This blog is a re-post of a recent blog by our own Woody Fincham, SRA. It was originally posted on the Appraisal institute’s Opinions of Value blog located here.
Why “Just Any” Residential Appraiser Will Not Do
The following is a guest blog post by Woody Fincham, SRA, principal, F&M Associates, Inc.
With so many appraisers vying for low-fee appraisal management company and lender-related work, many AMC-centered appraisers are starting to compete for non-lender work.
Most consumers don’t understand the need for experienced and designated appraisers outside of lender use work. It’s the appraiser’s responsibility – and in his or her best interest – to remind non-lender clients that hiring a designated appraiser is worth their time … and, most importantly, their money.
Attorneys, financial experts, homeowners and other non-lender consumers and users of residential appraisal services should tread very carefully when selecting appraisers. There are two distinct groups of appraisers in residential valuation: appraisers who perform primarily mortgage related work and those who work with non-lender clients. It pays to be able to discern between the two groups.
What is the difference?
Non-lender residential valuation is a market niche, often best suited for experienced appraisers who think outside the box. These assignments include appraisal reports performed for situations such as wealth-management, divorce and other litigation related needs. Often, intended users need to find the most qualified and experienced appraisers. Well-vetted experts are most applicable when testimony is a possibility or when looking at unique properties. Selecting an appraiser limited to only experience with lender related work could result in less than optimal results.
Take attorneys, for example. They need someone who can write reports well enough to be seamless and defensible, but also handle cross-examination in a trial or the craziness that can be a pre-trial deposition. It takes a good professional to write the report, but an even better one to be effective on the stand or to help with pre-trial preparation.
Often, during the interview process in pre-trial or in court testimony, the appraiser must be able to communicate complex valuation theory to a jury or a judge who may have no understanding of such things. In other words, the appraiser must become an effective teacher in addition to being a good report writer.
Many residential appraisers who work primarily with lenders − especially since the housing crisis emerged in 2007 − are required to stay confined within a limited scope of work. Lenders often require appraisers to utilize comparable sales within a very narrow window of time, a small geographic area, and to not exceed lending guidelines when adjusting comparables sales.
This can be problematic when dealing with situations that often, or may, end up in court. The cost for an attorney to reorder a better report, or to pay a well-qualified appraiser to assist in pre-trial analysis, can get expensive quickly. Even worse would be finding that across the courtroom, the opponent hired the appraiser he or she should have hired.
What is the Takeaway for Consumers?
- Be willing to ask an appraiser why they are a better choice than the other appraisers you are considering.
- Ask for a resume and check references.
- Take the time necessary to make sure the appraiser is well qualified, beyond just the minimum qualifications.
- Look strongly at professional designations such as the MAI, SRPA and SRA designations.
- If you are looking for pre-trial consulting that involves the review of another appraiser’s report, the new Appraisal Institute Review Designations are a great place to retain talent:
- AI-RRS for residential reviews, and
- AI-GRS for non-residential reviews.