by Judith Haney Certified Appraiser

Birmingham, AL - December 16, 2009

Based upon my experience, there are two groups of real estate consumers. They include:

Group 1: A light bulb over their heads: Buyers and sellers of real estate who utilize the expert services of real estate appraisers BEFORE they transact business. This is as it should be. Because, in order to proceed with confidence it is essential to be fully informed. 

Group 2: Operating in the dark: Parties to real estate transactions frequently invite a real estate appraiser into the discussion AFTER they have entered into an agreement to buy or sell property. After-the-fact-buyers erroneously believe they are protecting themselves from paying too much by inserting a contingency into the purchase agreement which requires the appraisal to meet the sale price. What they fail to realize is that the value estimate is only one component that should factor into a decision to acquire a given property.

While appraisal of real estate is not brain surgery - it's complex, and here's why:

Appraisal methodology, i.e., market, income, and cost approaches to value, is predictable, however, factors material to value that positively and negatively impact a given property are different in every case. Some of the differences include:

1. construction defects and degree of physical depreciation

2. location, present land use, and forecasting of changes in land use

3. analysis of economic trends and employment data

4. supply and demand of competing properties and detailed analysis of marketing time

5. availability of utilities and how those differences impact marketability

6. proximity to employment, schools, and traffic arteries

7. negative externalities including close proximity to airports, Interstate highways, toxic superfund sites, heavy air pollution

All of the above are value related issues which are analyzed and considered in appraisal reports as items of depreciation. Premises considered, the final value estimate is not all that factors into a decision to purchase property.

In the course of supplying a value estimate appraisers must supply it within a specific set of rules. The rules are called Uniform Standards of Professional Practice (USPAP). These rules originate from the Appraisal Subcommittee pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. According to license laws, appraisers may not supply value estimates without first complying with the requirements of USPAP. 

This may be the only free advice you will ever receive from an appraiser: do not buy or sell real estate in the dark. Hire an appraiser and receive the independent, confidential, guidance you need to make informed decisions. 

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Judith Haney is celebrating 26-years as a working real estate appraiser.

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