Fundamentals of Real Estate Appraisal Thirteenth Edition William L. Ventolo Jr. Martha R. Williams, JD Sam Martin, PhD, DREI, Consulting Editor

1 The Appraisal Profession Real estate appraiser provides opinion of value of an interest in real property (land and/or buildings) Scope of work determines extent of research and analysis required Opinion of value usually presented in written appraisal report

Appraisal Assignments Available Set/determine fairness of asking price Estate valuation Value in trade Business property valuation in merger, acquisition, liquidation, or bankruptcy Mortgage loan value

Appraisal Assignments (cont.) Insurance value Damages from construction defects Loss from natural disaster Property, gift, or inheritance tax Marital dissolution Arbitration Most profitable use Condemnation

Employment Opportunities Sole practitioner With/without support staff May serve as independent contractor with appraisal management company (AMC) Staff appraiser Appraisal company Business that acquires land/buildings Government agency Compensation based on time/expertise required and competition for appraisal services

Licensing and Certification FIRREA—Financial Institutions Reform, Recovery, and Enforcement Act of 1989 Defined type and monetary value of transactions that would require state-licensed or certified appraiser Licensing/certification required for those transactions in all states as of January 1, 1993

Appraisal Foundation Non-profit corporation established in 1987 Appraiser Qualifications Board sets minimum qualifications for appraiser licensing and certification Appraisal Standards Board defines appraisal terms and sets minimum requirements for appraisal reports Appraisal Practices Board issues guidance on emerging valuation issues in the marketplace

Appraiser’s Qualifications Education includes: Basic Appraisal Principles Basic Appraisal Procedures National USPAP course or equivalent Residential Market Analysis and Highest and Best Use; Residential Site Valuation and Cost Approach; Residential Sales Comparison and Income Approaches; Residential Report Writing and Case Studies Advanced appraisal courses Required hours of experience For certification, college credit hours or degree Education can also include: Accounting, Economics, City Planning, Statistics, Technology, Geography, Construction

Appraiser’s Qualifications Experience is gained by: State-licensed trainee position Training program in government agency or financial institution

Other Federal and State Regulations Fair housing laws Environmental concerns Subprime lending crisis Housing and Economic Recovery Act of 2008 (HERA) Federal Housing Finance Agency (FHFA) Appraiser Independence Requirements from Fannie Mae Dodd-Frank Wall Street Reform and Consumer Protection Act changes to Truth in Lending Act

Appraiser Independence Requirements Prohibits acts or practices that impair, or attempt to impair, an appraiser’s independence, objectivity, or impartiality, or which violate a law or regulation, including Truth in Lending Act (and Regulation Z) and Uniform Standards of Professional Appraisal Practice (USPAP) Effective October 15, 2010, for all appraisals in transactions involving Fannie Mae

Uniform Standards of Professional Appraisal Practice (USPAP) Published by the Appraisal Standards Board of the Appraisal Foundation Ongoing review and modification on a two-year cycle with revisions published in even-numbered years

Trade Associations Appraisal Institute awards MAI and SRA designations International Association of Assessing Officers International Right of Way Association National Association of Independent Fee Appraisers, Inc. Other specialized or regional associations

Modern Appraisal Office Requires knowledge of: Equipment, including computer, tablet, mobile phone, camera, printer, measuring device Appraiser-specific software that meets requirements of lender, Fannie Mae, and other clients Internet access for research and communication