Of Appraisers and Appraisal Trainees
July 2003
Right now, most appraisers have as much work as they like. The markets are active and those appraisers who do financing work are enjoying a steady stream of refinancing appraisal assignments. The business is in good shape and entry level trainees are clamoring to get involved, filling appraisal classes and seeking positions in firms.
In a time of economic adversity, appraisal provides an opportunity to make a positive career change. The vast majority are interested in residential work, the bread and butter of the industry.
Experienced practitioners know that getting into the business is not easy and that the learning curve is steep. Those looking for quick success and easy money may be disappointed.
Trainee appraisers can do no better than to carefully interview prospective employers. Does that sound strange? In terms of training, a prospective appraiser could do no worse than to find a firm that will provide adequate training and access to persons with experience and sound advice.
Even with licensing, there appear to be a surprisingly large number of appraisers out there who must have managed to sleep with eyes wide open through all the required classes. Many have entered the business since licensing began.
Prospective appraisers must make employment decisions when wide awake in order to avoid being trained improperly (or not at all). Training involves spending sufficient time with experienced appraisers inspecting properties, developing appraisals, and writing appraisal reports.
As concerns inspections, this is a dying art. However, it is most important. And it’s not as dead as some would make it out to be. The identification of the real property to be appraised is part of what the inspection of the real estate is concerned with. Whether the property is inspection inside or out or simply from the street, requires that the appraiser have sufficient information to adequate identify the property.
This is true: look in Standard 1. It’s very clear.
To the beginning appraiser, the inspection is highly confusing. Being able to talk to the broker or homeowner, sketch a floor plan, and collect information about finishes and systems is a highly refined art. Most beginning appraisers (and many experienced ones) would have difficulty distinguishing between various types of heating systems (is that a furnace or a boiler?).
Having an experienced appraiser to help is essential. A beginning appraiser will never know what they may have missed without someone experienced to highlight subtle points. Poorly trained appraisers get that way by being trained poorly at the beginning of the appraisal which many define as the inspection.
Many lenders and appraisers have minimized the importance of inspections. This is a dangerous trend, in my opinion. This is because it trivializes the appraiser’s job: many clients will say that the home inspection takes care of the physical issues. I disagree. The appraiser needs to take into physical deficiencies in the appraisal. Most appraisers could do a better job in this area. Of course, many will say that these physical items are often “deal breakers.”
Appraisers deal with a multiplicity of pressures. Appraisal life is an unending series of deadlines, some realistic, some not. To many entry level persons, these deadlines seem unrealistic. To the owner of a firm, trying to please clients, meeting these deadlines is key.
If that were not enough, the work that’s required creates additional pressures on often overworked appraisers. Changes in the manner in which lenders order appraisals and the type of appraisal products needed add additional decision points to assignments.
To an entry level appraisal, the whole notion of a limited appraisal makes an already confusing process almost unimaginably chaotic. Fresh out of classes and eager to apply the various techniques to arriving at a well-considered, supported estimate of value, they’re told to not consider various parts of the process. The whole notion of departure is confusing even to experienced practitioners: to a novice, it is dangerous path to follow without good guidance.
In terms of report writing, less is better is the current theme. Most trainees should realize that proper explanation of what was done in an appraisal is not only necessary, but makes perfect common sense. The new reporting formats are seductive: they look as if very little needs be written. In fact, they are designed so that the appraiser has flexibility in what to say and how to say it. Remember, the burden is on the appraiser to adequately disclose the process and to not create a misleading report.
Market conditions have been helpful to many appraisers. In the opinion of some appraisers (not all), rising prices take the heat off needing to be too terribly finicky. After all, a rising tide floats all boats, right? Wrong...just remember, low tide always comes and some boats have holes in them...
Clients ultimately have control of which appraisers gets which assignment. Resisting pressure for values is an essential part of the business. This begins on day one and never ends. It can’t be eliminated, but it can be managed.
Appraisers have lived with this uncomfortable fact of life. Some handle it well, some don’t. The outcomes of coping range from caving in to the pressure and pleasing short-term clients in the short term and achieving survival of one sort or not caving in to pressure not pleasing clients in the short-term and achieving survival of another sort.
Many legislators feel FIRREA and the operation of the “market” are adequate safeguards. Particularly with consumers, these protections may not be sufficient. If the bubble ever bursts, how might these consumers feel about their overvalued assets? To whom might they possibly turn at that point? Don’t answer that.
Creditors, lenders or realty agents can pressure appraisers to deliver a predetermined appraisal value by threatening to withhold future business, and may search for unscrupulous appraisers to assent to meet predetermined or required values. In rising markets, overvaluations do not much matter: when markets stop rising is when problems surface.
Some final advice to trainees: 1. Fee appraisal is not the only avenue for getting started in the business, Think creatively. 2. Ask question with prospective employers. 3. Look for quality education. 4. Get trained properly 5. Keep a log (The Appraiser Qualifications Board has the suggested content for such a log). 6. Make sure you can retrive your reports and file when the time comes to get a license. 7. If you sense your employment situation may not be optimal, do something about it. 8. Stay away from situations where you are asked to do appraisals and have someone else sign them. This creates numerous problems and may merit an article. 9. Remember that there is a requirement to keep a “true” copy of the report as well as your workfile. The trend is to keep the report without keeping inspection notes, comparable data backup, etc. This is not a good trend. Avoid it. 10. Most importantly, stay alert, careful, and remember that this a long-term business and not a get rich quick scheme.
William J. Pastuszek, Jr., MAI, heads Shepherd Associates, a real estate valuation and consulting firm located in Newton, Massachusetts. The firm specializes in providing real world answers throughout New England to a wide variety of local, national, and international clients.
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