eBook - Real Estate Appraisal from A to Z

Certified, Licensed Or Just A Dreamer?

As an appraiser you'll come across Realtors and third party people who will say to you, "Oh, I'm a certified real estate appraiser too. I don't work for an appraisal office, but I've done many appraisals for my clients." They usually make a comment like that when they think they have better comps or information than you do to estimate market value of the subject property. I've found a problem with these people saying this to me. The problem is that I've never seen one of them that have an actual Certification or License number issued to them by the State they work in. That can only lead to one conclusion. They're not State certified or licensed real estate appraisers!!!!  Period.

Some people have an amazing ability to kid themselves and rationalize things. If you're a State Certified or Licensed real estate appraiser, then you would have a State license number and documentation to prove it. This would verify that you have taken all the required classes; you have all the required fee-paid real estate appraisal experience; and you have passed all the required State appraisal examinations. There's no if, ands or buts about it! So the next time some Realtor or third party tells you that they know what they're talking about and you don't because they're an "appraiser," ask them the following questions:

1. Did you take the equivalent of the State appraisal Course 1 and did you successfully pass the course examination?

2. Did you take the equivalent of the State appraisal Course 2 and did you successfully pass the course examination?

3. Did you take the equivalent of the State appraisal Course Standards of Professional Practice Part A and Part B and did you successfully pass both course examinations?

4. Have you done at least 250 Fee-Paid Real Estate Appraisals that have all of the requirements necessary to be considered as actual appraisal reports?

5. Did you pay the required application fees and did you take the State Certification real estate appraisal examination and did you successfully pass the exam?

6. Do you have a State Certification or License number issued to you?

7. After they get finished answering "No" to all of the above questions, ask them a few more. This way they might realize that they don't know more than you do about appraising. Ask them questions like:

8. What's the proper appraisal definition of market value?

9. How do you estimate the Physical Depreciation using the Age/Life Method?

10. What's the difference between Physical, Functional and External Depreciation?

11. When is the Cost Approach effective and should it be used to estimate the market value of single family houses?

12. What are the standard three approaches to estimate market value?

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13. What price per square foot do you use to accurately reflect this market when you're adjusting for the different gross living area sizes between the subject property and the comparable properties?

Now don't be arrogant or rude about it, or be a wise guy yourself, just politely make them realize that you're the knowledgeable and professional real estate appraiser. It's fine if any Realtors or other third party people offer you some advice and try to assist you on your appraisal. There's nothing wrong with that, and often it'll help you out a lot. Just don't let anyone push you around or get an attitude with you. You don't want anyone to have an attitude like they've got all the answers and you're out to lunch or on cloud 9.

Most States have a minimum experience requirement of 250 Fee-Paid appraisals. These appraisals must have all the requirements necessary to be considered actual appraisal reports for State and Federal Certification experience. What this means is that you have to do at least 250 actual appraisal reports. These consist of appraisals that a client has hired you to do for them. Furthermore, the client has to have paid you specifically for doing the appraisal report. To elaborate further, it's when you're commissioned by a client to do an appraisal report only, and not in combination with, another real estate related service. The purpose of their payment to you is just for the appraisal and you're not being paid for some other real estate related service that you provide the client. Also, the appraisal must have all the requirements of a full appraisal report. Meaning that you must at least have all of the information, addendums, adjustments, math calculations, the three approaches to value, etc. that are found on the standard appraisal forms.

Realtors do what is called a Comparative Market Analysis, (CMA). Many Realtors improperly think that they actually do appraisals, like a licensed and qualified appraiser, when they do a CMA. They think that an appraisal consists of taking a few recent sales in their area and then writing a brief description of what they believe someone's house is worth based on these comps. Chicken feed!!! That's a CMA. That is not an appraisal report and you might want to clue them in on this. Also, tax assessors for the city have to reassess houses occasionally for tax increases. What the assessor will do is simply make across the board increases based upon rising prices and tax rates. They don't even have to go out and look at the property in many cases! They just punch in some new tax rates into a computer and it updates all the property tax files. These are not appraisals either.

As I said in the beginning of the book, the reason for the Federal and State certification and licensing process is that they basically want you to take some classes and work under someone else's guidance. It is recommended that you do this until you get some experience under your belt. This has many benefits to it and it will really help you out in your beginning stages. You won't spend a lot of time "spinning your wheels" trying to learn the business.

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