Become a Real Estate Appraiser

An appraisal is defined as an opinion of value or the act or process of estimating value. This opinion or estimate is derived from the market by using the three common approaches; Cost Approach, Comparison Approach and Income Approach.

1. The Cost Approach to value is determining a value estimate by what it would cost to replace or reproduce the improvements as of the date of the appraisal, less the Physical Deterioration, Functional Obsolescence and Economic Obsolescence. The remainder is added to determine the Land Value.

2. With the Comparison Approach to value the real estate appraiser will take the most similar comparables within the market area, considered “bench mark” properties of similar size, quality and location that have recently sold. The standard I try to stick to with the current market in San Diego is to start my first search of comparables within .5 miles from the subject, within 10% in living area from the subject, within 10 years of age to the subject and that have sold in the past 4 months. Depending on the results I will sometimes have to loosen my search criteria. Then a comparison is made between the comparables and the subject property making $ adjustments for the differences that affect value.

3. The Income Approach to value is of primary importance in ascertaining the value of income producing properties and is rarely used on owner occupied residential type properties. This approach provides an objective estimate of what a prudent investor would pay based upon the net income the property produces. When asked to appraise income properties, you will need to get the additional information and most lenders will also ask for an operating income statement along with a rent survey.

After a thorough analysis of all the gathered data, a final estimate or opinion of value is given.

You can then move on to the appraisal process.
1. Determine the purpose of the appraisal and who will be using it.

2. Get the required completion date of the appraisal, usually this is the date of inspection, but sometimes can be a historical appraisal based on a previous date.

3. If this is for a purchase transaction, you will need a copy of the purchase agreement to review.

4. If you can’t obtain the real estate taxes from public record, you can request a copy of current real estate tax bill.

5. Is property listed for sale and if so, for how much and with whom? Has there been any offers? Etc…

6. What personal property is included if any. This must be disclosed in the appraisal report.

7. If this is an income producing property, you will need to get the current rents and a breakdown of income and expenses from at least the past year and a copy of leases.

Each appraisal must contain the following items in addition to all pertinent information known to the appraiser at the time of the appraisal:

· A statement as to purpose and/or objective of the appraisal, with value defined. Refinace, purchase, as-is, etc… There could be many purposes.
· A legal description and/or adequate identification of the property appraised obtained from public record.
· The date of the value estimate, the date at which the value estimate applies. Usually date of inspection, but could be a historical appraisal needed for estate purposes, divorce, etc…
· An adequate description of the physical characteristics of the property appraised based on your physical inspection.
· A statement as to the known and/or observed encumbrances, if applicable.
· A statement and analysis of the highest and best use of the property appraised, if appropriate. Usually is the current use, but could be different.
· A statement as to the property rights appraised. Fee Simple, etc…
· A direct sales comparison approach and analysis, if applicable. This is usually required in most of the appraisals you will be completing as a trainee.
· A cost approach and analysis, if applicable. This is usually required on all properties except for condominiums.
· An income approach and analysis, if the property is an income producing property to include multi-family residences and rented single family residences.
· A statement as to the conclusions reached in the appraisal report.
· Documentation requirements [the appraiser must have the minimum data requirements in his/her file to properly support the final estimate of value]. You will also need to save this documentation.
· A statement as to the assumption and limiting conditions affecting the appraisal.
· The signature of the responsible appraiser together with his/her particular designation [IFA, IFAA, IFAS, IFAC]. You will need to get an electronic copy of your signature, usually obtained through the company software you will be using.
· A statement concerning the maintenance of confidentiality regarding the appraisal assignment and results thereof.
· Designated members [IFA, IFAA, IFAS, IFAC] must disclose their continuing education status clearly in every appraisal report.

Appraisal reports must not include:
· Improbable and non supportable premises.
· Vague assumptions unsupported by fact.
· Improbable highest and best use.