Real Estate Analysis and Commentary in Saratoga Springs

The Utah State Appraisal Board and national appraisal authorities are concerned about the lack of new appraisers. Why are so few people opting to take the required steps to become a state licensed or certified appraiser? I think the answer lies in the concept of opportunity cost. State and Federal regulatory bodies (along with lenders and other users of appraisal services) should be aware of how onerous the current requirements are, how tedious and involved is the work as an appraiser, along with the liability and deadline pressure, in proportion to the ever-eroding compensation, when compared to appraiser counterparts in the real estate and mortgage lending industries.

Lets Compare Licensing and Continuing Ed. Requirements

When compared to our other mortgage industry counterparts (real estate agents, appraisal management companies, and mortgage loan originators (loan officers)) appraisers are held to some serious requirements, laws, and standards! The Utah state licensing requirements for appraisers demand a lot more from people seeking to become a State Certified Residential Appraisers than any of the other industry counterparts. It is my experience that most borrowers, loan officers, real estate agents, employees of appraisal management companies, and a large percentage of the public is unaware of the time, education, experience, and of course money, it takes to become a Utah State Certified Residential Appraiser.

Appraisals have become a serious business with equally serious standards. The chart below shows the requirements to become a Utah State Certified Residential Appraiser in relation to the requirements to become a real estate sales agent, a mortgage loan originator, and to register an appraisal management company.

Other requirements of fee appraisers, like me, include being a member of the National Association of Realtors (yes, I am a Realtor®, however I am not a sales agent), being a member of the local RealtorĀ® association (I am a member or the Utah County Association of Realtors and have taken their ethics course), being a member of the Multiple Listing Services in the appraiser's coverage areas. Also, as of January 2015 it is required that a Certified Residential Appraiser hold a Certified Appraiser license for 3 years before he/she can train new appraisers.

It is my experience in business that business relationships are fine and dandy until money comes into play, then things become dead serious, if not heated when disagreements arise. Often, the appraised value of a property will meet the expectations of the user of the appraisal report, sometimes it just won't. This is the nature of performing an appraisal. As a property owner, you likely have an idea of what you think your property is currently "worth"...but where are you getting your idea of the value? Is it based on recent comparable sales data in your neighborhood...like it is generally required to be in an appraisal? Or is it based on free valuation estimate web sites? Have you used some other method of "guestimating" your value?

I have had some interesting phone calls over the years from property owners who appear to have done no research on how an appraised value is determined by an appraiser, and who have some pretty wild ideas on how a property should be valued, all of which favor a specific outcome...the outcome which is financially advantageous to the property owner, and typically out of line with appraisal industry standards.

The truth is, the process has many layers of laws, rules, and guidelines to which appraisers need to adhere in order to produce credible results. This is one of the reasons why it takes so much time, education, and training to become an appraiser. These include federal laws and rules, Fannie Mae seller guidelines, State laws and rules, and lender guidelines. Are you familiar with all of these??? I'm telling you, it is difficult for full-time professional appraisers who take time to study and keep up with the laws, rules, and guidelines, and who implement them daily in their work, to keep up with it all! Let alone the typical property owner who has no appraisal training. Please keep this in mind if you are thinking of contesting an appraised value.

I have often said to real estate agents and property owners that "you can't speak intelligently to the value of a property until you have lined up the most similar recent comparable sales in a grid (as can be seen in a typical appraisal report) and have at least made adjustments to the major features such as square-footage, lot size, number of bedrooms, number of baths, basement finish, and so forth. When you have done that...let's talk about the value".

Please understand, I am not trying to be condescending or cocky in writing this article, I am just trying to convey the level of training, education and experience appraisers have, along with the stringent requirements to which appraisers are required to adhere when appraising a property. I put a lot of time, though, research, and effort into every appraisal I perform, and am dedicated to providing my clients with information on which they can rely to make a decision regarding the appraised property.


Posted by Cory Larsen on December 13th, 2014 3:49 PMLeave a Comment

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