Archive for the 'Seattle Real Estate Appraisal Tips and Advice' Category

Training Trainees – Defining Supervision

Valerie A. Dreas July 11th, 2008

I remember back to those blissfully ignorant days when I said “yes” to be an appraisal trainee. I was lucky and worked for a large corporation and thus, a salary and benefits were included in this career change. It was not until several years later when I left that company to become a fee appraiser that I really began to appreciate the abject poverty and financial worry that I had been spared during my apprenticeship.

Trainee Selection
Therefore, when a potential trainee consents to go through that financial struggle, I do not take the responsibility of training someone to be an appraiser lightly. One, their success or lack thereof will reflect back on me; and two, I do not want someone to lose their license and career because of something I did or did not teach them. And so, the task of taking on a trainee should be considered – like marriage – soberly and carefully with all due consideration for the amount of time that will be expended, and likely never recouped, during the three year process.

It is important for a supervisor to pick someone who has the potential for greatness as an appraiser. Sometimes, that is not always readily seen in the interview process. So, I look for several things: intelligence, writing skill (yes, I do ask for a writing sample), articulation, education, and the all important computer skills. I also look for someone with a backbone and enthusiasm for doing the job. I also have the heart-to-heart talk about the financial struggles that are expected. I usually get one of two reactions: “That will not happen to me,” or, “Uh, maybe I’ll work for McDonalds. They pay better.”

As an aside, I will just mention here about the backbone part. I have fond memories of my review sessions with my supervisor. We would discuss the report at length and then I would exit her office and my coworkers would ask me if I was okay. I realized that our discussions got sort of loud as we both passionately “discussed” appraisal theory and practice. However, I look at it this way; it was great training for responding to those pesky clients who “insist” that the value is too high or too low – whichever position is to their advantage. Further, a backbone will help offset the rejection and downright rudeness encountered when trying to confirm comparables with buyer, sellers and brokers. Ya’ll are smiling right now cause you know what I mean.

Defining Supervision
Merriam-Webster defines the word supervision as “the action, process, or occupation of supervising; especially: a critical watching and directing (as of activities or a course of action).” In applying this to trainee supervision, the meaning here is to watch or review critically whatever a trainee does. The same source defines critical as “exercising or involving careful judgment or judicious evaluation.” Therefore, supervising and critically evaluating a trainee’s work does not involve sending them out on their own and reading through the report and putting a signature on it. What it does involve is a lot of time and effort in carefully guiding a trainee’s thinking regarding how to look at properties, understanding the scope of work for the appraisal, defining potential problems, and understanding valuation and economic theory.

Client Relationships
I have several hard and fast rules regarding client relations and trainees. My trainees do not discuss anything with a client other than setting up the site visit or asking for specific documents. They are never to discuss the valuation or issues regarding the property with a client – EVER. During the site visit, they are to take pictures and wait to ask me questions later. (The no talking rule abates when the trainee has some more experience under their belt.) As a trainee’s education and experience grows and they get closer to sitting for their license exam, they become more involved in the business of dealing with clients and putting together proposals and marketing packages.

I expect the new trainee to be in my office almost 70 percent of their day for the first few months and joined at the hip when out in the field. My focus is commercial property and that is a very broad range of property types, each with its own unique issues that need to be addressed. I have forms for site visits and comparables visits to help direct a trainee’s focus. I have scripts for verifications so that that the main questions are asked and answered.

Every detail is looked at, reviewed, and discussed with respect to the final work product. Comparable searches are done together, at first. Later, the trainee performs searches on their own and then comes in to discuss them. While we are talking, I’m pulling up the databases as well to see if we get the same properties. Afterward, each comparable is analyzed and red flags are noted. At this time, I explain what is important for this property type to look at and what questions will need to be asked during the confirmation process.

When the valuation has been completed, the final report document is brought up and reviewed – line by line. The file and the trainee are at my desk during this process to answer questions. If there are holes in the report that need to be addressed, I ask questions like who, what, where, when and why. If the trainee cannot answer those questions to my satisfaction, they are sent back to their desk to get the answers. Obviously, this is a time consuming process. However, by the time I am finished
reviewing the report and concluding the final value, I know everything about how the value was derived.

It disturbs me when clients tell me that they hired a certified appraiser and when they call with a question regarding a report, they are passed to a trainee to answer their question. Basically the supervising appraiser is saying they do not know enough about how the value was derived to answer the question. This also undermines the client’s confidence in the value, because a person without the specialized knowledge they are paying for performed the appraisal. That should never happen. The
supervisor’s signature is attesting to the fact that the value is true. How can they attest to that if they cannot discuss how the value was derived?

The recent change in Washington law regarding the trainee’s bill was a good one. However, it is only half the battle. The remaining battle needs to be fought in each appraisal office with respect to what supervision entails. It is up to each designated and certified appraiser to ensure that appraisal quality is at its highest, and that trainees are adequately trained and supervised so that the next generation of appraisers are better than the last. My ultimate hope is to hear someone say, “That person is a damn good appraiser.” My response will be, “I know. I trained them.”

Comments regarding this article can be posted at www.lambhansonlamb.com/blog.

We’ve Got A Long Way To Go!

Michael B. Lamb, MAI, SRA July 1st, 2008

In the 1930’s, in the depths of the depression, knowledgeable, intelligent, farsighted men organized what would become the two strongest, best known, and most professional appraisal organizations: The Society of Real Estate Appraisers and The American Institute of Real Estate Appraisers. When they were organized there was no intent, in my opinion, that they would become competitors, or that either group would seek to become the largest or more important professional appraisal organization. The men who gave birth to both of these excellent societies were genuinely and idealistically motivated to simply provide the very best professional appraisal service to the American public.

In the years immediately following, several other prestigious groups were formed, notably the American Society of Appraisers, the American Right of Way Association, the Independent Fee Appraisers, the Organization of Governmental Appraisers and others. All of these groups had various goals to achieve, but their primary aim was the same: To make real estate appraising a profession and all of their members true professionals.

Now let’s have the courage to call an obvious fact a fact. A whole passel of so-called appraisers licensed and certified have sprung up over the years, to a point where the public is overwhelmed and confused not knowing who’s the most qualified, because they all present themselves to be able to appraise or analyze all types of properties and real estate investments whether competent or not.

I don’t know why we can’t say what the problem is, because the public, our judges, attorneys, clients, lenders and knowledgeable laity, are saying it out loud repeatedly, writing letters about appraisers, the actions of appraisers, and reporting fraudulent, unethical and incompetent activities in ever-increasing numbers. And just what is it they are saying? The ones who only have a cursory knowledge of real estate and real estate appraising simply state that, based on their experiences, the letter designations don’t seem to mean a thing. The public does not seem to recognize the difference between a Designation and a State licensed or certified appraiser. They report that one seems to be just as bad as any other, and none of them seem to be real professionals. But the people who have a bit more sophistication, which include the courts, attorneys, lenders, and today the majority of the buying and selling public, are more articulate and more specific. They will mince no words and tell you that they know why most of the so-called appraisers came into existence during the past 15+ years: These johnny-come-latelies passed State exams with a minimal amount of training and dubious course work and have grown because it is relatively easy to get.

They have the minimum education requirements with very little work review, simply send in a log showing you have taken some courses and take a simple test; send in your money and you’ll be granted a license or certification. This plus the minimum continuing education courses of study are far below the rigid requirements that have made the Institute and like organizations strong, progressive, viable sources, and centers of professional growth and knowledge. The various designations of the Institute continuously demand hard work, dedication, additional study and a willingness to subscribe to a set of professional ethics and standards. Not the minimum standards found in licenses, certifications or designations COD by return mail.

I have talked about drawing in new members through our professionalism, ethics, continuing education, ability to make more money, and a strong, national, unified appraisal organization. These are different topics, but all inter-related and having a common goal. The public, our clients, are not talking about us as much as I would like, and I am afraid they don’t know who we are. I believe it is time for us to stand up, look at ourselves in the mirror of reality, and tell it like it is. The question is what are you, you, going to do about it?

Professional real estate appraising, in my opinion, is at a very serious stage in its history; we either go forward or backward. We are at a crossroad. We must take action. I believe we are in the position of the bicycle rider pedaling up a hill with a tiger on his tail: we can’t stop or stand still, and if we try to coast, we’ll go back downhill, so our only course is to keep on pedaling.

You’re right: Real estate appraising and real estate appraisers have come a long way since the middle 1930’s, but I believe the battle is just beginning, and we’ve still got a long, long way to go.

Residential Home Inspection: What Homeowners Need to Know and Do

Joseph A. Hasson June 25th, 2008

A residential real estate appraiser’s primary job is to determine an “opinion of value” as of an effective date. The inspection is one of the means that an appraiser uses to gather data in determining this “opinion of value”.

Setting the Appointment:

A typical scenario is the refinancing of a home and the bank/lender is sending out an appraiser. When the appraiser calls to the schedule the inspection appointment, feel free to offer up some information on your home. However, stick with the facts regarding the physical attributes of the home and DO NOT discuss the value (how much you think your home is worth). (More about this later.)

My initial phone conversation with a homeowner includes the following:

• Does your home have a particular style?
• How many floors does your home have?
• Does your home have a basement? Is the basement finished?
• How many bedrooms and bathrooms are there?
• Does your home have a view, e.g., lake, mountain, city, territorial?
• What is the condition of your home?
• Have you updated the interior in the last 5 years?
• Have you replaced any major systems of your home?
• Is there any on-going construction in your home?

Honesty is the best policy when it comes to answering these questions. You can expedite the appraisal process, save the appraiser a lot of time and frustration and the overall cost of the appraisal by being forthright with these answers.

Before the Appraiser Arrives:

Once the inspection appointment has been and set, you should tidy-up the home before the appraiser arrives. I say tidy-up because cleanliness is not the goal. Instead, the goal is removing the everyday clutter so the appraiser can see the amenities of your home. Unbelievably, I’ve been to homes with so much clothing on the floor that I did not know whether the room was carpeted or had hardwood floors. Why is tidying up so important? Because, in addition to the required exterior photos of the home, front and back, most lenders now want to see interior photos of the home. These photos speak volumes about the condition of your home.

The living room, kitchen and baths have become the standard required interior photos, but photos of special features such as custom designed family rooms with floor to ceiling fireplaces or media rooms with built-in seating with movie screen, may also be include in the report. On the exterior, photos of sport courts, garages and ponds may be included.

An appraiser also has the responsibility of photographing defects of the home as well, especially when they affect value. So be proactive and finish those projects so the bank/lender does not see the hole in the wall where the door handle broke through the drywall, or the dangling light fixture that was missing one part, or the bathroom tile work that wasn’t as easy to install as they said on the home improvement show. The same goes for the exterior. Broken down cars, no matter how much you cherish them, should not be on blocks in your front yard. Do you have a ladder against the home? Take it down and put it away. The bank/lender may assume the ladder is there for an unfinished repair. Avoid the costly situation where the appraiser is recontacted to return to your home to take more photos or hiring a roof inspector to confirm that the roof is in good condition.

The Appraisal Visit:

The appraiser arrives, and your house is clutter free and looking good. The appraiser will walk through the home, look in every room and take notes. The appraiser performs the inspection in order to assess quality, condition and amenities to determine the home’s value. If there are items that you think are special features in the home that may be overlooked by the appraiser, feel free to bring those to the appraiser’s attention. You don’t want an appraiser to overlook a bathroom, wet bar or any finished living space that is behind a paneled or locked room. Many older homes have built-in features including desks, stereo/intercom systems and foldout ironing boards. The appraiser may not attribute value to all amenities, as some may not be fully appreciated in the market place to typical buyers, regardless of how much money they cost to build or replace.
Stay Professional:

Many homeowners ask the appraiser how much they think the house is worth. This is not an appropriate question to ask at the time of the inspection. The appraiser should actually refuse to answer this question to comply with USPAP (Uniform Standards of Professional Appraisal Practices) and respect the client/appraiser relationship that, in part, led to the credit crisis fiasco in the sub-prime market. You will learn the value of your home when the appraiser has delivered the completed appraisal report to the bank/lender. The homeowner has a legal right to view this report.

Good Luck.

The Truth About Professional Designations

Michael B. Lamb, MAI, SRA June 11th, 2008

The designation doesn’t make the appraiser: The appraiser makes the designation.

The old cliché, the clothes make the man, is true only for a very brief instant, or while the suit is on a dummy, or in a photograph, because as soon as the image is animated, whoever is wearing the clothes, names, or expensive tailoring will hide or disguise the person under the clothes.

Designations are important, vitally important to our industry. To the people who retain us, to the bankers and lenders who rely on our professional ability, and to the attorneys and courts who listen to us as experts. Additionally, they prove a great deal both to the outside world and to the individual, because they represent the culmination of a great deal of study, hard work, and discipline. But acquiring the letters behind one’s name, earning the professional designations, is just the first step. As any very candid M.D., or D.D.S., or J.D. will tell you, once he or she has the coveted little initials after their names, that is when they really began to prepare, to study and learn. Doctors, dentists, lawyers, all professional people, really only begin to practice their professional AFTER they have been designated.

In the real estate profession a lot of us were interns for a number of years, working as appraisers, and working toward our designations, and harboring the hope that on the day we were designated we would be given enlightened intelligence, that the designation would be the key to solve all of our problems.

What a shock: We finally received that coveted group of letters, and an impressive document to frame and hang on our office wall, but the fact of the matter was we were just exactly the same person we had been twenty minutes earlier. We still knew as little, or as much, we were still filled with the same hopes and fears, but there was one essential difference: We had the knowledge, ability, and stamina to complete a very rigorous course of study and had been so recognized by our professional peers and associates.

Having earned a professional appraisal designation seems to make a person stand a little taller, look a bit sharper, and act more decisively. A professional designation doesn’t grant immunity to mistakes, or make the average appraiser into a genius, but it seems to make the person more aware of his responsibilities, to make him want to do a better, more thorough job.

In the last twenty-five years, we have gone from slide rules and mechanical typewriters to word processors and computers, and the speed at which the appraisal profession is changing is simply awesome. If the appraiser doesn’t keep up with the changes, the advances, he will surely be left behind.

A designation as a professional appraiser is a hallmark that the individual has dedicated a great deal of time, energy, effort and study to improving his ability to serve the public and I sincerely believe that the designation will become more important in the future. With the increasing speed of communications and all the other technological advancements, appraisers must devote more and more time each just to stay abreast of these changes. And the criteria of ability will trend more and more to be a professionally designated appraiser, because he or she will be involved in mandatory education recertification programs.

A professional real estate designation tells the world that you care enough to be the very best!

Opportunity

Michael B. Lamb, MAI, SRA June 4th, 2008

Who knows when or where opportunity will strike next. It’s all around us. All the time. Almost every day we hear stories about someone who invented some apparently simple or trivial item, but it made him a millionaire. Or somebody else wrote a book, or a friend secured a wonderful new job, or your cousin got a fabulous raise in pay. It happens every day – but it seems to happen to someone else. And all we see are the results, and not the long hours and hard work that produced these results.

I think all of us daydream once in a while about finding the pot of gold at the end of the rainbow, winning the State Lottery, or inheriting a fortune from some long lost relative we’ve never even met.

But the dream passes, and we come back to reality, back to our jobs, and our daily routines. Too often though, we tend to equate back to work, or reality, with drudgery, or unpleasant tasks, and miss the fact that our golden opportunity, the key to future happiness and success, is right there in front of us and always has been just waiting for us to take the initiative.

If you are working to become a professional real estate appraiser, why not upgrade that goal to read, “I am working to become the BEST professional real estate appraiser.” Too many people sacrifice themselves to mediocrity simply because it is the easy way out. There is always an excuse available if needed. One can always justify the reason for not doing something. It’s just human nature at work. But remember, success and accomplishments don’t need to be rationalized, explained, or excused: They tell their own story.

One of the really serious problems of our appraisal profession has been that a large number of real estate appraisers have never taken appraising seriously. They arrived, sort of by accident, found they could make a fairly good living, and having reached a certain level they stopped reading, studying, learning, and trying to advance their knowledge and skills. As a result, we have a lot of people working in the appraisal profession who are actually satisfied with mediocrity, are willing to deliver just enough to get by, and will accept the income such work justifies.

They don’t want to join a professional organization because they say it costs too much, and anyway they get all the work they want without belonging. But these are the people who have benefited from all of the work done by professional appraisal organizations, by the research and techniques developed by members of professional groups, and they enjoy the standards of pay or fees that others have established. They are free loaders.

Human nature won’t change, so there is probably nothing we can do about this attitude of some appraisers, but we can do something about our own attitudes, our own approach to the problem of enlarging and increasing our professional expertise.

Instead of worrying about what “they” do out there, if each one of us will strive to improve his or her professional qualifications this coming year, by attending meetings, seminars and courses, we will discover that opportunity is right there knocking at our own front door. It’s strange, but every time you improve your techniques or capabilities, you find a need for them; you discover a market for your added skills, and a market that will pay for your professional services.

There are opportunities galore for the well-qualified, well-prepared, educated professional appraiser. He or she will find all of the “opportunities” he or she can handle, and then some. Just look back at our recent recession: A lot of “appraisers” dropped out of sight, but the qualified, the designated appraisers, kept right on working.

Opportunity: It’s right there in front of all of us, just waiting to be taken advantage of. And the key to success is preparation, education, and professionalism. Opportunity isn’t an accident, it isn’t luck; opportunity is the result of good hard work.

So, you want to be a developer? (Pt 2)

C. Edward Boyle April 30th, 2008

Back for a second dose, huh? Well, here it comes in the form of another article. This time, we are going to address the selection of property that you are going to buy for development.

The first step is deciding what you would like for your development specialty. Single family homes? Office buildings? Neighborhood retail space? Residential lots? This is all up to you. You can be successful in any of these arenas if you are focused and stay on top of the game. Most of the readers will have heard the answer to the question “What are the three most important aspects of a piece of real estate?” Continue Reading »

So, you want to be a developer?

C. Edward Boyle April 30th, 2008

During the course of their careers many real estate agents and professionals come to the understanding that real estate brokerage is really the facilitating of the transfer of wealth (real estate equity) from one party to another. On the other hand, the development of real estate (putting raw land to use, or putting land to a higher or better use) is in fact the creation of wealth. It is easy to jump to the conclusion that there is more profit in creating wealth than in transferring it. As a result, many agents decide to become developers. Sometimes, property owners and many others make a similar decision – to become a developer.
Continue Reading »