix III

List of Agencies and Groups Contacted

Page 60 GAO-03-404 Real Estate Appraisal Industry Oversight

• Texas Appraiser Licensing & Certification Board

http://www.talcb.state.tx.us/

• US Virgin Islands Department of Licensing & Consumer Affairs

• Utah Division of Real Estate

http://www.commerce.utah.gov/dre

• Vermont Board of Real Estate Appraisers

http://vtprofessionals.org/opr1/appraisers/

• Virginia Real Estate Appraiser Board

http://www.state.va.us/dpor/apr_main.htm

• Washington Department of Licensing, Real Estate Appraisers

http://www.wa.gov/dol/bpd/appfront.htm

• West Virginia Real Estate Appraiser Licensing and Certification Board

http://www.state.wv.us/appraise

• Wisconsin Department of Regulation & Licensing

http://www.drl.state.wi.us

• Wyoming Certified Real Estate Appraiser Board

http://realestate.state.wy.us

Private Consultants • Lewis Allen, Consultant, Automated Valuation Models 

• Walt Humphrey, IFAC, Humphrey and Associates, Inc.
Page 61 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix IV

National Registry Database of the Appraisal 

Subcommittee ApendxiIV

Title XI requires the Appraisal Subcommittee to maintain a national 

registry of state-licensed and -certified appraisers eligible to perform 

appraisals in connection with federally related transactions. The National 

Registry database, created in 1992 and revised and updated in 1997,1

provides names and qualifications of appraisers in each state and statistics 

on, among other things, active and inactive licenses, types of licenses, and 

disciplinary actions. The database contains both public and nonpublic 

information—for example, some data on disciplinary actions are restricted 

to authorized representatives of state regulatory agencies. Users can 

access the database from the Internet and may download the entire public 

portion at no charge. 

According to the Appraisal Subcommittee’s 2001 annual report, the registry 

is designed to allow users to determine (1) whether an appraiser is eligible 

to perform appraisals in connection with federally related transactions and 

(2) whether the appraiser’s credentials have ever been suspended, revoked, 

or surrendered. The registry helps in facilitating temporary reciprocity by 

allowing states to determine an appraiser’s licensing status and assists state 

agencies in enforcing laws governing appraisers. In addition, financial 

institutions can receive updates via the Internet on revocations, 

suspensions, surrenders, and expirations of licenses. 

Information contained in the database comes from the states, which 

periodically submit files to the Appraisal Subcommittee for inclusion in the 

registry, with most states submitting data monthly. The registry reports on 

four classes of appraisers—licensed, certified general, certified residential, 

and transitional. According to an Appraisal Subcommittee official, the 

database also serves as an archive, as no records are ever deleted. Our 

research showed that nearly one-half of the appraisers included in the 

database were classified as inactive because of retirements, death, 

departure from the profession, or other reasons. Some appraisers were 

1

According to an Appraisal Subcommittee official, results from their on-site state review 

conducted in the mid-1990s found that the number of appraisers many states reported to the 

Appraisal Subcommittee did not correspond to the number of appraisers in the state's 

records. In response, the Appraisal Subcommittee made two changes to the National 

Registry database to ensure that states were submitting the names of and collecting fees on 

behalf of all eligible appraisers. First, the Appraisal Subcommittee required states to submit 

records for all real property appraisers and determined whether any fees were outstanding. 

Second, the Appraisal Subcommittee redesigned the database to calculate the fees owed by 

each state, including for creating and mailing invoices. According to the official, revenues 

for the registry increased significantly as a result of the changes. 
Appendix IV

National Registry Database of the Appraisal 

Subcommittee

Page 62 GAO-03-404 Real Estate Appraisal Industry Oversight

listed as both active and inactive, since they had given up one type of 

license and obtained another kind. 

As of October 31, 2002, the database reported nearly 89,000 appraisers 

eligible to perform appraisals for federally related transactions. The 

number of appraisers reported by state appraisal regulatory agencies 

ranged from 10 in the Northern Mariana Islands to nearly 9,500 in California 

(table 3). Certified general and certified residential appraisers accounted 

for nearly 76 percent of the licensed appraisers. 

Table 3: Active Appraiser Licenses, by State and Type

Type of license

Licensed

Certified

general

Certified

residential

Transitional

license All

Issuing states

and U.S. territories N N N N Number

Alabama 113 420 510 a 1,043

Alaska a 70 82 a 152

Arizona 424 568 626 a 1,618

Arkansas 113 343 314 a 770

California 2,124 3,395 3,936 a 9,455

Colorado 737 1,092 971 a 2,800

Connecticut 31 505 583 a 1,119

Delaware 61 169 214 a 444

District of Columbia 327 212 a a 539

Florida 105 1,944 2,824 a 4,873

Georgia 1,034 1,430 894 a 3,358

Guam 9 10 3 a 22

Hawaii 22 131 150 a 303

Idaho 191 221 133 a 545

Illinois 2,342 1,037 1,768 a 5,147

Indiana 829 528 728 a 2,085

Iowa a 528 485 a 1,013

Kansas 261 419 328 a 1,008

Kentucky 90 448 698 a 1,236

Louisiana a 340 556 a 896

Maine 103 268 214 a 585
Appendix IV

National Registry Database of the Appraisal 

Subcommittee

Page 63 GAO-03-404 Real Estate Appraisal Industry Oversight

Maryland 820 724 780 a 2,324

Massachusetts 524 675 726 a 1,925

Michigan 2,074 987 73 a 3,134

Minnesota 148 790 835 a 1,773

Mississippi 344 451 406 a 1,201

Missouri 247 616 994 a 1,857

Montana 42 225 140 a 407

Nebraska 120 344 110 a 574

New Hampshire 115 288 296 a 699

New Jersey 674 987 648 a 2,309

New Mexico 62 249 221 a 532

Nevada 160 319 263 a 742

New York 388 1,440 1,811 a 3,639

North Carolina 169 678 1,435 a 2,282

North Dakota 59 117 a a 176

Northern Mariana Islands a 9 1 a 10

Ohio 1,684 863 543 a 3,090

Oklahoma 564 389 361 a 1,314

Oregon 686 471 151 a 1,308

Pennsylvania a 1,150 1,777 a 2,927

Puerto Rico 9 148 40 a 197

Rhode Island 69 143 183 a 395

South Carolina 434 560 626 a 1,620

South Dakota 66 137 16 a 219

Tennessee 203 553 747 a 1,503

Texas 375 2,161 1,787 36 4,359

Utah 99 325 563 a 987

Vermont 49 116 101 a 266

Virgin Islands a 11 9 a 20

Virginia 787 855 871 a 2,513

Washington 391 845 1,201 a 2,437

West Virginia 169 161 190 a 520

Wisconsin 556 606 872 a 2,034

(Continued From Previous Page)

Type of license

Licensed

Certified

general

Certified

residential

Transitional

license All

Issuing states

and U.S. territories N N N N Number
Appendix IV

National Registry Database of the Appraisal 

Subcommittee

Page 64 GAO-03-404 Real Estate Appraisal Industry Oversight

Source: GAO Analysis of Appraisal Subcommittee National Registry of Appraisers Database as of 10/31/02.

a

Not applicable.

As previously noted, the database contains information on disciplinary 

actions taken and reported by state regulators (table 4). Of the 4,360 

disciplinary actions reported for active and inactive licensees in the 

database as of October 31, 2002, the category "other" accounted for the 

greatest number --1,088 (25 percent) followed by "fines" with 788 instances 

(18 percent). 2 The number of disciplinary actions taken by state appraiser 

regulatory agencies ranged from a single action to as many as 668. 

Specifically, Vermont reported taking a single action, while California, 

Oklahoma, and Virginia accounted for nearly 34 percent (1,473 actions) of 

the actions reported. Table 4 identifies the number and type of disciplinary 

actions taken against active licensees in each state.

Wyoming a 213 91 a 304

All 21,003 32,684 34,885 36 88,608

(Continued From Previous Page)

Type of license

Licensed

Certified

general

Certified

residential

Transitional

license All

Issuing states

and U.S. territories N N N N Number

2

According to an Appraisal Subcommittee official, “other” disciplinary actions can include 

warning letters, monetary penalties, probations, and educational requirements. In general, 

only the Appraisal Subcommittee and state regulatory agency have access to the details of 

disciplinary actions classified as other. 
Appendix IV

National Registry Database of the Appraisal 

Subcommittee

Page 65 GAO-03-404 Real Estate Appraisal Industry Oversight

Table 4: Disciplinary Actions, by State (Active and Inactive Licensees)

Type of disciplinary action

Issuing states

and U.S.

territories Other Warnings

Additional

education Fine Probation

DowngradeSuspensionRevocationVoluntary

surrender

Official

reprimand All

N N NN N N N N N N

No. of

actions

Alabama 15 a a 2 a 3 12 3 3 a 38

Alaska aa a 1 2 a 1 a 1 a 5

Arizona 119 a aa 35 1 19 15 12 a 201

Arkansas a 7 6 4 12 a 3 5 a a 37

California 5 108 3 105 6 2 87 83 45 a 444

Colorado a 2 3 29 18 a 76 3 a 68

Connecticut 4 a 4 5 a a 1 1 a 1 16

Delaware a a 2 a 2 a aa a a 4

Florida a 3 9 80 31 1 8 26 a 1 159

Georgia 87 3 a 26 a 1 34 56 23 a 230

Hawaii a 1 aa a a a 1 a a 2

Idaho a 4 8 13 9 a 2 a 2 a 38

Illinois 4 116 a 21 8 2 12 36 7 a 206

Indiana a a aa 3 a 4 1 a 2 10

Iowa 2 1 62 10 a a 3 7 3 1 89

Kansas 1 9 24 25 12 a 59 a a 85

Kentucky a 2 11 59 1 a 14 3 2 a 92

Louisiana a 14 a 2 a a 4 aaa 20

Maine 2 a 1 13 2 a a 1 1 3 23

Maryland 1 a 2 4 a a 8 2 a a 17

Massachusetts a a 1 a 8 a a 2 3 a 14

Michigan aa a 17 16 a 65 1 a 45

Minnesota 13 a a 14 a a 28 4 a a 59

Mississippi 132 a 29 a 4 a 5 1 48 a 219

Missouri 1 1 a a 27 a 37 5 a 44

Montana a a aa 5 a aa 1 a 6

Nebraska a a 9 a 4 a aa 7 a 20

Nevada a a 27 20 a 868 a a 69

New 

Hampshire a a aa a a 21 1 a 4
Appendix IV

National Registry Database of the Appraisal 

Subcommittee

Page 66 GAO-03-404 Real Estate Appraisal Industry Oversight

Source: GAO Analysis of Appraisal Subcommittee National Registry of Appraisers database as of 10/31/2002.

a

Not applicable.

New Jersey aa a 6 4 2 9 1 2 4 28

New Mexico a 4 51 aa a 1 a a 11

New York a a aa a a a 2 1 a 3

North Carolina 1 a 45 a aa 38 3 5 43 135

North Dakota a a 7 a a 212 1 a 13

Ohio a 26 11 a aa 17 1 a a 55

Oklahoma 371 a 2 a aa 1 293 a 1 668

Oregon 1 5 3 158 a a 15 5 7 4 198

Pennsylvania a a 49 40 4 a 5 3 3 3 107

Rhode Island a a aa a a 4 4 a a 8

South Carolina aa a 33 16 7 4 5 a a 65

South Dakota 4 a aa a a 3 a a 11 18

Tennessee 24 46 69 13 3 3 1 5 5 a 169

Texas 1 3 42 12 5 a 46 1 a 74

Utah 4 a 7 28 7 1 a 2 13 a 62

Vermont a a 1 a aa a a a a 1

Virginia 295 6 a 43 a a 6 11 a a 361

Washington a 34 a 3 19 a 9 15 3 a 83

West Virginia a a aa a a 5 aaa 5

Wisconsin 1 a 20 1 aa a 2 1 3 28

Wyoming a a aa a a 2 a 2 a 4

All 1,088 395 462 788 263 33 398 644 212 77 4,360

(Continued From Previous Page)

Type of disciplinary action

Issuing states

and U.S.

territories Other Warnings

Additional

education Fine Probation

DowngradeSuspensionRevocationVoluntary

surrender

Official

reprimand All

N N NN N N N N N N

No. of

actions
Page 67 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix V

Evolution and Use of Automated Valuation 

Models ApendxiV

Automated valuation model (AVM) is a broad term used to describe a range 

of computerized econometric models that are designed to provide 

estimates of residential real estate property values. AVMs may use 

regression, adaptive estimation, neural networking, expert reasoning, and 

artificial intelligence to estimate the market value of a residence. The 

earliest users of computer-assisted property valuations appear to have been 

government assessors who needed to value large volumes of property for 

tax purposes. However, early efforts to develop computer-assisted 

appraisal models were hampered by the lack of large data sets and the 

costs of computing. 

Since the early 1990s, AVMs have become commercially viable, for several 

reasons. First, computerized real property data sets have become available 

at the metropolitan and state levels. Second, the cost of computers has 

declined. Third, the Internet has improved distribution capabilities and 

further increased the availability of needed data. Finally, the growth of the 

secondary mortgage market has helped fuel the demand for AVMs as a 

faster and more economical alternative to traditional appraisals. According 

to Standard & Poor’s, AVMs were expected to play a role in 10 percent of all 

new loan originations in the residential mortgage market in 2002 and will 

be put to a variety of uses, from acting as checking appraised values to 

being the sole determinant of a property’s value. 

Three Types of AVM 

Models Are Currently 

Used

There are many different types of AVMs available. However, three types of 

AVM models are most commonly used: hedonic, repeat sales, and hybrids.

• Hedonic models use a sales comparison (or market) approach, which 

is the most commonly used approach for appraising single-family 

houses. Estimates are based in part on recent sales of comparable 

homes in the local market. These models require information about 

specific characteristics, including the living area and lot sizes, age of the 

property, and other physical attributes, to determine value. Recent 

market sales of comparable homes in the local market are used to 

estimate the price of the subject property. In effect, hedonic models use 

a sales comparison (or market) approach, which is the most common 

used approach for most appraisals of single-family houses for lending 

purposes. 

• Repeat sales models calculate and apply geographic-specific indexes 

to update a property’s last known sales price. Price trends are 

constructed at the zip code and county levels using matched-pair 
Appendix V

Evolution and Use of Automated Valuation 

Models

Page 68 GAO-03-404 Real Estate Appraisal Industry Oversight

analysis. Indexes are generally developed with several price tiers within 

each zip code and assume that the subject property behaves much like 

other properties in the zip code and price tier. Unlike the hedonic model, 

the repeat sales model does not require information on property 

characteristic, only the prices and sale dates for properties within a 

specific geographic area. 

• Hybrid models are typically a combination of hedonic and repeat sales 

models, although all hybrids do not give the same weight given to each. 

Another form of hybrid models combines an AVM with involvement or 

input from the appraiser. For example, an appraiser may use the results 

of an AVM as a tool to develop a standard appraisal.

Data Sources for AVMs 

Vary in Completeness 

and Reliability

Regardless of the model used, the quality of the underlying data determines 

the AVM’s accuracy and usefulness. The data that are the core of any 

model’s results must be accurate, current, and complete. Data sources for 

AVMs include public records, multiple listing services, and traditional real 

estate records. Sources of public data include tax records and information 

kept by country recorders, but both these sources have limitations. Tax 

assessment data are often part of the database mix, but AVMs do not rely 

solely on the assessed value of a home. For example, Freddie Mac uses tax 

assessments along with other factors to determine property values in its 

models. It has found that the tax assessment alone is not sufficient to 

provide accurate value estimation. Information at the county level is not 

available for properties that are located in “nondisclosure states.”1

 Further, 

counties use different methods of collecting data, so that the information 

available in some counties is more complete and consistent than it is in 

others. 

Multiple listing service data are considered by some to be the best available 

for determining trends in specific geographic markets and changes in the 

overall market. But this data can also be as fragmented and 

nonstandardized as county data. According to one of the AVM developer 

and vendor that we contacted, his company is increasingly relying on data 

from appraisers because they are usually more accurate and in-depth than 

publicly available data. In addition, he stated that some AVM developers 

1

Nondisclosure states are those states in which the price and terms of real estate 

transactions, such as the amount paid for the property, are not subject to public disclosure.
Appendix V

Evolution and Use of Automated Valuation 

Models

Page 69 GAO-03-404 Real Estate Appraisal Industry Oversight

and vendors might be physically collecting their own data, especially in 

areas where public data are sparse. 

Because of the problems obtaining reliable data and the fact that properties 

are not physically inspected, AVMs are generally not considered a viable 

replacement for traditional appraisals. AVMs work best in markets that 

have an abundance of recent sales data and homogenous neighborhoods. 

In rural areas, they may be less useful, either because of a shortage of 

comparable sales or because rural properties are often unique. Without a 

physical appraisal, AVMs may not take into account excess depreciation, 

wear and tear, and upgrades that are not contained in the public records. In 

addition, the proprietary nature of commercial AVMs has raised concerns 

about the “black box” technology these models use. AVM vendors are not 

required to make their AVM methodologies available to the public. As a 

result, some groups have raised concerns that AVM models may be 

including factors that could unintentionally introduce bias into their 

analysis.

AVMs Have Both 

Advantages and 

Disadvantages

AVMs offer a number of advantages over traditional appraisals. First, AVMs 

are generally much faster and cheaper to use in estimating the value of a 

property. For example, traditional appraisals for single-family residences 

typically cost several hundred dollars and can take days or even weeks, 

depending on market conditions and the availability of the appraiser. AVMs, 

however, cost less than $100 and take just a few minutes. Second, 

proponents of AVMs argue that this technology delivers more objective and 

consistent appraisal values than human appraisers, who often value 

properties differently and may be subject to pressure from lenders to 

assess a property at a specific value. Third, AVMs can be used to validate 

traditional appraisals, especially in valuing high-risk loans. 

As has been pointed out, AVMs also have a number of disadvantages. 

Because data may not be available or may not be complete and reliable, the 

models are sometimes unworkable. The lack of a physical inspection could 

mean that some important factors are not taken into account. And AVM 

technology is proprietary, so that vendors do not have to disclose their 

methodologies to the public. Despite these disadvantages, AVMs provide a 

fast, inexpensive means of valuing properties in active markets.
Appendix V

Evolution and Use of Automated Valuation 

Models

Page 70 GAO-03-404 Real Estate Appraisal Industry Oversight

Guidance and 

Regulations on Using 

AVMs Are Relatively 

New

As of January 2003, federal financial institutions regulators have not issued 

specific regulations or policies governing a federally insured depository 

institution’s use of AVMs. According to representatives of the federal 

financial institutions regulators, federally insured depository institutions 

are free to use AVMs for transactions not considered to be federally related 

transactions, such as mortgage loans falling below the $250,000 threshold 

for appraisals. The regulators stated that their examiners are being 

introduced to AVMs through various training programs.

The Appraisal Standards Board has issued an advisory opinion, stating that 

the output of an AVM by itself does not constitute an appraisal.2 However, 

the advisory opinion states that appraisers can use AVMs as a tool in 

developing an appraisal, appraisal review, or appraisal consulting opinions 

and conclusions. The opinion lists five critical questions that an appraiser 

must answer before deciding to use an AVM: 

• Does the appraiser have a basic understanding of how the AVM works?

• Can the appraiser use the AVM properly?

• Are the AVM and the date it is used appropriate?

• Is the AVM output credible?

• Is the AVM output sufficiently reliable for use in the assignment?

The advisory opinion also identifies the steps appraisers should take to 

ensure that the output of an AVM is communicated in a way that is not 

misleading.

Fannie Mae and Freddie Mac, the two government-sponsored enterprises 

(GSE) that control a significant portion of the secondary market for 

conventional single-family mortgage loans, include AVMs within their 

automated loan underwriting systems. According to representatives of the 

two GSEs, their automated loan underwriting systems use various factors 

to determine the appraiser-related services that need to be performed. In 

some cases, the two GSEs allow lenders to use an AVM rather than 

2

Appraisal Standards Board, Use of Automated Valuation Model (Advisory Opinion 18)(July 

9, 1997).
Appendix V

Evolution and Use of Automated Valuation 

Models

Page 71 GAO-03-404 Real Estate Appraisal Industry Oversight

requiring an appraisal because the automated loan underwriting system has 

sufficient information. Both Fannie Mae and Freddie Mac reportedly use 

their proprietary AVMs as part of their quality control systems and their 

own risk and portfolio management. Freddie Mac has also made its 

proprietary stand-alone AVM available to other public and private entities. 
Page 72 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix VI

The Appraiser Qualifications Board’s Process 

and Fees for Approving Appraiser Education 

Courses and Certifying Instructors ApendxiVI

Some providers of education courses for appraisers have expressed 

concerns about the fees the Appraiser Qualifications Board (AQB) charges 

to approve courses and certify instructors. This appendix contains 

information on (1) the AQB’s course approval program, (2) the AQB’s 

instructor certification program, (3) options the AQB has offered education 

providers for approving distance education courses, and (4) fees charged 

by other entities offering similar course approval and instructor 

certification programs. 

AQB’s Course Approval 

Program

According to the AQB, it established its course approval program at the 

request of state regulators and education providers associated with the real 

estate appraisal industry. AQB officials told us that many state regulators 

had notified the AQB that Uniform Standards of Professional Appraisal 

Practice (USPAP) courses were deficient and that appraisers were facing 

disciplinary action as a result of not fully understanding the standards. 

Participation in the course approval program is entirely voluntary for 

course providers, and the AQB encourages but does not require states to 

accept approved courses for appraiser education requirements. Moreover, 

a state may set its own requirements, which all education providers 

operating in the state—even those offering AQB-approved courses—must 

meet. 

Education providers that choose to participate in the AQB’s course 

approval program must submit course materials and policies for review by 

a member of the AQB Review Panel. Appraisal Foundation officials told us 

that AQB review panelists are college professors from Virginia 

Commonwealth University, the University of Hawaii, and Texas A&M 

University with experience in real estate appraising. According to the AQB, 

the chief reviewer also performs a summary review to assure objectivity 

and quality control. The chief reviewer then recommends whether the AQB 

should approve the course. According to Appraisal Foundation officials, 

education providers may be asked to fix identified deficiencies prior to 

receiving approval for the course. Approval is valid for 3 years, except for 

courses involving the USPAP, which must be approved annually. 

The AQB offers education providers content review services for all 

courses—qualifying courses for trainees as well as continuing education 

courses for practicing appraisers—including distance education courses. 

Courses that are approved for qualifying education will automatically be 

approved for continuing education. Distance education providers must 

have their delivery methods certified by the International Distance 
Appendix VI

The Appraiser Qualifications Board’s Process 

and Fees for Approving Appraiser Education 

Courses and Certifying Instructors

Page 73 GAO-03-404 Real Estate Appraisal Industry Oversight

Education Certification Center (IDECC). AQB officials noted that IDECC 

certification is essential, since distance education courses are held to a 

different standard than traditional classroom setting courses because 

students do not have direct in-person interaction with instructors.

The AQB’s fees for approving courses vary based on the length and type of 

course. For example, the initial fee for approving a 15 to 29 hour qualifying 

education course is $1,200, while the fee for a course of 30 or more hours is 

$1,400. The renewal fee is $125. For continuing education courses, AQB 

charges $800 to approve a 2 to 8 hour course, $900 to approve a 9 to 16 hour 

course, and $1,000 to approve a course of more than 16 hours. The renewal 

fee for these courses is $100. AQB charges distance education providers 

the same fees, but distance education providers must also pay service fees 

to IDECC. IDECC charges $750 to review the first course and $400 to 

review each additional course. Distance education courses with IDECC 

certification are approved for 3 years, with a recertification fee of $270. 

AQB’s USPAP 

Instructor Certification 

Program

AQB’s USPAP instructor certification program was implemented in 

February 2002 as part of the revisions to the Real Property Appraiser 

Qualification Criteria. According to the AQB, the instructor certification 

program, like the approval process for USPAP courses, was adopted in an 

effort to improve the overall quality of USPAP training. Although 

participation in the program is voluntary, as of January 1, 2003, only AQBcertified USPAP instructors were permitted to teach the national USPAP 

courses.1

 The AQB certifies instructors at the national level, but some 

states have their own requirements that instructors must also meet. 

The prerequisites for AQB’s USPAP instructor certification program 

include at least 7 years of appraisal experience in any discipline and at least 

35 classroom hours of appraisal teaching experience within the last 5 years. 

Individuals who complete the USPAP instructor certification courses and 

pass the examination must take a USPAP update course and examination 

every 2 years in order to remain certified.

Appraisal Foundation officials reported that past and present Appraisal 

Standards Board members develop, maintain, and teach the USPAP 

1

The AQB’s minimum qualification criteria for those seeking to become appraisers require 

the course or its equivalent. AQB has also established a continuing education requirement 

for appraisers of 7 hours of similar training every 2 years. 
Appendix VI

The Appraiser Qualifications Board’s Process 

and Fees for Approving Appraiser Education 

Courses and Certifying Instructors

Page 74 GAO-03-404 Real Estate Appraisal Industry Oversight

instructor certification program course with guidance from the AQB and 

the Education Council of Appraisal Foundation Sponsors (ECAFS).2

 For 

example, an Appraisal Foundation official told us that members of the ASB 

had developed the course content and that the AQB had contracted with a 

psychometrician experienced in the science of examinations to develop the 

examination structure. The AQB also contracts with a firm specializing in 

psychometrics—Gainesville Independent Testing Services, LLC—to review 

the examinations after every course. Gainesville scores each student’s 

exam and summarizes its strengths and weaknesses. Students who fail the 

course receive both their results and a summary of their strengths and 

weaknesses for each component of the examination. 

The AQB instructor certification program includes a 2 1/2 day course, 

followed by a half-day 120 multiple-choice question examination. The 

course and exam cost $425. Individuals who participate in the program 

and fail the examination may exercise one of the following options within 

12 months:

• retake the 2 1/2 day instructor certification course and examination for 

$225, or

• retake the examination only for $95.

If an individual retaking the examination only fails to pass it the second 

time and still desires to become certified, he or she must retake both the 

course and the examination for $225.

Some education providers are concerned that AQB’s mandatory USPAP 

instructor certification program is intended simply to generate revenue for 

the Appraisal Foundation. According to the Appraisal Foundation, the 

program yielded approximately $165,000 in revenues for calendar year 

2002, while expenses for the program were almost $230,000, resulting in a 

deficit of $63,000. The AQB Instructor Certification Program is unique to 

the AQB, and the AQB has not approved any alternative methods of 

certification for individuals who teach the National USPAP courses at the 

national level. 

2

ECAFS is an advisory committee to the Appraisal Foundation made up of representatives 

from the Appraisal Foundation sponsoring organizations.
Appendix VI

The Appraiser Qualifications Board’s Process 

and Fees for Approving Appraiser Education 

Courses and Certifying Instructors

Page 75 GAO-03-404 Real Estate Appraisal Industry Oversight

Options Provided by 

AQB for Approving 

Distance Education 

Courses

State regulatory agencies also offer course approval programs for 

education providers offering training for appraisers. In some states, this 

approval is mandatory even if the state participates in AQB’s approval 

program. For distance education, the AQB offers four options, including:

• having an accredited college or university present the course, in which 

case the AQB would approve both the content and delivery method;

• submitting the course to the American Council on Education (ACE) 

College Credit Recommendation Service for content and delivery 

method approval;

• submitting the course to IDECC to have the delivery method approved 

and then submitting the course to the AQB to have the content 

approved; and

• submitting the course to IDECC to have the delivery method approved 

and then submitting the course to the state regulatory agency for 

appraisers (in the state where the course will be offered) for additional 

approval.

Relative Costs of AQB 

Course Approval and 

Instructor Certification 

Programs

To compare the AQB’s fees with those of other entities offering similar 

services, we obtained information from the ACE College Credit Approval 

Service, the Accrediting Council for Continuing Education and Training, 

the National Association for Practical Nurse Education and Service Inc., 

the Distance Education and Training Council, and the International 

Distance Education Certification Center. The course approval programs 

these entities offer vary in scope but in general provide services similar to 

those of the AQB. For example, the National Association for Practical 

Nurse Education and Service offers an approval program for continuing 

and vocational education courses. The Accrediting Council for Continuing 

Education provides both course approval services for continuing education 

and accreditation services for entire institutions.

Directly comparing the fees charged by these organizations is difficult 

because they do not all offer exactly the same services; moreover, in some 

cases the fees are not the only cost to the education provider. Fees for 

services from the National Association for Practical Nurse Education and 

Service can range from $60 for a one-time course offering by an association 

member to $600 for more than 60 repeat course offerings by a nonmember. 
Appendix VI

The Appraiser Qualifications Board’s Process 

and Fees for Approving Appraiser Education 

Courses and Certifying Instructors

Page 76 GAO-03-404 Real Estate Appraisal Industry Oversight

Fees for accreditation services by the Accrediting Council for Continuing 

Education and Training are a minimum of $6,300, which includes a 

preapplication evaluation, an application for initial accreditation, a 

mandatory accreditation workshop for education provider representatives, 

and a site visit. Table 5 provides an overview of the fees charged for course 

approval services.

Table 5: Approval Service Fees, by Service Provider as of February 2003

Source: GAO analysis of data obtained from the service providers.

n/a = not available or applicable.

Note: ACCET= Accrediting Council for Continuing Education and Training; NAPES= National 

Association for Practical Nurse Education and Service Inc.; DETC = Distance Education and Training 

Council; IDECC = International Distance Education Certification Center.

a

Fees do not include variable costs, which the education provider pays (for example, on-site review, 

data entry, and staff travel, hotel, and per diem).

b

Fees for the accreditation of an institution and the current courses it offers.

c

Application fee for accreditation of a distance education institution. Other fees may apply for services 

such as on-site visits, subject specialist review, and annual fees.

No other entity offers a program similar to AQB’s USPAP instructor 

certification program, although the Appraisal Institute—an international 

membership association of professional real estate appraisers—has a 

program with similar examination requirements. Among a number of other 

requirements, individuals seeking to be certified to teach Appraisal 

Institute courses must successfully complete its Instructor Leadership 

and Development Conference and subsequent examination requirements. 

The fee for taking the Appraisal Institute’s last Instructor Leadership and 

Development Conference—held in February to March 2002—was $350. In 

contrast, the AQB charges $425 for USPAP instructor certification.

Service provider

Type of approval service AQB ACEa ACCETb NAPES DETCc IDECC

Qualifying education course $1,200-$1,400 $700 n/a n/a n/a n/a

Continuing education course $800-$1,000 n/a $6,300 $60-$600 n/a n/a

Distance education course content $800-$1,000 $700 $6,300 n/a $300 n/a

Distance education delivery method n/a $700 $6,300 n/a $300 $225-$750
Appendix VI

The Appraiser Qualifications Board’s Process 

and Fees for Approving Appraiser Education 

Courses and Certifying Instructors

Page 77 GAO-03-404 Real Estate Appraisal Industry Oversight

State Fees for Course 

and Instructor 

Approval

In addition to the fees charged by the AQB for its course and instructor 

approval programs, education providers in certain states may also have to 

pay fees to state appraiser regulatory agencies for course approval and 

instructor certification. Information obtained from the Internet sites of 47 

of the 55 state regulatory agencies and, in some cases, directly from the 

state regulatory agency indicated that fees ranged significantly between 

individual states. For example, fees charged by individual states ranged 

from:

• zero to $500 for course approval of qualifying education courses,

• zero to $250 for course approval of continuing education courses,

• zero to $500 for approval of distance education courses, and

• zero to $300 for instructor certification.3

Eight of the states did not charge a fee for course approval and instructor 

certification.

3

One state charged a single certification fee of $1,000 to education providers for all 

instructors.
Page 78 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix VII

Federal Financial Institutions Examination 

Council’s Legal Advisory Group Opinion ApendxiVI
Appendix VII

Federal Financial Institutions Examination 

Council’s Legal Advisory Group Opinion

Page 79 GAO-03-404 Real Estate Appraisal Industry Oversight
Appendix VII

Federal Financial Institutions Examination 

Council’s Legal Advisory Group Opinion

Page 80 GAO-03-404 Real Estate Appraisal Industry Oversight
Appendix VII

Federal Financial Institutions Examination 

Council’s Legal Advisory Group Opinion

Page 81 GAO-03-404 Real Estate Appraisal Industry Oversight
Appendix VII

Federal Financial Institutions Examination 

Council’s Legal Advisory Group Opinion

Page 82 GAO-03-404 Real Estate Appraisal Industry Oversight
Appendix VII

Federal Financial Institutions Examination 

Council’s Legal Advisory Group Opinion

Page 83 GAO-03-404 Real Estate Appraisal Industry Oversight
Appendix VII

Federal Financial Institutions Examination 

Council’s Legal Advisory Group Opinion

Page 84 GAO-03-404 Real Estate Appraisal Industry Oversight
Appendix VII

Federal Financial Institutions Examination 

Council’s Legal Advisory Group Opinion

Page 85 GAO-03-404 Real Estate Appraisal Industry Oversight
Appendix VII

Federal Financial Institutions Examination 

Council’s Legal Advisory Group Opinion

Page 86 GAO-03-404 Real Estate Appraisal Industry Oversight
Page 87 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix VIII

Comments from the Appraisal Subcommittee ApendxiVI
Appendix VIII

Comments from the Appraisal Subcommittee

Page 88 GAO-03-404 Real Estate Appraisal Industry Oversight
Appendix VIII

Comments from the Appraisal Subcommittee

Page 89 GAO-03-404 Real Estate Appraisal Industry Oversight
Appendix VIII

Comments from the Appraisal Subcommittee

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Page 91 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix IX

Comments from the Appraisal Foundation ApendxiIX
Appendix IX

Comments from the Appraisal Foundation

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Page 93 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix X

Comments from Fannie Mae ApendxiX
Appendix X

Comments from Fannie Mae

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Appendix X

Comments from Fannie Mae

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Appendix X

Comments from Fannie Mae

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Appendix XI

Comments from Freddie Mac ApendxiXI
Appendix XI

Comments from Freddie Mac

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Page 99 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix XII

Comments from Department of Housing and 

Urban Development ApendxiXI
Appendix XII

Comments from Department of Housing and 

Urban Development

Page 100 GAO-03-404 Real Estate Appraisal Industry Oversight
Page 101 GAO-03-404 Real Estate Appraisal Industry Oversight

Appendix XIII

GAO Contacts and Acknowledgments ApendxiXI

GAO Contacts David Wood (202) 512-8678 

Harry Medina (415) 904-2000

Acknowledgments In addition to those named above, Susan Baker, Emily Chalmers, Erika 

Cruz, Edda Emmanuelli-Perez, Joel Grossman, Tracy Guerrero, Jennifer 

Lai, Alexandra Martin-Arseneau, Marc Molino, David Noguera, Jerome 

Sandau, and Paul Thompson made key contributions to this report. 

(250079)
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