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I have been thinking about what
makes a good appraiser for a long time. Many appraisers, including
myself, presently have more work than we can handle. We remember the "good old
days" when we had much larger staffs and made more money. But finding an experienced
appraiser is tough. Trainees are high risk because you don't know if they will be able to
make it as an appraiser, and there is a long training time in many states due to
Everybody has a different opinion of a good appraiser -clients,
review appraisers, other appraisers, regulators, etc.
Who do you call when you have an appraisal question? I bet it's a
name from a short list. This article focuses on what makes those appraisers the people you
call when you have a problem (and the appraisers you would like to hire).
Form fillers and boiler platers
I'm sure you have met clueless appraisers, who you would never call for
In residential, I call them form fillers. They just know how to
fill out a form to satisfy underwriters. They have great difficulty doing an appraisal
unless they are given a value to "come up with." When they try to do one with
out a "target" value, they can be way off.
I refer to clueless commercial appraisers as boilerplaters. The
boilerplaters have thick appraisal reports that are empty of any meaningful, relevant
analysis. They use spreadsheet templates or black box programs such as Argus or Project
and have no idea about how spreadsheets work, or how investors evaluate cash flows.
Characteristics of a good appraiser
- Personal and professional integrity.
- Has a career, not just a job
- Objective, can overlook personal biases.
- Talented. Is able to take conflicting information and pieces
of a puzzle, and make a reconciliation. Get "hunches" that something isn't quite
right, and are able to find out what's really happening (or at least make a very good
effort to find out).
- Doesn't use a "cookbook" or pull out a form,
previous appraisal, seminar notebook, or textbook and fills in the numbers without
considering if it is the best approach
- Very good interviewer, able to get people to talk
- Talks with commercial tenants to find out about their
businesses, information on the subject property, why they are leasing that space, etc.
Requires signed leases and likes to get estoppel certificates
- Reconciler, not just an accountant. Independent, but not
too independent to ask for help or advice
- Knows when he or she has gotten in "over her head"
and asks for help or declines the assignment
- When traveling, reads the real estate section of the local
paper first Listens when someone at a party starts talking about a deal, local
politics affecting real estate, etc.
- Curious and wants to find out the real story. Asks questions.
Looks beyond the comps. Analyzes and considers the current and future markets, not
just the past (comps).
- Not a perfectionist or overanalyzer. Realizes no appraisal
report is perfect. There is always another piece of information that could be obtained.
Knows when to stop obsessing and get the report out the door.
- Wants to figure out what a property is worth, not just whether
it has enough equity to qualify for a loan.
- Can get "out of the box." Flexible, willing to try
new ways of analyzing, researching, or reporting.
- Easily bored. Likes new challenges.
- Always learning.
A career, not just a job
Think of the people you know who dropped out of the appraisal field. Except
for the recent downturn and cutbacks, they were often people who really didn't see
themselves as professional appraisers.
They just had a business or a job. They could have been doing anything else,
such as accounting, photography, or managing a restaurant. When they left appraising, they
usually left real estate.
Can you learn to be a good appraiser? Yes, to some extent. But just
like being a good baseball player, you have to have talent, be willing to learn, and take
the time to develop your skills.
Some people have talent and don't really use it, some try hard but will
never be really good, and some will never get it. It doesn't mean that you are a bad
person, just that you don't have the talent for appraising.
You must be able to deal with uncertainty, have a sixth sense or
hunches when something isn't right, never stop learning more about the real estate market,
and can make decisions when faced with uncertainty.
Many appraisers, particularly commercial appraisers, focus on sales
verification as identifying good appraisers.
The formfiller/boilerplater confirms the price and terms and hangs up.
The good appraiser wants to know "why." Why did the
buyer purchase this property rather than another one, why did the seller sell, how was the
asking price determined, etc.
Commercial appraisers ask such questions as which income and expense items
were actual and projected, what was the "upside" that the buyer saw, was the
buyer or seller in a 1031 exchange position and desperate for a property?
The purchase contract
When the subject property has a purchase contract, the good appraiser wants
to know the listing history, how many offers were received, how it was marketed, why the
buyer picked this property, why the seller was selling, etc. The good appraiser carefully
reviews the sales contract, including terms, date, etc.
The formfiller/boilerplater just asks what the price is, and
maybe reads the sales contract. They don't have the ability or interest to analyze the
When markets are changing quickly, up, down, or stabilizing, the good
appraiser can "feel" when this is happening. The good appraiser doesn't rely on
comps, which are the past, but researches listings and expireds.
The good appraiser attends local meetings of appraisal associations to
keep up on the latest trends.
The good appraiser keeps track of the pulse of the market by
talking with buyers, sellers, and real estate agents.
The good appraiser makes some clients upset by considering
changes in market conditions when evaluating comps.
I started in appraising in the "old days" when you started in
residential then moved into commercial appraising.
Now, appraisers are typically "tracked" into one or the
other. Market factors are much easier to see and understand in the residential market. You
can develop your "feel" for the market much easier. You don't get bogged down in
spreadsheets and numbers when you first start appraising. You do many more appraisals in a
month than in commercial appraising.
Local market factors
The good appraiser reads the local newspapers and knows about zoning
changes, controversial developments, and environmental problems. The good appraiser goes
to the Web sites of the local newspapers looking for relevant information.
If the good appraiser gets a hunch that something is happening,
he or she makes the calls to find out.
Open to new information and ideas
The good appraiser is not rigid and is willing to change a value or market
opinion based on new information.
Willingness to learn new ways of appraising and reporting, use
new data sources and scrap outdated ones, and always looking to expand his or her
appraisal knowledge are characteristics of a good appraiser.
Why should you hire a good appraiser?
Good appraisers stay in the appraisal field. After spending all the
time to train someone they won't change careers.
Good appraisers love what they are doing. You don't have to worry
about a lot of whining.
Good appraisers are a lower liability risk to your firm. They
take the extra step to make sure they are not missing something. They let you know when
they are over their heads on an assignment.
Good appraisers get their work done on time and don't obsess over the perfect
Good appraisers are fun to work with. You can bounce ideas off each other.
They can keep you up when you are bogged down in a difficult assignment or a business
hassle such as a collection problem.
How to find and keep good experienced appraisers
Good appraisers are usually frustrated when working for a
formfiller/boilerplater firm. They really want to analyze real estate but are forced into
providing a "vanilla" appraisal product. You may be able to recruit them.
Offer the opportunity to work with other good appraisers who can
help them learn more.
See if your associate appraisers know anyone who may be available. They
are usually much more aware of the market for appraisers that principals. Offer a hiring
bonus of $1,000 to $2,000 to the associate appraiser who recruits the new hire.
When interviewing, ask the applicant questions to test their appraisal
How to find a good trainee appraiser
Everybody hates to hire a trainee who just doesn't "get it' and
will never be a good appraiser. You can waste months of your time.
You can easily tell a good appraiser from a
formfiller/boilerplater by reviewing their work and giving them sample appraisal problems
when interviewing them. But trainees have no appraisal experience.
Ask about previous employment. Which jobs did they like and
dislike and why? Go back in the past to jobs they had in college.
When researching references, ask questions relating to
characteristics of a good appraiser, such as curiosity, tenacity, non-perfectionism, etc.
See if the applicant is interested in real estate. Ask what the
person thinks about the local real estate market. Or, if there have been any homes near
their house that have sold (if the person is a homeowner). Or, how apartment rents are
doing (if the person is a renter).
Where to get more information
I have never seen anything written on the topic of what makes a good
appraiser. However, there are books on recruiting and interviewing that can help.
Thanks to the appraisers who responded to my Internet request for
input on good appraisers: Nancy Mueller, Dave Loving, Greg Cornblotti, Greg Stephens, Rod
Wycoff, Jan Woolsey, and Jim Fennell.
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