One comment I sometimes hear from agents is, “The appraiser doesn’t know what they are doing!” I ask the agent complaining, “What do you think the appraiser does?” They typically respond, “They kill my deals!” That reveals a misunderstanding of who the appraiser is, why we are here and what agents can do to help the process. Let me offer some clarity.
An appraiser is expected to perform valuation services competently and in a manner that is independent, impartial and objective. An appraiser must not perform an assignment with bias nor accept an assignment that includes the reporting of predetermined opinions and conclusions. Unlike agents, appraisers must not advocate the cause or interest of any party or issue.
When you’re working with a buyer or seller on a transaction, remember this: The price of a property is a fact based on the agreement between a willing buyer and seller. The appraisal is an opinion of value based on credible assignment results. Appraisers observe the property, analyze the data and report their credible results to their client—typically the lender, seeking to assure the property is worth enough to guarantee the loan. There are many different valuation products, including traditional appraisals performed by licensed appraisers and ones not performed by a licensed appraiser, including competitive market analyses (CMAs), broker price opinions (BPOs), evaluations and automated valuation models (AVMs).
(Learn about the National Association of REALTORS®’ Residential Accredited Appraiser designation.)
Appraiser qualifications are established federally by the Appraiser Qualifications Board of the Appraisal Foundation (AQB). The minimum qualifications to enter the appraisal profession is the completion of 75 hours of qualifying education. Once people complete the 75 hours, they generally receive a trainee license, at which point they can work under a supervisory appraiser. As trainees, they must take additional education and earn qualifying experience working with their supervisor. There are three paths trainees can take, and all include taking an AQB-approved exam:
Licensed residential real property appraiser
- Can appraise non-complex one- to four-unit residential properties having a transactional value of less than $1 million and complex one-to-four unit residential properties having a transactional value of less than $400,000. (“Complex” generally means something about the appraisal is out of the ordinary. For example, the property itself or the form of ownership may be atypical.)
- Must complete 150 hours of qualifying education and 1,000 hours of qualifying experience in no fewer than six months
- No college education required
Certified residential real property appraiser
- Can appraise one-to-four unit residential properties without regard to value or complexity
- Must hold an associate’s degree or higher from an accredited college or university or alternative defined by the AQB
- Must complete 200 hours of qualifying education and 1,500 hours of qualifying experience in no fewer than 12 months
Certified general real property appraiser
- Can appraise all types of real property
- Must have a bachelor’s degree or higher from an accredited college or university.
- Must complete 300 hours of qualifying education and 3,000 hours of qualifying experience in no fewer than 18 months
All appraisers follow the Uniform Standards of Professional Appraisal Practice (USPAP). USPAP is the appraisal profession’s rules and standards. It’s baked into each state’s appraisal law, and it addresses both competency and requirements for ethical conduct. Appraisers who perform incompetently could violate their state law and be subject to regulatory and disciplinary actions.
The Agent and the Appraiser
Regardless of how much we prepare for an appraisal assignment, none of us are mind readers. If agents have information germane to the valuation, the appraiser needs to know. Communication is key—so is keeping a complete work file. To ensure no miscommunications, send answers to the appraiser’s questions and data requests via email before meeting them at the property.
Sometimes, agents become frustrated when they perceive that the lender or appraisal management company (AMC) has made an assignment to an appraiser from outside the area. Bear in mind the agents sometimes work outside their market area, too, and geographic distance isn’t always the best measure of competency. It’s ethically and legally required that an appraiser only if they have the competency to handle the assignment. Appraisers certify that they are competent in their reports; if they are not, their licenses can be disciplined. It is for this reason I stress: Understanding how the market is defined is key to geographic competency and avoiding misunderstandings. The listing agent may have one idea of how the market is defined, while the appraiser may have a different one. Clarity begins with the answers to these questions:
- How do you define the neighborhood for your listing? Is the market defined by school district, street coordinates, census tracts or something else?
- What search criteria did you use find relevant comparable sales and listings? Location? Housing style? Bedroom/bath count? Something else?
In addition to coming to a common understanding of neighborhood and search criteria, agents can provide appraisers with information that helps inform their work, including:
- True legal description
- Plat of survey
- Blueprints if available on newer houses
- Accurate and complete listing sheet
- Brag sheet, including property features and upgrades, as well as the parameters for competing properties and local benefits
- Any closed sales or listings that support the listing price
- Your insight on why the property is priced where it is
If the property is in an association (condo, cooperative or community association or planned unit development), you should also provide:
- A copy of the governing documents for the association
- The name, phone number, and email address of the association’s property manager or board president if the property is not managed by a professional management company
- Answers to the questions found in the Fannie Mae condominium questionnaire (FNMA Form 1076)
Appraisers bring specific expertise to their role, which is quite different than the role of an agent. By understanding the appraiser’s role, agents can ensure they provide the helpful information. Doing so not only improves the competency of the appraiser, it can also help the agent better serve their client.