The Real Estate Valuation Professional: Moving from Local Crisis Manager to Global Financial Leader

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The Real Estate Valuation ProfessionalMoving
from Local Crisis Manager to Global Financial
Leader

• Alan Hummel, SRA
• Appraisal Institute, President

2
Time for Change

• The valuation profession has a long and rich
  history. In the past, development has often been
  driven by economic crisis.
• The property valuation profession must become a
  more integral, respected and proactive part of
  the international financial community.

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A small world after all

• Today the Internet, global positioning satellites
  and other technologies have brought about new
  systems to manage property information.
• The new century brings opportunity for the
  nations of the world to work together to maintain
  growth and help less-developed areas realize
  their own systems.

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Paradigm Shift

• A good legal property system is a medium that
  allows us to understand each other, make
  connections, and synthesize knowledge about our
  assets to enhance our productivity.
• Hernando de Soto

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The way forward

• How can the valuation community further develop,
  gain respect, and redefine itself so that valuers
  are more central players in real estate markets
  and can help those markets avoid the shocks of
  the past?
• Five critical areas of concern

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Civil Societies

• Whether in established markets or emerging
  economies, civil societies must widely promote
  the benefits of their activities on markets.
• Established societies must do more to help foster
  civil societies in developing economies.

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International Standards

• To facilitate cross-border transactions and
  contribute to the viability of international
  property markets 
• To serve as a professional benchmark for valuers
  around the world 
• To provide standards of valuation and financial
  reporting that meet the needs of emerging and
  newly industrialized countries

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Education

• Many countries still lack enough trained valuers
  to apply the generally accepted standard
  methodology of the three approaches to value.
• Market value is one of the cornerstones of the
  IVS, yet many countries still rely heavily on the
  cost approach or land price indexes.

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Transparency

• The reliance on cost basis is due to the lack of
  data market data are scarce due to lack of
  information disclosure and the failure to collect
  systematically transaction data. Therefore, the
  real estate market is not transparent.
• The World Bank

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Databases

• The Appraisal Institute has recently participated
  in the development of residential and commercial
  databases of appraiser-verified property data.
• Because they contain data that is verified by
  independent appraisers, the data tends to be more
  reliable than data in broker listings or records
  maintained by government authorities.

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Community

• World Association of Valuation Organizations
  (WAVO)
• The purpose is to serve as an international
  advocate for the valuation profession
• To act as an agent for change as property markets
  continue the process of globalization
• To facilitate the development and harmonization
  of the worldwide valuation profession

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Case Study Turkey

• Earthquake in 1999 lead to a need for new or
  rebuilt housing
• U.S. home builders rush in to make deals and sell
  building products
• The lack of a mortgage market and financial
  infrastructure inhibited success

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Case Study Turkey

• Capital Markets Board approached the Appraisal
  Institute to provide education for appraisers to
  support the creation of a mortgage market
• Turkish Appraisers Association formed in 2001
• August 2001 Capital Markets Board issues
  principles regarding the licensing of appraiser
  and appraisal companies

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Case Study Turkey

• January 2002 First instructor workshop
  conducted at Istanbul University
• March 2002 First course for appraisers in
  Turkey
• Fall 2002 First licensing exam given by CMB
• Today Work with IU and the Appraisers
  Association continues

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Recommendations

• More money must be channeled to national and
  transnational civil societies.
• Every effort must be made to support and
  implement International Valuation Standards.
• Greater efforts must be made to educate and train
  an adequate supply of real estate valuation
  professionals.

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Recommendations

• International data standards and systems of data
  sharing must be developed so real property
  markets can become more efficient and
  transparent.
• Real property market players must develop
  transnational ties and a stronger sense of
  community.

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