Wednesday, October 30, 2013

Associate Appraiser- Now the Work Begins!

Work Experience:

Now that you have gotten your certification, you are almost ready to head out into the field. But first, I want to reiterate the necessity to make sure you have a clear set of expectations from your supervisors and visa-versa. Over the next several years, you will be appraising a variety of properties such as: land only, interior residential, exterior residential, condos, small income producing properties 1-4 units, and reviews to name just a few. Be sure to keep track of your work experience, you will need to submit periodic samples to your appraiser board for review.

No matter what you are appraising, when you boil the assignment down to the basics, you will be identifying the problem, analyzing the data, reporting your results, and answering the initial problem. Everything up to filling in the form will cover the first two steps. Let’s get started.

Learning the Ropes:

Congrats, your first appraisal request has come in! I’m sure you have done the preliminary steps of identifying the user/client (which is not always the same person or company), intended use of the appraisal, and scope of work which is all a part of identifying the problem. This is an important step, because the amount of analyzing and reporting depends on the type of problem. Depending on the type of request, you may be contacting home owners, executors, Realtors, or lawyers for setting up the appointment time. Try to mention to home owners and Realtors that you will be inspecting the attic, crawl space, and will need the utilities on for certain types of reports; sometimes these areas are blocked or utilities may be off which hampers the report or could cause you to have to come back.

Before going to the inspection and if time permits, try doing some background work. Pulling PVA cards, County Clerk documents, real estate tax information from the Sherriff department, Planning & Zoning classification, aerial photos, and MLS data will give you an idea of what you are getting yourself into and is all part of analyzing the data. I’ll even start pulling potential sales and listings that may be used as comps if enough data is available on the subject. The bulk of your time in developing an appraisal will be spent in this phase.

On the way to the inspection, try to arrive early enough to get a feel for the neighborhood. Take this time to look for factors that may be contributing or detracting from the subject property. Drive around the subdivision or area and look for repos, commercial/industrial facilities, high tension power lines, golf courses, railroad tracks, etc. Anything that may raise a red flag would probably need to be disclosed in the report. If you have pulled potential sales and listings during your background work, take this time to drive by them to verify the MLS data and get a feel for their neighborhood. I do this on a regular basis, and from time to time, I will find a sale that I have pulled for consideration does not compete with the subject for whatever reason; drop the sale and find another! A second trip to verify another sale won’t hurt.

Do yourself a favor; show up on time to your appointment. I rather make a call asking to show up a little early then calling to tell the home owner I’m going to be late. I usually dress sharp casual (polo shirt, slacks or jeans, a cap to hold my pen, and water-resistant footwear) for two reasons: I am a professional, and I do plan on getting a little dirty. Once you are at your appointment, the interior inspection can be tailored to whatever is comfortable to you. I always start out by sitting down with the home owner and chatting with him or her for a couple minutes. This accomplishes a few things. First, I give them a brief run-down of the appraisal process because some people have not been through an appraisal before, and I want them to have a good experience. Second, I get them talking about what they have done to the property in recent years. This helps me in determining the condition and effective age of the home. I won’t be discussing how I determine the condition or effective age of a home in this article; I’ll leave that to your supervisor.

After I am done talking to the owner, I inspect the home the same way each time for consistency sake. I take notes, measurements, pictures, look for deferred maintenance, safety hazards, and updates as I am going throughout the home. I’ll do this on each floor of the home (including the attic and crawl space) before I go outside. Once I am outside the home I do the same thing: notes, measurements, pictures, location of wells and septic tanks, etc. Before I leave, I make sure I have all the data I need, and I thank the home owner for their time. I’ll let them know what to expect from here on out, and I give them a card. I started doing this when I kept hearing that some (not all) loan officers were not telling their customers the next step in the process.

Are you ready to start throwing the report together? Not yet. After the inspection you need to finish the analysis phase of the appraisal by analyzing anything that may have come up during the inspection. I’ll give you a good example. Let’s say that while you were driving around the neighborhood, you noticed a set of high-tension power lines behind the subject’s street. This may or may not affect the value of the property, but it is your job to find out. I would start out by searching for sales along the lines to see if there were any signs of depreciation, and follow up by disclosing your results in the report. Once the analysis phase is complete, it is time to compile the report.

Since this article covers mainly residential appraising, I’ll stick to the most common form of reporting, which is form filling. During this phase, we are taking the data that we have analyzed and disclosing it in the report in a way that makes sense to the reader. The recent requirement of UAD (universal appraiser dataset) does not help in this due to the jargon that is required in the report. Nevertheless, all the requirements of reporting under standard 2 of USPAP need to be covered in the report. For the most part this is easy, just plug in the data that the field is asking for and work your way down the report. It’s during this time that comparable (comp) sales and listing are selected from your pool of data. This is another area where your supervisor can assist you, but I’ll give you a couple of tid-bits: you are looking for the closest, most recent, most similar sales and listings for your report; explain, explain, explain; and disclose, disclose, disclose. Once you start selecting your comps, you may have to slip back into the analysis phase in order to develop adjustments. Remember, look for verifiable sources for your adjustments, and don’t pull them out of the air!

Once you have completed the report, if possible, have someone else look it over. Having another set of eyes usually will pick up errors or something that needs to be tightened up on. The forms we fill out make the last phase of the process easy: answering the problem. This is done when we place a value on the property, but you should still take the time to explain how you arrived at that number. In other assignments, the final phase may need to answer a different question, because not all definitions of value are the same or the initial problem may be a portion of the value. After the report has been signed, completed, and delivered, you need to follow your office procedures on how to handle the work file and billing. Simply putting your work file on a stack in the corner of the office and hoping the client will cut you a check is not how a professional operates.

Mind what you have learned:

After the first report you may say to yourself, “this took forever, how am I ever going to make any money?” Be patient, as time goes on you will begin to develop your own routine and begin to anticipate the types of problems that arise in the appraisal process. The reports will get easier, but remember the words of Master Yoda, “mind what you have learned, save you it can.”