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Real estate appraisal is based on specific time tested analytical procedures as well as new technology as it emerges, but it is not a science. It is a profession that is truly a practiced art, similar to the practice of accounting, law, or medicine.
What is appraisal practice?
Appraisal practice is appraisal, appraisal review, appraisal consulting, and other valuation services where there are expectations that the appraiser be objective, impartial, unbiased, and independent. Other professionals may offer valuation services, but are not usually held to the same ethics and standards as professional real estate appraisers.
What is an appraisal?
An appraisal is a professional appraiser’s opinion of value. An opinion of value is not a fact, but rather the appraiser’s interpretation of market activity relevant to the property being appraised. An appraisal involves research into relevant and timely market data, the analysis of data pertinent to the appraised property; and a conclusion based on knowledge, experience, and the objective judgment of the appraiser.
What is an appraisal report, and what does the appraiser analyze?
Most market value appraisals are reported in writing, although an appraiser may provide an oral report. The report generally consists of: a description of the property and its locale (the appraiser usually visits the property, and notes condition, overall livability based on design, layout, and appeal, and relevant external factors); analysis of highest and best use of the land; analysis of sales of comparable properties similar to the appraised property; and information regarding current real estate activity and/or market area trends. New construction cost and income analysis may be included, depending on the assignment.
These are usually the most important factors in considering the market value of the property. Note: There are other types of values, and each value type has its own criteria, that are relevant to its particular value.
What is expected of the appraiser regarding public trust?
Appraisers are ethically bound to provide objective, impartial and unbiased opinions about the value of real property. Appraisers provide assistance to those who buy, sell, own, manage, invest in and/or lend money on the security of real estate. Appraisers bring knowledge, experience, ethics, trust and integrity to the transaction. In doing so, their conclusions help clients to make sound financial decisions.
The appraiser is obligated to promote and maintain the public trust.
What is the range of services appraisers provide?
In addition to residential, commercial, industrial, agricultural, and special use appraisals, and depending upon an appraiser’s qualifications and level of licensure, he or she may be hired for:
- Estate planning and estate settlement
- Tax assessment review and analysis
- Feasibility studies
- Supply and demand studies
- Expert witness court testimony
- Market rent and area trend studies
- Land utilization studies
- Advice on eminent domain/condemnation suits
- Dispute resolution - for divorce, partition suits, foreclosures, zoning issues, and other litigation
- Cost/benefit analysis (as part of a feasibility study), i.e. what will be the financial return on remodeling, vs.: leaving the property "as is", and/or what other uses are possible based on zoning, demand, etc.
Certified appraisers (and their staff of appraisers) are typically hired independently by banks, mortgage brokers, credit unions, attorneys, property owners, and a host of other clients. Some appraisers serve as staff appraisers for financial institutions. Some certified appraisers serve as review appraisers and/or chief appraisers of these institutions.
How does a new appraiser enter the profession?
Associate appraisers, apprentice appraisers, and trainee appraisers (depending on your state laws) work under a certified appraiser. This working arrangement is very similar to the way a real estate agent works under the supervision of a real estate broker. Some licensed appraisers are content to sign on with an appraisal firm and stay for the long term. Other appraisers work toward state certification and move up within the industry. Appraisers negotiate compensation with their certified supervisory appraiser, based on individual skills and merit. There is no standard compensation or fee arrangement.
What type of education is required to enter the appraisal field?
All states require appraisers to be licensed or certified in order to provide appraisals for federally regulated lenders, or on any federally related transactions. Entry level education ranges from 75-90 hours. (Consult your state’s professional licensing department for specifics)
New appraisers will be well served to find a mentor who takes their professional responsibilities seriously, as the Public Trust must be preserved and maintained. Reputation is earned by performance of quality appraisal practice. The benefits of quality field supervision can not be over emphasized. The new appraiser has much to learn, and the learning never stops, as the appraisal field is constantly changing. |
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