Meeting this morning in Pierre, the Government Operations and Audit Committee discussed Governor Kristi Noem’s unusual intervention in her daughter Kassidy Peters’s appraiser certification application in July 2020 and broader issues relating to real estate appraisal rules in South Dakota.
That discussion was informed by remarkable documents from the Professional Appraisers Association of South Dakota that cast doubt on Governor Noem’s claim that the state’s appraisers support her efforts to “streamline” the appraiser certification process. According to the PAASD, Noem’s new executive director of the state’s Appraiser Certification Program, Scott Amundson, has ruptured good relations between his regulatory office and the appraiser community and caused the professional organization, for the first time in its history, to oppose the rule recommendations of the ACP exec.
On October 14, GOAC Chairman Kyle Schoenfish (R-19/Scotland) invited PAASD President Sandra Gresh to testify at today’s committee hearing about the state’s Appraiser Certification Program. President Gresh responded with this October 22 letter saying PAASD is “pleased to accept the invitation and to contribute to the discussion” about the ACP. Gresh explains that, since its inception in 1991, her organization has maintained a keen interest in a good working relationship with the state because their business depends on making sure South Dakota strictly follows federal guidelines for real estate appraisers:
To this day, a federal agency called the Appraisal Subcommittee (ASC) oversees the actions of all state appraiser regulators in the United States, including South Dakota’s ACP. The performance of the ACP is subject to a unique form of federal oversight and monitoring by the ASC. Unlike other professions, the SD state credential(s) earned by appraisers from the ACP are subject to decertification by this federal agency. If the SD appraiser regulator, the ACP, is found to be consistently out of compliance with Title XI of FIRREA, one of the remedies available to the ASC is to decertify for federally related transactions all the appraiser credentials issued by the ACP. In practical terms, this action would mean that the appraiser residents with businesses in SD would lose their ability to perform appraisals almost overnight. For this reason, appraisal practitioners in the state have always had an intense interest in the actions of the ACP and carefully monitor its activities and programs. In a very real sense, the ability to practice as an appraiser in SD is inherently tied to the successful and compliant operation of the ACP, as judged by the ASC [Sandra Gresh, President, Profession Appraisers Association of South Dakota, letter to Tim Flannery, Department of Legislative Audit, 2021.10.22].
We’ve noted that federal oversight from the beginning of this latest Noem nepotism scandal: if the state deviates from proper practice in appraisal certification, the feds could shut down all real estate appraisals in South Dakota, which would create an immediate and enormous statewide economic crisis.
To demonstrate just how much appraisal certification is governed by federal standards, Gresh provides this grid showing the requirements applicants must satisfy to gain each of the four appraiser credentials:
The items in yellow are federal requirements. In fifteen out of sixteen requirements on this grid, the state can cut no slack; no streamlining can reduce the required classroom hours, training time, or exam criteria. Only the trainee-level state-registered credential provides any wiggle room for the state, and that’s only on the exam, which allows unlimited tries. Under that trainee item, Gresh notes that South Dakota already allows trainees unusual slack in appraising on their own, without supervision.
Gresh forwarded GOAC this 40-page document submitted to state Appraiser Certification Program (ACP) executive director Amundson on October 21 declaring the appraiser association’s opposition to rule changes Amundson proposed (we’ll get to the details of those changes below, but you can read them here in the public notice). This opposition is historic, says Gresh:
In the dozens of proposed administrative rule revisions since the Appraiser Certification Program (ACP) was created over three decades ago, PAASD as never before written in opposition to either the notification process or the contents of the proposed revisions to the rules. On the contrary, PAASD hgas worked closely with the ACP over these many years to update ARSD 20:14 and to pass revisions to SDCL 36-21B, as needed. These changes through the decades have enabled the regulator to better serve the public trust while also fairly regulating the profession [Sandra Gresh, letter to Scott Amundson, 2021.10.21].
According to Gresh, the appraisers and the state established the ACP Advisory Council in 1991 to maintain a close working relationship and protect the ability of appraisers to work in South Dakota. Gresh states that since the state ousted longtime ACP executive director Sherry Bren last winter, the Advisory Council has received none of the traditional communication from the ACP or anyone else in state government:
Gresh says neither she nor anyone else on the Interested Persons List that South Dakota agencies are required to maintain received prior notice of the rule changes Amundson proposed for an October 7 public hearing. PAASD first heard of the proposed rule changes from “an out-of-state professional organization that monitors state rule revision processes.”
Just on that failure to communicate, PAASD is urging the Legislature’s Interim Rules Review Committee to block Amundson’s proposed rule changes. PAASD is also alarmed at the Appraiser Certification Program’s apparent lack of “agency data or studies” to support the rule changes:
…in the current case PAASD is not aware of any studies by the agency that offer support or the rationale for the ACP’s proposed rule changes. In fact, the only stated rationale offered by the ACP for this bundle of rule changes has been verbally expressed as “removing barriers to entry into the profession” [Gresh to Amundson, 2021.10.21].
Removing barriers to entry into the profession was the primary theme of Governor Noem’s press release on her appraisal-certification “streamlining” efforts.
PAASD gathered data with a quick October 14–23 survey of its members. The survey drew an “extremely high” response rate of 77.4% (195 of 252 credentialed South Dakota appraisers). PAASD asked its members about the three major rule changes and found strong majority opposition to all three, plus comparably strong rejection of the idea that two of the three changes address real barriers to entry into the profession.
- Rule Change 1: eliminate the minimum number of inspections trainees must conduct under supervision. “The Appraiser Survey confirms that 72% of the appraisers in SD do not feel that the existing 25/15 personal inspection requirement is a barrier to taking on trainees. Additionally, 74.5% of the appraisers in SD are opposed to the administration rule changes proposed by the ACP that make that change” [Gresh to Amundson, 2021.10.21, p. 6].
- Rule Change 2: eliminate the requirement that appraiser-trainees pass a national appraiser-trainee examination before obtaining the State-Registered Appraiser credential and beginning to log experience hours. “…76% of the appraisers in SD do not feel that the existing requirement for an individual to pass the national appraiser-trainee exame before obtaining the State-Registered credential is a barrier to takin on trainees. Additionally, 77.5% of the appraisers in SD are opposed to the administrative rule changes proposed by the ACP that make that change [Gresh to Amundson, 2021.10.21, p. 7].
- Rule Change 3: “dramatically alter” the Experience Training Program that previous ACP exec Sherry Bren dutifully testified for in Legislative committee before the Noem Administration ousted her. The PAASD survey finds that “69% of the appraisers in SD feel that the traditional supervisor-trainee model (the only path for a trainee to gain experience hours) is a barrier…” and “68.5% of appraisers in SD are in favor of an alternative to the traditional supervisor-trainee model for obtaining appraiser experience — like the ETP.” However, 68% of South Dakota appraisers oppose the ACP’s proposal to reduce the months and experience hours that subject matter experts said should be in the training program.
It appears that in her rush to avenge her daughter’s slow progress through the appraisal certification program and now to cover her heavy-handed intervention with the pretense that she is “streamlining” a bureaucratic process, Governor Noem has installed a bureaucrat who has actually made the process worse. By failing to follow traditional communication practices, Governor Noem’s new executive director of appraiser certification appears to have ruptured constructive relationships with appraisers across the state and drafted rule changes that the vast majority of appraisers say would not solve the shortage of appraisers and would be bad for the profession.