Residential Real Estate Appraising Today
Posted by admin under: real estate appraisal Jun 21One day, a couple of years ago, I was in a real estate office to pick up a key for an appraisal inspection when the real estate girls asked some kind of stupid question, and my response was, “well, what are they afraid of, appraisers going crazy”? Everybody kind of giggled, but there was some truth to my off the cuff comment. I’m not sure what it means, though. I guess it kind of describes the belief out there that the entire mortgage meltdown, and subsequent recession was all because of appraisers going out of control with values and misrepresentations.
I guess it just describes the trials, tribulations and triumphs of the residential real estate appraiser in the current market. There sure are not many triumphs these days, though. Not with HVCC, AMCs, inexperienced appraisers low balling fees, underwriters, mortgage brokers, bankers still pressuring for values so they can keep their customers, real estate agents, oh, and did I mention underwriters? It is just a crazy time to be an appraiser. I got in this business for the potential freedom it offered…after sufficient training and experience, I could work from home! Be in business for myself! Have freedom and income all at the same time!
Well, a funny thing happened on the way to Utopia. Uncle Cuomo stepped in, created the HVCC, and now all of the relationships I’d built (or at least most), over the past 8 years were worthless. This is the residential real estate appraisal profession of today. It is no longer about relationships with clients, excellent service, honest opinions of value.
No, today it is about winning the lottery every day with your name coming up for the AMC to order an appraisal from you. And, by gawd, that form (otherwise knows as the appraisal report) better be filled out correctly, and we need it back in 48 hours, and we are going to pay you $250 while we collect $450 from the borrower. This is the world of Appraisal Management Companies and the typical appraisal request of today.
Residential real estate appraisers are no longer rewarded for doing a professional job, and supporting adjustments and painting an accurate and supported opinion of value. We are only rewarded for getting the report back to some cubicle in Dallas in 48 hours. It’s crazy, I tell you.
Residential real estate appraising has gone from a profession with a solid foundation and excellent prospects of success, to one of extreme frustration for those of us on the front lines. Uptight underwriters, profit driven appraisal management companies, and new appraisers that don’t know any better are making it tough for the established, ethical appraiser to make a living. Keep up with the everyday trials and tribulations at Appraisers Gone Wild.
Hiring a Real Estate Appraiser
Posted by admin under: real estate appraisal Jun 21Selecting a real estate appraiser sounds like a task that is almost overbearing. However, you would be surprised to realize that it is not quite as difficult as you think. This is one of the most exciting times of your life, whether it is your first home, second home,vacation home or a rental and the selection of your real estate appraiser should be just as exciting.
While it may sound lengthy, it is not a lengthy process. To begin, take a deep breath and relax and realize when you find a real estate agent you can trust the process is simple. Search for someone that you feel comfortable with, let them know what you expect from them and make sure that they can commit.
When searching for a appraiser, make a list of appraisers in your area. There are many ways to do this. You can start with the phone book and look in your local area. You can also access the Internet and search. Both these resources will bring you valuable information on finding an appraiser in your area. This is truly the easiest method when searching for an agent.
There are things that you should be aware to discuss when interviewing your real estate appraisers. You should ask what exactly their services include and how much they will cost. You will find that your responses will vary.
When you do feel as though as though you have found an appraiser that is someone that you are comfortable with you will want to ensure that you build a working relationship by placing your utmost into the process. Be sure not to make the selection with the first real estate appraiser you talk to. The more appraisers you talk to about their services with, the better you will recognize the right appraiser when you speak with them.
This is not a difficult process…in fact, it can be relaxed and enjoyable. Do your research and allow yourself enough time to find an appraiser that is the right fit.
Getting Started As a Real Estate Appraiser
Posted by admin under: real estate appraisal Jun 21Are you one of the many who is considering a career as a appraiser? Real estate appraiser careers are interesting more and more people each day. Why? Because there is a need for appraisers and it is a great career choice. It is important to know where to get started. There is a ladder in which you must climb to get to the position of a real estate appraiser. However, knowing the process will ensure you an easy ride to the top.
To begin, the first thing you must do is to get your license as a real estate appraiser. This will include taking the training courses that are required in order to obtain your license. Once you have fulfilled the required hours of course study then you will need to take the appraisers test and pass. This is not as lengthy of a process then it sounds. If you are having decided to become a real estate appraiser, then you need to be educated so that you are capable of providing your clients with the service they need.
Once you have passed your test and obtained your license, then you will be ready to get started. It is important to start with actual appraisals. First, you must make prospects aware that you are available. Let the industry know you are there. This means marketing yourself. Advertise locally in the real estate section of the newspaper, purchase a listing in the telephone book, and start advertising on the Internet. All of these resources will help you to become known in the industry and to help bring clients to your door.
It is important to start off correctly. It will take time, however, done properly you will gain. If you are willing to take the steps to become an appraiser and willing to dedicate and commit yourself, chances are you will be a great appraiser.
The “Lingo” Of The Real Estate Appraiser
Posted by admin under: real estate appraisal Jun 21A real estate appraisal is a service performed, by an appraiser, that develops an opinion of value based upon the highest and best use of real property. The highest and best use is that use which produces the highest possible value for the property. This use must be profitable and probable. Also of importance is the definition of the type of value being developed and this must be included in the appraisal, ie fair market value, condemnation value, quick sale value, etc.
Types of value
There are several types and definitions of value sought by a real estate appraisal. Some of the most common are listed:
Market Value
- The price at which an asset would trade in a competitive Walrasian auction setting. Market value is usually interchangeable with fair market value or fair value. The legal definition of market value is usually given by some variant of the following: “The most probable price at which a property would trade in an arms-length transaction in a competitive and open market, in which the buyer and seller each act prudently and knowledgeably and in which the price is not affected by any special relationship between them”.
Value-in-use
- The net present value (NPV) of a cash flow that an asset generates for a specific owner under a specific use. Value-in-use is the value to one particular user, which may be above or below the fair market value of a property.
Investment value
- is the value to one particular investor, which may be above or below the fair market value of a property.
Insurable value
- is the value of real property covered by an insurance policy. Generally it does not include the site value. It is important to distinguish between market value and price. A price obtained for a specific property under a specific transaction may or may not represent that property’s market value: special considerations may have been present, such as a family relationship between the buyer and seller, or else the transaction may have been part of a larger set of transactions in which the parties had engaged. It is the task of the real estate appraiser/property valuer to judge whether a certain price obtained under a certain transaction is indicative of market value.
Three approaches to value
There are three usual approaches to determining the fair market value of a property, cost approach, sales comparison approach, and income approach. The appraiser will determine which of the approaches is applicable and develop an appraisal based upon information from each individual market area. Costs, income, and sales vary widely from area to area and particular importance is given to the specific location of the property. Consideration is also given to the market for the property appraised. Properties that are typically purchased by investors (ie. skyscrapers) will give greater weighting to the Income Approach, while small retail or office properties (purchased by owner-users) will give greater weighting to the Sales Comparison Approach. Single Family Residences are most commonly valued with greatest weighting to the Sales Comparison Approach.
Cost approach
The Cost approach is sometimes called the summation approach. The theory is that the value of a property can be estimated by summing the land value and the depreciated value of any improvements. It is the land value, plus the cost to reconstruct any improvements, less the depreciation on those improvements.
Sales comparison approach
The sales comparison approach looks at the price or price per unit area of similar properties being sold in the marketplace. Simply put, the sales of properties similar to the subject are analyzed and the sale prices adjusted to account for differences in the comparables to the subject to determine the fair market value of the subject. This approach is generally considered the most reliable, IF good comparable sales exist.
Income capitalization approach
Income Capitalization Approach
Often simply called the income approach, is used to value commercial and investment properties.
Automated valuation models
Automated valuation models (AVMs) are growing in acceptance. These rely on statistical models such as multiple regression analysis and geographic information systems (GIS). While AVMs can be quite accurate, particularly when used in a very homogeneous area, there is also evidence that AVMs are not accurate in other instances such as when they are used in rural areas, or when the appraised property does not conform well to the neighborhood. Because of the limitations, AVMs have begun to fall out of favor with many lenders but are widely used in other appraisal problems such as mass appraisals for ad valorem real estate tax purposes.
Tips For Choosing a Real Estate Appraiser
Posted by admin under: real estate appraisal Jun 21Whether you’re investigating the value of your own property, the potential of an investment property or trying to obtain financing for a home, you’ll need the services of a certified real estate appraiser. If you’re trying to hunt down the value of a particular property and need to hire a real estate appraiser, keep reading for some tips on how to locate a quality person.
1. Ask your Bank
Because most lenders require proof of the value of a property before they will finance its purchase, they can often recommend trusted appraisers that they work with on a frequent basis.
If you trust your bank or lender, ask your mortgage agent for an appraiser recommendation.
2. Check with your Real Estate Agent
Your real estate agent is there to help you make this sale happen. Since they work in the business, they deal with appraisals and appraisers every day. Likely, your agent will be able to recommend a number of appraisers that they work with and trust.
3. Opt for Experience
The value of a home, whether you’re buying or setting an asking price, is going to depend largely on the appraiser’s recommendation and appraisal. Hiring the wrong appraiser or an inexperienced person could cost you a lot of money, whether you set the asking price for your house too low or you buy a home that’s simply not worth its stated value.
When hiring a home appraiser, look for experience and good references, not the cheapest price.
4. Ask Family and Friends
Some of the best recommendations come from our trusted friends and families, so ask around. If a member of your family or circle of friends has recently purchased a home, ask them about their appraiser and whether they would recommend them.
When hiring a service provider on a recommendation, always mention that you were referred to their business and who gave the referral. Referral-based business can often go a lot smoother than a cold call.
5. Check Online Customer Reviews
Many consumer review sites, like Yelp.com, let customers review and rate service providers and businesses in their area. These sites let you read actual customer reviews that include the good, the bad and the ugly about a particular business. So, before you hire, check online for customer reviews and comments.
Hiring a real estate appraiser is necessary, but also easier than it sounds. To get the best results, ask your bank, real estate agent and family and friends for recommendations. Finally, remember to opt for experience and check available customer reviews.
Reasons To Acquire A Real Estate Appraisal
Posted by admin under: real estate appraisal Jun 21There are many reasons to obtain a real estate appraisal. The most common reason to acquire an appraisal is to settle an estate. Taxing authorities often need real estate appraisals in order to establish the value of a real estate or property when a death occurs. Usually the survivors wish for a conservative value estimate which limits their tax liabilities as much as possible. Most of the estate appraisals are ordered through attorneys and not by the survivors. Another reason is to establish the substitute cost for insurance. Appraisals acquired for establishing the loss risk in case of fire accidents are mostly limited to offering a reproduction cost of the improvements or an estimate of the replacements. The insurable value may not be the representative of market value and usually doesn’t include the land’s value. Insurance agents might order real estate appraisals when their cost service manuals are not adaptable to a structure or a typical home. Owners of properties might order appraisals to contest the yearly appreciation increase that is mandated by certain insurance companies, particularly when there is a raise in the insurance coverage which results in an impractical premium.
To get a compensation for condemnation, the appraiser might represent either the condemning authority or the landowner. Generally the government entity which requires land for its usage orders an appraisal and purchases the land for the cost mentioned by the appraisal. If the land owner thinks that the sum offered by the condemning authority is not sufficient or adequate, then the land owner may order an appraisal. If both the parties couldn’t decide on a cost, then the issue will be settled in a court with each others appraiser testified on behalf of their respective estimated values. Appraisers aren’t advocates for their clients; they are just the expert witnesses who are trying to hold up their estimated values. Land owners often do not consider ordering another appraisal from an appraiser of their choice. Usually, they try to settle with the concern authority by a negotiation rather than receiving the expense of the appraisal. It is very much clear that the land owner’s negotiating position would be enhanced if a supporting professional appraisal report were accessible.
Another reason to get an appraisal is to contest in high property taxes. For instance, if property owners think that their properties are assessed very highly then the property owners can order an appraisal from an appraiser who is qualified to contest the tax assessments. In some parts of US, this practice is quite common but lot of property owners isn’t aware that this avenue for decreasing their tax load is available. The investment return is easy to perceive when the price of the appraisal is compared to many years of lower taxes. Occasionally these assignments contain an appearance in front of the equalization panel to argue the land owner’s case. However the appraiser must be watchful not to base the appraisal charge on the dollar amount of the value appraised that might be a violation of USPAP.
Small Business Idea – A Real Estate Appraiser
Posted by admin under: real estate appraisal Jun 21A real estate appraiser estimates real estate values for a variety of clients which may include mortgage lenders, attorneys, homeowners, appraisal management companies, related professionals and investors. The demand is high at times and low at others. This business suffers from the “feast and famine” syndrome so it is good to save money in the good times and work as much as possible.
An appraiser spends much of his time gathering and analyzing data. While doing this travel will be required to the property being appraised. There are two types of real estate appraisers, commercial and residential. Commercial appraisers command higher fees since their work is more complex than residential appraisal work. To get started in this business you should have a solid background in statistics and real estate. Good analysis skills are also very important. To get to the experienced required and aspiring appraiser will begin to work as an appraiser trainee with an appraisal firm or as an appraiser trainee with a government agency usually a county or a city. During this two-year period the trainee will gain valuable experience to get him started as a certified, licensed or general appraiser.
This business allows you to work from home and in a few instances people with disabilities can do this business. As with any professional license continuing education is required. The highest expense involved is car maintenance and fuel. You should advertise to investors, lenders, real estate professionals, attorneys, and appraisal management companies. You can charge usually $200 to $500 per residential appraisal, and $1,000 or more per commercial appraisal depending on complexity of work. For Internet link related to this business do a search for the Appraisal Institute, the International Association of Assessments Officers, the Appraisal Foundation, and Appraisal Buzz.
Real Estate Appraiser and their Importance
Posted by admin under: real estate appraisal Jun 21Real estate appraiser helps you in finding houses in your city at right prices. Real estate appraiser role is very important when someone wants to sell a property and wishes to know what the property is worth so that they know how to price the home. They will provide complete comparability studies about flats for rent or sale. They will help you in finding rental houses, commercial property and property foreclosure information.
In the world of commercial real estate, not all appraisers are considered equal. It takes a certain expertise and knowledge to correctly appraise commercial property and not just anybody is qualified. There are two types of appraisers, a fee appraiser and a staff appraiser. A fee appraiser is generally available to the public for hire and a staff appraiser works for a specific lender or lending firm. So be careful when you are choosing the real estate appraiser.
Most of the real estate appraisers are government authorized; some are non-authorized so check their license and track record before taking the services of real estate appraiser.
Real estate appraisal for rental properties isn’t the same as for single-family homes. If you were looking at a 24-unit building, it would be difficult to find similar ones nearby that have recently sold. Therefore, a market analysis using comparable sales isn’t normally used.
Many people assume that the only time that you need an appraisal for real property is when you are buying but you need at other times also like to know value of his/her property, when the time to decide the division of assets.
Be careful when using any real estate appraisal method or appraiser services. No formula is perfect and all are only as good as the figures you plug into them so choose according to your requirement. Used wisely, though, real estate appraisal using capitalization rates is one of the most accurate methods.
Essential Tips for Real Estate Appraisals
Posted by admin under: real estate appraisal Jun 21When you have the perfect home picked out and you know this is the home you want, your lender will require you to have an appraisal upon the request to use the home as security for a loan. A real estate appraisal will help in establishing a property’s market value, the sales price it would probably bring the seller, if offered in an open and competitive real estate market.
The reason the lender requires the real estate appraisal is because they want to ensure that the property would sell for at least the amount of money you require for your loan. Simply put, if the lender should ever have to foreclose, they want to ensure they would be able to get their moneys worth.
A real estate appraisal is not to be confused with a comparative market analysis (CMA). Real estate agents commonly use a CMA as a tool to determine a realistic asking price for home sellers. Although, an experienced agent may come extremely close to an appraisal price with the CMA, an real estate appraisal’s report include a lot more detailed information, not to mention the fact that it is the only evaluation report a bank will accept when making the decision of whether or not to loan money.
When having a home appraised for this purpose you should have an appraiser that is an objective third party. The appraiser should have no financial or any other connection with either party involved. If you have never experienced a real estate appraisal before, here are a few things that are included in the report.
There will be many details about the property in question as well as side-by-side comparisons of three different properties like it. There will be an evaluation of the areas overall real estate market. Any issues an appraiser feels can be harmful to the value of the property. Notations about any serious flaws will also be made; these are all coupled with many other items on the detailed appraisal report.
Real estate appraisals come in two different methods for appraising homes. There is the sales comparison method where the market value is estimated by comparing the property to other similar properties that has been sold in the same area. This method uses the similar properties to make several estimates of what they would have sold for if they had the same feature as the property in question.
Then there is the cost method, this is generally used for new properties when the costs of building is known. In this method, the appraiser estimates the costs involved in replacement of the structure if it were to be destroyed.
It is important to note that you should not depend on an appraisal to help you determine if the home is in satisfactory condition. This is a job for a home inspector. During a real estate appraisal, the appraise may take notes about obvious issues, however they will not test appliances, inspect the chimney or roof.
Real Estate Appraisals 101 – A Simple Guide for Everyone
Posted by admin under: real estate appraisal Jun 21Even though this seems obvious, a definition is a good place to start with such an important topic.
A real estate appraisal is a process to determine the value of a home or other property for pretty much one of three reasons:
1.A potential borrower wants to borrow money against the value of a property.
2.A person wants to buy or sell a house or other property.
3.Someone is involved in a family situation (such as executing a will) and they need to determine a property value.
The person who actually makes the valuation of the property is an appraiser, state licensed and regulated, trained, and experienced in real estate in the area where the property is located.
There is a big difference in appraisers, based on their training, experience, and attention to detail. The opinion of value in an appraisal report is an estimated fair market value. In other words this is the price a normal buyer would expect to pay a normal seller for the home if it were for sale. The appraiser uses local market information to arrive at this opinion of value.
Real estate appraisals are conducted for commercial, residential, and industrial properties, including leased agricultural trust lands, but for most people, what they really need is a valuation for a home. they want to be able to buy one or sell one or borrow against one.
Real estate appraisals are used for buying and selling while an insurance value appraisal is for determining insurance coverage amounts. And while there is often a degree of mystery in how they are conducted, real estate appraisals are a necessary step in the property buying process. There is a lot of confusion out there regarding the truth about appraisals.
Real estate appraisals are the next best thing to having your own private real estate assistant and when you are looking for one, reputation is everything. Without using an appraiser with a great reputation, you always run the risk of having your property over or under valued. While this might seem like a great deal at the time, when it comes to your property and your finances, you really only want the truth.
A real estate appraisal gives you a professional view of how much someone will offer or ask for a property in your area. With true professional appraisers, you will not only learn about the valuation methods used in your appraisal, but also understand what that value means in the specific situation for which you need the valuation.
Reputable appraisers will share all the information they have obtained with you and will go out of their way to watch out for the best interests of all the parties involved in the transaction. Reputable appraisers will not take sides in any negotiations because the truth is their reputation rests upon yours and the real estate agents referrals. In my personal experience, a professional reputable appraiser is worth usually double or triple the fee they receive, making their service one of the best bargains in the real estate world.
And the best of the best will answer any question you have, honestly, truthfully and in language you can understand.