By Emily L. Braman, MAI, SRA, AI-GRS
Having appraised Frank Lloyd Wright homes in Ohio, Indiana and Wisconsin, I know my clients had a hard time finding an appraiser qualified to value their properties. The first Wright home I appraised was a local property for donation to a non-profit. The house was subject to a preservation easement and the donor wanted to retain a life-estate in the property. Another was operated as a museum, and it was to be valued for a donation to a non-profit and a third was to be valued as subject to the expansion of an existing historic preservation easement to an outbuilding on the property. Complex valuation issues like these require an appraiser with specific experience and expertise. Valuing a Frank Lloyd Wright designed home is difficult even without extenuating circumstances such as easements and life estates. This is because there is a section of the market that values Wright homes for their historical and architectural significance, and this can create a different market for these homes than other homes in the same geographical area. A national search is often required, as is the ability to extract the value of the site from similar homes that have sold in very different locations.
When people think of a real estate appraiser, they typically think of getting a residential mortgage loan and needing an appraisal for financing. This most common type of appraisal protects the lenders collateral and answers the question “how does the value of the property relate to the contract price? A higher-level residential appraisal answers the question, “what is the value of this property”? Even more complex appraisal assignments answer more esoteric questions such as “what is the value of this home before and after a historic preservation easement is placed on all or part of the property?”, “what was the value of this home as of a specific previous date?” for property tax or estate purposes. Carefully defining this scope of work early in the process of selecting an appraiser is critical.
Real estate appraisers are regulated by The Appraisal Foundation and licenses and certifications for federally regulated transactions are granted by the States. States classify appraisers as Licensed Residential, Certified Residential and Certified General Real Property Appraisers. Professional organizations also award designations to real estate appraisers after licensing, such as those granted by the Appraisal Institute – the residential designation, SRA and the most prestigious designation, MAI. A Licensed Residential Real Property Appraiser can appraise non-complex one-to-four residential units having a transaction value up to $1,000,000, and complex one-to-four residential units up to $250,000. A Certified Residential Real Property Appraisers can appraise any residential property up to 4 units, and a Certified General Real Property Appraisers are permitted to appraise all types of real property.
Beyond state certification and licensing, the Appraisal Institute offers designations to appraisers that meet rigorous standards of peer reviewed experience credits, education, complex exams, and demonstration appraisals. The SRA membership designation is held by professionals who provide a wide range of services for residential properties related to providing opinions of value, reviews, consulting, and advice regarding investment decisions, among other things. The MAI designation is for professionals that provide a similar range of services on all property types including residential property. These professionals have had additional experience and training beyond the certification by the State.
Appraisers have a Competency requirement in the Uniform Standards of Appraisal Practice and this ethics requirement ensures that an appraiser does not take on an assignment that he or she is not competent to complete. Competency may apply to factors such as, an appraiser’s familiarity with a specific type of property or asset, a market, a geographic area, an intended use, specific laws and regulations, or an analytical method. Competency can be acquired in various ways; however, if the appraiser takes on the assignment and takes the necessary steps to become competent, he or she is required to disclose in the report the lack of prior knowledge and those steps taken to become competent.
The Find an Appraiser website provided by the Appraisal Institute is one way to find a designated appraiser in your area. Often appraisers will refer complex assignments to colleagues who may be more qualified for a particular issue, and conversations with a few appraisers in your area could lead to the right appraiser for your property. When selecting an appraiser to value a unique property, or for an assignment with a complex scope of work, make sure to ask about the appraiser’s experience with that property type, location and with the appraisal issue at hand.
A discussion of the scope of work and the appraiser’s competency will reveal whether the appraiser has the experience necessary to tackle a specific assignment. Scope of work decisions relate to the specifics of the complexity of the appraisal assignment. The scope of work could be as simple as an appraisal for sale, donation or financing or could be as complex as a retrospective appraisal for property tax or estate purposes, the donation of a life estate or the valuation of the property before and after the donation of a conservation easement. Finding the right appraiser, with the necessary experience in both the property type, the location, and the assignment type, will simplify the appraisal process and avoid unintended delays.
Posted April 12, 2022