Last week, I wrote about how difficult it is to schedule an appraisal in Portland, Oregon right now. The backlog has resulted in recent appraisal fee increases. Subsequently, more people have been contacting me seeking someone willing to train them and pass the largest hurdle of becoming a Certified Residential Appraiser – the two-year apprenticeship. If you’re an appraiser looking to find an assistant, please contact me, I will connect you with some good candidates.
I cannot hire everyone that contacts me. So, what advice do I give to someone looking to find a supervising appraiser? I generally tell them to seek out and attend local appraiser functions and organizations. In Portland, the local NAIFA meets monthly for lunch and a guest speaker. (Click here for more information about the chapter luncheons.) The Appraisal Institute (AI) also has local events, but the mixes are not as regular as with the NAIFA. However, the meetings in both organizations are welcoming to guests and are a great way to meet appraisers, particularly the ones who might be able to hire or otherwise help you.
When you are looking to find an appraiser to train you, they are much more likely to hire you if they feel like they know you. This takes shaking hands, sending out resumes, and phone calls. It is said in sales that it takes seven touches or interactions to make a sale, so don’t get frustrated if you don’t get a job right away. Here is a plan to use on every appraiser that you think might be able to train you or get you into contact with someone who can.
The more appraisers that you can interact with, the better your chances are at finding a job. When you’re interacting with appraisers, you never know when someone will ask for your resume and cover letter. Here is a listing of some things that I look for in an appraiser assistant.
For additional information, here is a link to another article that I wrote about How to Become a Real Estate Appraiser. Did I leave anything out or do you want to join in the conversation? Let me know in the comments below.
If you find this information interesting or useful, please subscribe to this blog and like A Quality Appraisal, LLC on Facebook. Also, please support us by making Portland real estate appraisal related comments on our blogs and YouTube videos. If you need Portland, Oregon area residential real estate appraisal services for any reason, please request appraisal fee quote or book us to speak at your next event. We will do everything possible to assist you.
Thanks for reading,
Gary F. Kristensen, SRA, IFA, AGA
One small part of what real estate appraisers do is measure homes to calculate the living area or “square footage.” The standard that is typically used by most home appraisers to measure and calculate living area is provided by ANSI (American National Standard Institute). However, in this post I’m focusing on the geometry and simple math of determining the total area.
Normally, appraisers draw homes using software that automatically calculates the area. Our company recently measured a home of an engineer by using just such software. After examining the computer generated home sketch, the engineer said that the upper level of his home (shown in the illustration above) had been incorrectly calculated. He then provided his handwritten calculations as support.
When I heard this, my stomach knotted up and I thought, “Did this engineer find a bug in our software?” A Quality Appraisal associates measure many homes each year all around the Portland area. I thought, “Is this an isolated bug or something that could have caused errors in hundreds of appraisals or measurements?” We don’t manually check the calculations of the software on all of our measurements before they are delivered to a client. Maybe we should.
I could not wait to get back to my office and check for myself. Once in the office, I deconstructed the drawing into five smaller shapes (a composite figure and some appraiser software will do this automatically) and then I was able to easily calculate the area as shown in the figure above. To my relief, I came up with exactly the same number as the software total for the upper level. After this experience, I concluded it is good practice for appraisers to occasionally check the calculations totaled by our sketching software. For more information on how to deconstruct a composite figure and add up the individual areas, here is a short helpful video from Mathtrain.TV.
Did I leave anything out or do you want to join in the conversation? Let me know in the comments below.
Recently, I’ve been tossing around the idea of listing the top things not taught in appraisal school, but that would result in a very long blog post. Therefore, for this post, I will describe what I consider to be the most important skill not taught to aspiring appraisers.
Often when I’m appraising a home, or speaking to real estate agents about appraisals, I hear stories of how the last appraiser came to the property, looked around, said almost nothing, and left quickly. I know that appraisers must work fast if they want to earn a decent living in this business, but time spent talking with the owner or agent is a corner that should not be cut. Speaking with homeowners and agents is one of the most important parts of the appraisal process, yet the subject is often overlooked in appraisal school. Some appraisers never feel comfortable with such interaction. Consequently, they may tend to avoid speaking with clients altogether.
Conversing with a homeowner or agent is one of the appraiser’s best opportunities to obtain valuable information about details of the property that might not be otherwise observable. The homeowner may know things like how long ago the furnace was serviced, the costs and timelines of upgrades or remodeling, and features that first attracted them to purchase the home. All are things that an appraiser might not identify on a normal walk-through inspection, but they are also things that may alter the outcome of the appraisal.
The inspection is also the best time for the appraiser to earn the trust and respect of homeowners by being courteous, professional, and knowledgeable. As with any appraiser, there are many times where I deliver a value opinion that is not what the homeowner wanted, expected, or hoped. However, I believe that the time I spent getting to know the owner during the inspection could be the best way to reduce the possibility that the owner will second guess the conclusion or complain about the service.
A good example of a conversation likely saving problems later came from a recent appraisal done by A Quality Appraisal for a divorce. At the inspection, the owner spent a lot of time talking about the great view that the property has. He is proud of the view and he should be. However, it is a view that happens to be characteristic for the area because the majority of properties in this hillside neighborhood enjoy a very similar outlook. In most appraisals, little time is spent discussing a typical view or things that are not significant factors for comparison. However, since I knew the owner was proud of the view and would be looking closely at my analysis of it, I was able to go into greater detail in this section of the appraisal and likely reduce questions or hard feelings later. If I did get questions about the view, I would be able to direct the client to the appropriate section of the report.
Did I leave anything out or do you want to join in the conversation? Let me know in the comments below. (As of the publishing this blog post, the comments section is not working but I am told that the website developers are working on a repair.)
If you’re an appraiser, loan underwriter, or a real estate agent, you’ve probably heard someone say, “There are no comps (comparables or comparable sales).” This is understandable. Sometimes, depending on the approach to value, it feels like there are actually no comparable data. However, it is my opinion that there is always something to compare to the subject. Appraisers just need to look harder to find strong data or be willing to accept comparable properties that are not ideal.
When there are few comparable sales, an appraiser generally has six options to find comparable data. A description of those alternatives follows.
Expand the search to more distant places. Sometimes if the subject sold on the outskirts of town, expanding a radius search results in less than ideal comparable sales that are closer to town, less comparable, and difficult to adjust for location. A better approach might be to look for other areas that have similar proximity to town and/or similar underlying markets. This might mean going further than typically accepted, but it might also result in a comparable sale that is a stronger indicator of value, like a comparable sale that is on the other side of town, but similar in distance to the center.
It is understood that crossing from the east side of Portland to the west side for comparable sales does not work well because the neighborhoods represent altogether different markets with very different prices. However, if I was appraising a property on the rural eastern outskirts of Oregon City, there might be a strong comparable sale on the rural western outskirts that would be more comparable in terms of location than a property closer to the subject and nearer the center of town.
I once assisted on an appraisal of a house with a cell phone tower on the property. We used comparable sales that were close to the rural subject, but to support the adjustment for the cell phone tower, we looked at several sales scattered across the entire State of Oregon to measure how the cell phone towers influenced the sales prices of other homes.
Be willing to accept comparable properties that are less similar. Sometimes when searching for comparable sales, real estate experts can get tunnel vision and think that we are only going to accept a property as a comparable if it has a certain feature, is in a specific or competing location, or is within a certain range of living space, year built, style, and so on. I catch myself doing this from time-to-time. However, when the data is far less than ideal, appraisers need to open their minds to what is actually comparable. Appraisers should be focused on what types of differences can be quantified with strong evidence and then concentrate on finding comparable properties with those differences. For example, time or living space adjustments might be easier to quantify and support a credible adjustment than might location or condition.
Try a different approach to value. All three approaches to value rely on comparable data, not just the sales comparison approach. The cost approach requires comparable sales to estimate land value, depreciation, and cost. The income approach requires comparable data to estimate capitalization rates, rent, and expenses. However, if there are very few direct comparable sales, there might be plenty of comparable data for another approach. The appraiser might be able to easily estimate market rent and a capitalization rate for the income approach.
All of the above. When comparable sales are extremely limited, the appraiser can assemble a strong case for value by using a mixture of value approaches and comparable sales where some might be older than ideal, some might be more distant than ideal, and some might be less comparable than ideal. If a mixture of varied comparable sales and approaches to value are considered and, after a diligent adjustment analysis, the indicators of value all point to a similar range of value, then the appraiser has done their job and can reconcile a credible opinion of value.
Decline the assignment. If an appraiser believes that there are no comparable sales, or that the comparable sales cannot be located within the course of business, and that they cannot produce a credible value opinion, the assignment should be declined. Appraisals should be based on evidence and expert analysis of comparable data. Having no comparable data would mean having no evidence and therefore no credibility.
The following are some phrases that I prefer over, “There are no comparable sales.”
There are no comparable sales that are exactly like the subject.
There are no sales with the subject’s feature that sold in the past six months.
It is outside the scope of work for this assignment to continue searching for comparable sales.
It is going to cost an additional research fee to find and analyze comparable sales.
Additional sales were identified and analyzed, but the results are not conclusive.
Did I leave anything out or do you want to join in the conversation? Can you think of any additions to my list? Let me know in the comments below.
When a home is exposed to the market under normal conditions, it will most often sell within a reasonably tight range. This range is the most probable price and is a fundamental part of the definition of market value. So how is it that market participants (buyers, sellers, and agents) usually agree on a price that is close to market value, even when they are not making adjustments, verifying data, and analyzing statistics like an appraiser does? There are three key factors why the market usually gets the price right.
When someone decides to buy or sell a home, they usually start by contacting an experienced agent who provides expert advice. Agents help to educate buyers and sellers on factors that may not be readily apparent to the layperson. An agent may or may not know the value of a property, although most agents have experience in setting price based on comparable sales or other approaches. (Even so, I still recommend ordering an appraisal before you sell). In addition to helping with setting strategic list prices or offer prices, an agent will be able to point out local trends, help guide decisions, and provide buyers or sellers with a foundation to start searching.
Buyers will usually determine where they want to purchase and start looking at homes in their price range to see what is available. When a buyer is focused on one area, one price range, and one set of key features, it is not long before they can accurately determine what a good deal is. Buyers will not necessarily know what market value is, just that some homes are priced better than others given the buyers’ individual need and budget. This process usually leads a buyer to the right price.
Sellers will set a price, but once the home is exposed to the market, they will usually know quickly if the price is close to market value. A home that is priced very high will typically not receive many showings. A home that receives showings, but no offers, might only be slightly high. A home that is priced too low will often receive multiple offers and still sell for close to or even more than market value (depending on many factors but there are different opinions on this).
This begs the question, if buyers usually get the value right, then why do banks require an appraisal in a purchase? The answer is that buyers usually get it right, but sometimes do not. Some properties are unique, and buyers will just fall in love without sound justification for the price. Other times there are non-market factors that influence the price. Whatever the case, banks use appraisers as one way (of many) to verify and protect their interest in the loan. The typical appraisal cost is very low in relation to the cost of making a bad loan. An independent opinion of value from an experienced local certified appraiser just makes good financial sense.