There are many reasons to engage the services of a real estate appraiser. Banks need appraisals for loan disposition and financing decisions, and they usually obtain these reports through their own network of approved appraisers. However there are many other uses for appraisals including sales/marketing, tax appeals, divorce, estate planning, bankruptcy, partnership buyout and foreclosure. Oftentimes, an appraisal from the latter group is ordered by the individual property owner. The following are some tips to consider in order to hire the ideal appraiser for your particular situation.
The first question that most people ask when inquiring about an appraisal assignment is, “How much does it cost?” Of course, cost is an important issue. But it might not make sense to base this decision solely on cost. Coming up with a value based on “picking comps” and averaging the sales prices is not an appraisal. But engaging an appraiser who does not have the experience, or who is not willing to thoroughly investigate the market may yield the same result.
Sometimes market analysis can yield unexpected results. It’s possible that the property in question is obsolete and may need major upgrades to conform to the market. Or perhaps there is an abundance of inventory of the property type and a new, more intensive use is in demand, driving the need to demolish the building. These types of scenarios require a great deal of support through market analysis. In order to do a thorough job, the appraiser needs to spend the time to do it right. The fee should reflect this effort.
Another factor to consider is experience in the area you need for the appraisal. Geographic competency refers to the appraiser’s knowledge about the neighborhood and the local demographic and economic factors which drive value in that neighborhood. If an appraiser has never done an appraisal in your specific area, he/she might not be the best choice for your property.
In addition to experience, education is another important factor to consider. State requirements continue to become more difficult. In order to obtain a license, a college degree is required, along with many hours of classwork, supervised report writing and the passing of a state test. In addition, a designated appraiser from a national appraiser organization indicates completion of additional classwork, along with more experience hours, intensive testing and completion of a comprehensive demonstration report. Designations to look for include the SRA for residential appraisers. The MAI, which I hold, is for commercial appraisers.
Also, while many assignments have a tight time schedule, it’s in your best interest to be as flexible with time as possible. As stated earlier, a thorough report takes time to do properly. Because the report involves so many steps and cooperation from many other real estate professionals, the report cannot always be completed quickly. The time needed will be somewhat dependent upon how easy it is to get in contact with these professionals.
Lastly, the best appraisers operate under a strict and unwavering obligation to provide independent and unbiased value opinions. As stated earlier, an accurate appraisal is based on market data, and should never be directed by the seller based on their particular wants or needs. The appraiser investigates the market to find out what a typical buyer would pay for the property, but if that property is appraised for a higher amount to satisfy the owner, it may not sell for that amount, and it defeats the reason the appraisal was ordered in the first place. This could result in the owner of the property becoming “under water” in a short sale situation, because the property is not worth what is owed on the loan. This is why it is never a good idea to hire an appraiser who would give in to this type of pressure. While it may seem like a good idea to present a value higher than market, the results could eventually be catastrophic to the owner.
Choosing an appraiser is not difficult, however there are certain key elements to consider, as I have outlined above.
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