View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.


Perspectives on Appraising

Jerry L. Jordan
President and Chief Executive Officer
Federal Reserve Bank of Cleveland

Training Seminar:
Appraising Residential Properties in Cleveland Neighborhoods
presented by
The Greater Cleveland Residential Mortgage Credit Project

Convocation Center
Cleveland State University
Wednesday, September 11,1996
8:30 a.m.

Background Notes:

There will be about 160 people in the audience, including 100 appraisers, 20 people from
real estate firms who probably do some appraising, 20 people involved in the Cleveland
Residential Housing and Mortgage Credit Project, and 20 representatives of community
Bud Burkle will introduce you.
You have 15 minutes on the agenda. Barbara Grothe says it would not be a problem if
you used less time.
Q & A is not needed following your remarks.
You do not need to describe the program for the day, nor serve as host.
After you speak, either Bud Burkle or Barbara Grothe will thank you and then introduce
the next speaker.


Letter to you from Barbara Grothe
Flyer announcing the program
Letter to CEOs encouraging them to have their appraisers attend the program
Letter from National City to their appraisers
Report of the Appraisal Task Group
Directory of Cleveland’s Neighborhoods (to be distributed to seminar participants)


Outline of Talking Points

A. Welcome
1. Thank you, Bud.
2. I’d also like to welcome all of you to today’s program.
3. I’m pleased to see such a strong turnout, because the work to be done here today is important.
4. I’d like to congratulate Barbara Grothe, Program Director at the Cleveland Roundtable, for
organizing today’s event, and Rick Edlund of Ohio Savings Bank, who did a terrific job as
chairman of the group that planned the actual training
5. Also, I’d like to recognize Tony Willis, who was chair of the original Appraisal Task Group,
and who is one of your instructors for today.
6. In addition, I want to acknowledge the contributions of:
The Cleveland Department of Community Development.
The Cleveland City Planning Commission.
The Northern Ohio Data and Information Services Department at the Urban Center of
Cleveland State University.
7. The Appraisal Institute facilitated the process of obtaining State Continuing Education Credit.
8. Now, I want to take a few minutes to put today’s session in perspective.

B. Background on the Cleveland Project
1. Today’s session is part of the Greater Cleveland Residential Housing and Mortgage Credit
2. Origin:
a. The Cleveland Project was startedjust about three years ago.
b. A study generated evidence of racially based bias in the home buying and financing
process in Boston.
c. There was a suggestion that a similar study should be done in Cleveland.
d. Rather than do another study, it was agreed that it made more sense to assume that a
study here would also indicate that bias exists, even though everyone involved in
building, selling, buying, and financing homes will say that there should be no
e. Instead of commissioning another study, a group of Cleveland business and
community leaders agreed to become part of the solution to this difficult problem. They
believed that committed people can make a difference.
3. Sponsors:
Four local organizations stepped forward to be catalysts for action by the private sector
by sponsoring the Cleveland Project. They are:
Greater Cleveland Roundtable
Cuyahoga County Department of Economic Development
Ohio Civil Rights Commission
Federal Reserve Bank of Cleveland


4. Philosophy
The philosophy of the Cleveland Project is a good example of belief in the private sector’s ability
to come together and reach mutually satisfactory solutions to community problems. Some
ground rules were adopted:
a. Participation was to be voluntary.
b. Solutions were not to result in new laws or regulations.
c. There was to be no finger pointing, no name calling, and no use of the news media to
push some group’s agenda.
d. A cross section of professionals from the local housing industry, including lenders,
appraisers, real estate brokers, title firms, etc., was to be the source of ideas, not some
outside “experts.”
e. The emphasis was to be on finding and implementing practical action steps, not
making just another academic study that would gather dust on a shelf.
5. Propagation of a Good Idea
a. This process, developed in Cleveland, is now being utilized in some other cities:
b. Cincinnati.
c. Federal Reserve Banks of Boston, New York, Chicago, St. Louis, and San Francisco.
d. Just yesterday, Community Affairs staff from the Cleveland Fed met with a state
senator, the mayor of Akron, and community leaders to discuss using the same process to
identify and remove impediments (“sand in the gears”) from the system through which
credit worthy small businesses in the Akron area obtain access to capital.
e. Also, the Federal Reserve Bank of Cleveland is now working with COSE in Cleveland

to initiate a project to improve access to capital for small businesses.

Progress Thus Far
a. Seven task groups have studied the areas of appraising, initial contact with real estate
agents, initial contact with lenders, secondary market issues, private mortgage insurant,
property insurance, and the credit reporting process. Each task group has made specific
recommendations for improvement actions.
b. We are now in the implementation phase. Committees are developing specific actions
to follow through on the recommendations.
c. For example, today’s training session is a direct result of a recommendation made by
the Appraisal Task Group.
d. Surveys of housing industry professionals who have participated in the Project show
that their experience with the Project has been overwhelmingly positive.
e. Participants have expanded their network of business contacts and information
sources, as you will have a chance to do today, particularly at the luncheon. [Note to
Jerry: Table seating at lunch will be organized so that appraisers will have the opportunity
to meet leaders of community development corporations, who can be sources of
information about neighborhoods.]

C. Today’s Seminar is a Good Example of the Cleveland Project’s Philosophy

1. Having this training seminar is a good example of the way things are supposed to work.
a. It is action, not words. It is an important, tangible step in the overall process.
b. It is local. Local professionals are working together to find local solutions to a local
problem. The training was planned by representatives of five local associations of
professional appraisers:
American Society of Appraisers, Akron/Cleveland Chapter
Appraisal Institute, Northern Ohio Chapter
Cleveland Area Board of Realtors
National Society of Real Estate Appraisers
National Association of Independent Fee Appraisers, Cleveland Chapter
c. It is voluntary. It is being accomplished with no new laws, no new regulations, no
instructions from Washington, which means it will be faster, more efficient, and more
2. As you can see from today’s large attendance, this local effort at self improvement has strong
support from the local appraisal industry.


D. Importance of Appraising for a Healthy Community
1. Appraisers play a key role in the economic health of neighborhoods.
2 Appraising is more difficult in some urban neighborhoods, where there is a mixture of
properties. There is both single family and multi family housing, and some might be vacant or
deteriorating while others are being renovated. Sometimes there is new construction mixed in.
3. An appraisal that is well below true market value:
a. Harms the purchaser by preventing him from getting credit to make the purchase.
b. Harms the seller by making it difficult to sell, or forcing him to sell at less than true
c. Harms the lender by causing them to miss out on a good lending opportunity.
d. Harms the neighborhood because the reduced selling price, or the lower appraisal, will
be used in making appraisals of for nearby homeowners seeking home equity loans or
home improvement loans, making it more difficult for them to maintain or improve their

E. Concluding Comments
1. Let me conclude by again thanking and congratulating everyone involved in this important
2. I hope you have a very productive day.