The Art of Appraising

21 Jun The Art of Appraising

In the appraisal industry, there have been more tools and software developed over the past few years advancing data support. While there are various products to support our appraisal work files, I think it’s important to not overlook the art of appraising.

Brief history: Years ago, Fannie Mae and Freddie MAC developed the Uniform Appraisal Dataset (UAD) in an effort to improve the quality and consistency of appraisal data for loans delivered to government-sponsored enterprises. This was the impetus of the appraisal industry moving towards “big data” which is millions of data records.

As the UAD has evolved, this has trickled down to more emphasis on appraisers analyzing “small” sets of data within neighborhood and comparable analysis. One positive is that it has forced appraisers to look at support for appraisal report adjustments. Examples: Where is the GLA adjustment derived from? Is there really a market reaction difference between a 12,000sf vs. 16,000sf lot?  

Most appraisers were taught adjustments from their mentor but UAD along with other data tools developed have forced appraisers to revisit what they’ve learned and were taught about data analysis, adjustments, etc. I know this has been a positive for my appraisal career.

While the data and adjustment tools have advanced, over time, there is also a feel and art of appraising that comes only from years of experience that can’t be replaced. This is one thing that big data, small data and numbers on paper can’t analyze.  Two properties can be the same size, condition and lot size, but X property sold for X amount more. Why?  Was it the street location? Design/layout? Sloping driveway? Landscape? Small backyard?  When I arrive to the subject property or viewing a comparable sale from curbside, there is a feel that you get from viewing and walking the property vs. just looking at it from google earth.

Further, appraisers are neutral 3rd parties and the importance of understanding buyer and seller motivations when analyzing real estate transactions is very important. The information I can obtain from calling and talking to realtors about potential comparable sales is invaluable and an important step in the appraisal process.

Summarizing, I believe that both technical analysis and appraiser’s experience and understanding of the market are equally important and need to always be in balance as the appraisal industry continues to evolve.  Any thoughts to add?

Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use.  This information is NOT intended to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or other potential real estate or non real estate purpose. This appraiser is NOT a qualified home inspector and any tips are for informative purposes only. If you’d like to obtain and order an appraisal for your specific needs, please contact Bryan at 530-878-1688 for more information.