Posts Tagged ‘real estate’
One 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.
Selecting 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.
Are 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.
A 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.
Whether 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.