What the customer wants.. APPRAISERS

Question

I'm about to start a job as a junior appraiser for a CRE firm. Really trying to get a jump on my peers! My question to buyers is what was your experience with CRE appraisers? What things could appraisers do better? What do you see as unneeded? Etc...

Account Closed · Answer

Hey Everyone! I have read these comments and wanted to respond. Thanks @Joe Fairless for looping me in to this conversation.@Adam Griffis , congrats on starting your job as a CRE appraiser! Just like @Bill G. said, it speaks volumes that you have asked these questions. I wish more appraisers would do this. I am still learning myself.The comments from @Joel Owens and @Mark Creason are spot on. As a profession, valuation is fairly young, especially with how it is being regulated and defined. And unfortunately we do have people in our profession who do exactly what @Joel Owens and @Mark Creason and @Bill G. have said. Of course every industry will have these types of people, but hopefully you and I can begin to make that even less so for ours.Appraisers can get paid a salary or fee split within their office (it’s a split of the appraisal fee). No appraiser should accept an assignment where their compensation is based off of the performance or sale of the real estate being valued – this is a big violation of USPAP (which I am sure you already know).@Kyle Kelley , the fee for an appraisal varies depending on the complexity of the real estate in question and also (in my opinion) what type of appraisal you are asking for. For appraisers, the process whereby we determine this is generally called “scope of work”.In response to more of what @Bill G. said, I agree that adjustments should be justifiable, either in terms of quantifiable data or qualitative relationships. Both have to be supported and reasonable. In my opinion, we should take in all the data available we can, and that includes understanding what the owner/investor thinks are the best comps. There is nothing wrong with taking in all the data we can. It is our responsibility to sift through the data, verify it, and use it in the report if it applies.Typically, real estate is valued separately from any business component. If a business component is being valued, that appraiser must be competent in that area. It is also extra work and the fee should reflect that. In any assignment, the appraiser must state that they are either competent to complete it or will be by the time the assignment is completed to ensure credible results. They should state this upfront to the client before they start.If you would ever like to talk, feel free to call me at 480-993-7488. And @Adam Griffis are you certified or working toward certification? What about the MAI designation?

Joel Owens · Answer

The appraiser needs to stay in the market they understand. They also need to not be lazy and pull comps that are not relative to the report to get it completed faster.We have had to go round and round before with appraisers using crappy comps nowhere close to the subject or in relation because they did not want to spend time to do it right.When appraisals costs thousands of dollars in commercial you will not accept mediocre as it skews evaluation of a deal under contract.

Joe Fairless · Answer

@adam Account Closed as well

Account Closed · Answer

@Joel Owens have you had different experiences with appraisers that get paid salary vs. ones that get paid via fee split?

Bill Gulley · Answer

Well, can't argue with using good comps. To that, adjustments should be justifiable rather than preconceived opinions. Greater care might be taken in cap rate assumptions, that's generally an assumption from thin air unrelated to the type of business. Cap rates are also different as being acceptable by an investor of larger multi family as opposed to smaller 5-10 types primarily from effects of early depreciation.As to specialty areas, I haven't seen Joel's concern as to multi family as much in business and RE, office-warehouse, warehouse, storage facilities, general office are not difficult, I'd rather see an appraiser admit they don't do agriculture, industrial, hotel-motel-hospitality appraisals than attempt to and screw it up costing a few grand. No appraiser can do a good job with just any property type much less businesses. As to a commission split? Who is the client anyway? If you're speaking of a fee split between inter-office appraisers, that's fine. An appraiser should not have or be receiving any compensation based on the estimated value or outcome of the value derived, that's a biggie! I probably misunderstood that aspect, fee appraisers are on a flat fee basis, it's the only way compensation is paid in this area and never heard of a commission basis. I'd kick out an appraisal that wasn't on a fee basis.Inner-office, salary would be just fine. Institutional or corporate appraisers for inner-office work, some commission from your principal would be fine, but not paid as an independent. Review appraisers are often on salary or split on a production basis, I see no problem there.Communication, returning calls, keeping a client up to date is a big deal from your marketing standpoint. When I can select an appraiser, do I call the guy who calls with progress reports or the guy who gets the order that I never hear from until he drops off the appraisal with his bill?I've had a few appraiser were just too arrogant and opinionated, there is a difference in listening and accepting valid considerations and flat out ignoring such thinking they are the only expert in the area, and usually they aren't. That is not a good reputation for an appraiser to have.I could unload some more, but it's Thanksgiving and I have to digest 10 pounds of food, at least I feel like it's 10 pounds worth, so I don't want my suffering to influence yours. LOLI think it speaks volumes that you even inquired, very good call starting out! Happy Turkey Day :)

Joel Owens · Answer

You could still likely get it cheaper but an appraiser that does 5 plus units does not usually do the 2 to 4 etc.So I would think the cost would be higher than a standard residential appraisal.I do not like 5 to 6 units. The benefit for the extra one to two bed unit just isn't there. Might be better to buy 2 quads for 8 units total and lock in lock term 30 year debt with two loans putting 20% down.

Kyle Kelley · Answer

@Joel Owens What range would you expect to pay for a smaller, like 5 or 6 unit multifamily apartment complex appraisal? I know you mentioned "thousands" of dollars but I was thinking that applies to larger complexes like 30 or 40+ units, but wasnt sure if "commercial" appraisal rates truly start at anything 5 or higher

Mark Creason · Answer

Joel knows what he is talking about on this. How many times do we get an appraisal back and they are using the wrong vacancy rate or low balling the rent.Mark