Updated 10-20 The answers on this page are provided by the Webmaster of this site, Ann O’Rourke, a professional appraiser. For more information go to about us. She frequently answers these questions!
Note: the rest of this page is a long list of questions, which you can scroll through.
- What is an appraisal?
- What is an appraiser?
- What’s the difference between an appraiser and a real estate agent?
- Who can do appraisals?
- What do appraisers really do?
- What about appraiser licensing?
- What are appraisers’ professional standards?
- What state laws are appraisers subject to?
- Who regulates appraisers?
- Appraisers and lenders – what is the appraiser’s role?
- Why do some appraisers have to walk through my house? Last time, they just drove by.
- What should I have ready when the appraiser comes to my property?
- Can I use this appraisal for another lender?
- Who “owns” the appraisal?
- If I’m paying for the report, will you send me a copy?
- When do you need your own appraiser?
- What should you look for when hiring an appraiser?
- How can you find a qualified appraiser?
- What about fees?
- What are “MAI appraisers”?
- What do the letters after appraisers’ names mean?
- How can you become an appraiser?
- What if you don’t agree with an appraisal?
- What about appraising paintings, jewelry, machinery, etc.?
- What about appraising businesses?
What is an appraisal? An appraisal is defined as an opinion of value by professional appraisal standards (Uniform Standards of Professional Appraisal Practice, see below). Appraisers consider appraising to be both an art and a science. You probably have an opinion of the value of your home. Your opinion and a professional appraiser’s opinion may be the same. But appraisers are required to be objective and impartial in their analyses and opinions. A professional appraiser has been trained in appraisal methodology and looks at how your home compares with sales and listings of homes similar to yours, considers many factors such as price trends and proximity to a freeway, complies with professional standards, and usually completes a written report.
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What is an appraiser? An appraiser is a real estate professional who specializes in providing opinions of value (appraisals). Most appraisers are real estate appraisers, who specialize in real property. Other appraisers specialize in other types of property, such as gems or machinery and equipment. Professional appraisers have taken courses and been supervised during their training period. State licensed and certified appraisers must pass a test and have completed basic education and continuing education. Most states also require a period of supervision, usually 2,000 hours before being able to do appraisals “on your own.”
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What’s the difference between an appraiser and a real estate agent? Real estate agents are salespersons. They also provide appraisals to assist buyers and sellers, and to make listing presentations. Typically no fee is charged for these appraisals.
I frequently recommend getting “appraisals” from two or three real estate agents if a home owner is thinking about putting their home on the market. However, some home owners want an independent appraisal, particularly if they already have a buyer or are selling it themselves.
Some real estate agents provide appraisals for other purposes such divorce or “evaluations” for mortgage lending purposes. A fee may or may not be charged for these appraisals. If the real estate agent is providing an appraisal, that is not part of their role as a salesperson, and is a Realtor member of the National Association of Realtors (NAR), NAR regulations require adhering to professional appraisal standards of the Uniform Standards of Professional Appraisal Practice (see below).
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Who can do appraisals? In most states, anyone can do appraisals for non-lending purposes. However, only state licensed and certified appraisers are subject to discipline by their state regulatory agency. Professional appraisers have training and experience in appraisal methods and techniques.
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What do appraisers really do? When I inspect a home for an appraisal, the inspection is really the “tip of the iceberg” of the work I do. Before I go to the house, I research public records information, get a plat map, check the zoning and flood data, and printout sales and listings of similar homes. During the inspection, I make a drawing of the home and other improvements such as a swimming pool and make notes on physical characteristics such as floor coverings and built in appliances. I check the site boundaries against my plat map. I look at the adjacent properties. After completing the inspection, I select comparable sales and listings and take photos of them. Back at the office, I contact real estate agents for more information on the sales terms, condition of the home, etc., reconcile conflicting information from different data sources, and write up the report. Total time? About 6 to 8 hours, on average. I work in the San Francisco Bay Area, where data is computerized and plentiful. Appraisers working in rural areas or with less data availability will take longer to complete an appraisal.
Appraisals of income producing property are much more time consuming as more research and analysis is required. The time can vary from a few days on a small apartment building to many weeks for a large, complex property.
For many years, the appraisal process has been seen by many as mysterious. This is partly the fault of appraisers, as we have not informed the public of what we really do.
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What about appraiser licensing? Because of the savings and loan crisis in the late 1980s, appraisal licensing was set up in every state by the mid 1990s. A few states are “mandatory” where all appraisals must be done by licensed or certified appraisers, but most only require licensed or certified appraisers for mortgage loans over $250,000 (an other state and federal requirements). A few states licensed appraisers prior to that time.
State certified appraisers (residential and general) have higher requirements than state licensed appraisers. For more information on requirements, Appraisal Foundation Web site at www.appraisalfoundation.org Residential appraisers can appraise one to four family properties, and sometimes small apartment or commercial properties. General appraisers can appraise all types of properties.
All licensed appraisers are listed at www.asc.gov
Each state also has a list. Search for appraisal regulator in your state.
What are appraisers’ professional standards? All state licensed and certified appraisers must adhere to the Uniform Standards of Professional Appraisal Practice (USPAP). A copy of the current USPAP can be found on the Appraisal Foundation Web site at www.appraisalfoundation.org. Go to the Appraisal Standards Board section, then click on USPAP. The Appraisal Foundation is a national nonprofit organization that determines USPAP and educational requirements for state licensed and certified appraisers. Members of appraisal professional organizations, whether or not they are licensed or certified, are required to adhere to USPAP.
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What state laws are appraisers subject to? State licensed and certified appraisers are also subject to their state’s Appraisal Regulator’s requirements. When doing work for lenders, they are subject to the lender’s requirements. For links to your state’s appraisal regulatory agency, try the Appraisal Subcommittee site at www.asc.gov. Look for a link on the left side of the screen. Or, try your state’s government Web site. Search for appraisers or appraisal.
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Who regulates appraisers? State licensed and certified appraisers are regulated by their appraiser state regulatory agency who enforce the Uniform Standards of Professional Appraisal Practice as well as state and federal regulations.
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Appraisers and lenders – what is the appraiser’s role? Most appraisals in this country are done for mortgage lenders. Most appraisers work for lenders, particularly if they specialize in appraising homes. The appraiser’s role is to provide an objective, unbiased opinion of value to the lender. Appraisers work for the lenders, not the owners, buyers, or sellers, even if one of them pays for the appraisal by writing a check to the appraiser. Federal banking regulations require that the lender order the appraisal. This was a result of regulations coming from the Savings and Loan scandals in the late 1980s.
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Why do some appraisers have to walk through my house? Last time, they just drove by. The type of appraisal needed for a mortgage loan depends on many risk factors, such as loan to value, loan amount, borrower’s credit, etc. The determination is made by the lender. Some loans are made using Automated Valuation Models, with no “human” appraiser involved.
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What should I have ready when the appraiser comes to my property? No one knows your property as well as you! Make a list of all the special features, such as a remodeled kitchen or new roof, or at least tell the appraiser about them. Let the appraiser know if a nearby home was listed and sold, as sometimes sales don’t show up on the local MLS or other data sources.
Can I use this appraisal for another lender? Sometimes appraisals can be used for another lender. The original lender must release the appraisal for use with a new lender. Also, the appraisal must be relatively recent, typically no more than 6 months old.
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Who “owns” the appraisal? The appraisal is “owned” by the client who ordered it (engaged the appraiser). If a lender ordered it, the lender owns it, even if you paid for it. If you ordered it for nonlending purposes, you own it.
If I’m paying for the report, will you send me a copy? By federal law, you are entitled to receive a copy of the appraisal from your lender. Unfortunately, appraisers are not able to provide you a copy of the appraisal.
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When do you need your own appraiser? When getting a mortgage loan, the lender selects the appraiser. On rare occasions, an out of the area lender will as the borrower to find an appraiser.
Property owners, buyers, and sellers, or their attorneys, often hire their own appraisers for :
- Determining a fair sales price
- Divorce
- Estate
- Gifts
- Property disputes (views, easements, etc.)
- Eminent domain (government agency “takes” property)
- PMI removal (private mortgage insurance)
- Partnership dissolution
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What should you look for when hiring an appraiser?
All lenders hire their own appraiser by federal regulations. You cannot pick the appraiser.
If the appraisal is not for a lender, you need to consider the purpose of the appraisal and the type of property. Try to hire an appraiser with experience in the property type, geographic area of the property, and for similar purposes. Look for a state certified appraiser.
If it is a home and for non-lending purposes, select an appraiser with experience in appraisals for that purpose, who has appraised similar homes in that area (neighborhood or city). If it is for tax purposes, be sure to select a well qualified appraiser to minimize hassles with the IRS. Using a state certified appraiser, at the minimum, is a good idea, unless the appraiser is well known, with many years of experience, and very knowledgeable.
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How can you find a qualified appraiser? Start with a list of appraisers names. Try asking at your local bank, asking real estate agents, looking online, or appraisal association web sites. Some appraisers have Web sites. Use a search engine such as www.google.com and search for “appraisal and St. Louis” as an example.
When you have your list, ask each appraiser about his or her experience with your property type and geographic area. For example, you inherited a small house in another state. A neighbor wants to buy it. Ask the appraiser how any homes he or she has appraised in the city in the past 3 months. Or, you need the value on your home six months ago, for estate purposes. Ask the appraiser if he or she is familiar with “retrospective” appraisals. If the appraiser sounds qualified, but you are uncertain, have him or her fax you a resume with references.
What about fees? Residential appraisal fees for homes tend to fall in a narrow price range, so I advise shopping for the most qualified appraiser who can complete the appraisal in your required time period. I don’t recommend shopping for the lowest fee. In contrast, fees for other types of properties can vary widely, so be sure to get several bids from qualified appraisers.
What are “MAI appraisers”? The most widely known professional designation is the MAI designation from the Appraisal Institute. MAIs typically specialize in income producing properties. Most don’t appraise homes, but some do. I have an MAI and appraise many homes. If an MAI doesn’t appraise homes, he or she may have a residential specialist in the company, or will refer to an appraiser specializing in homes. For more information, go to the Appraisal Institute Web site at www.appraisalinstitute.org.
What do the letters after appraisers’ names mean? Prior to state appraiser licensing, there was no easy way to tell if an appraiser had experience and education. You could look for an appraiser who had a professional designation recognized in your geographic area. Now state licensing or certification is the minimum.
Some appraisal designations have requirements that go well beyond licensing, and some don’t. The Appraisal Institute requires a demonstration appraisal report, more education, and an experience review before awarding its designations (MAI, SRPA, SREA, SRA, RM). Many MAIs and newer SRAs also had to pass an examination. Designations from other organizations, such as the American Society of Appraisers also have requirements beyond state certification.
How can you become an appraiser? Most new appraisers today start with a trainee license, before being hired or soon after. Typically, 90 classroom hours and passing an exam are required. Then you train under another appraiser (or company) for 2,000 hours, plus take more classes, to get your regular license. Finally, after more hours and classes, you become state certified. A few states allow trainees to set up their own businesses without working for someone else.
Getting your first appraisal job can be tough. In the past, most appraisers were trained by assessors offices or lenders. Today, most are trained by independent appraisal companies, which are often very small and reluctant to hire trainees.
For information on licensing and certification requirements, go to the Appraisal Foundation Web site at www.appraisalfoundation.org. For state requirements, call your state appraisal regulatory agency.
What if you don’t agree with an appraisal? Appraisers are required to be objective real estate observers, reporters, and analysts. Ethically, appraisers cannot accept an appraisal assignment contingent on a certain appraised value, direction in value, or minimum or maximum value.
If the appraisal was done for lending purposes and you think the appraiser has missed higher sales that could have been used in the appraisal, or missed valuable features in your home such as a remodeled kitchen, contact your loan officer with specific information such as the address of a sale.
If you think fraud was involved or the appraiser was very inexperienced, lazy, or just plain stupid, contact your state appraisal licensing agency. You will need to have more than “I think the value was too low (or too high).” You need the “why” also…didn’t use nearby similar homes that sold recently, missed a swimming pool, etc.
What about appraising paintings, jewelry, machinery, etc.? Because there is not enough work to support many non-real-estate appraisers, most also sell what they appraise. Look in the Yellow Pages under appraisers or the type of product, or check with the American Society of Appraisers , which is the primary professional appraisal association for non-real-estate appraisers. It also has real estate appraiser members.
What about appraising businesses? There are several professional associations for appraisers specializing in business valuation. Just as with personal property such as paintings, smaller businesses are often appraised by business brokers, who also sell businesses. Look for a business appraiser affiliated with the American Society of Appraisers or the Institute of Business Appraisers.