As a real estate appraiser, how do you know if you can credibly perform appraisal reviews? USPAP provides the review appraiser with plenty of flexibility grounded in ethics and competence. Competence comes with knowledge and experience, but it also requires you to possess specific skills, technology, and abilities. To better understand if you’re prepared to review appraisals, we’re sharing the six key competencies you’ll need.
1. Credentials to perform appraisal reviews
Check your state for the credentials required to perform reviews and any other review-specific requirements. In Texas, for example, the review appraiser must have the same license or certification level or higher as that of the WUR’s appraiser.
2. Competence for this assignment
Each property is unique, and so is each review assignment. When you’re offered an assignment, weigh your competence against the task to ensure you can perform the appraisal review properly. Per the USPAP Competency Rule, “an appraiser must determine, prior to agreeing to perform an assignment, that he or she can perform the assignment competently.”
Even if you were competent for an assignment yesterday, you may need to acquire more knowledge or obtain access to data to remain so for a new assignment, because it is a different market or a different property type.
Moreover, competency requires proper performance. Hence, you must determine the amount of time available and required to complete the appraisal review assignment competently.
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3. Knowledge and experience
The comment to USPAP Standards Rule 3-1 (a) urges review appraisers to improve their skills to remain proficient in appraisal review at all times:
“Changes and developments in economics, finance, law, technology, and society can have a substantial impact on the appraisal profession. To keep abreast of these changes and developments, the appraisal profession is constantly reviewing and revising appraisal methods and techniques and devising new methods and techniques to meet new circumstances. Each appraiser must continuously improve his or her skills to remain proficient in appraisal review.”
“Aspects of competency for an appraisal review may include familiarity with the specific type of property, market, geographic area, analytic method, and applicable laws, regulations, and guidelines.”
As a review appraiser, you should have specialized experience and knowledge in the particular purpose and type of property of the appraisal for which you will review. For example, if you need to review an appraisal on a timber property to determine making a commercial loan decision, you should be familiar with commercial lending guidelines and experienced with appraising timber properties. Also, intangible assets and personal property may be included in an appraisal of a commercial real property, and you must be competent with these property types as well if it comes within the scope of work of the review assignment.
4. Geographical competence
Can you review appraisals outside your license state or typical geographical practice area? Per USPAP FAQ 336, yes—if the purpose of the review is to ascertain compliance with certain guidelines or standards. If the review involves a quality assessment that requires familiarity with a geographical area, such as evaluating the selection and adjustment of comparable sales, then geographical competence is required.
Of course, geographical competence isn’t always about distance in miles. For example, some appraisers in low-density areas often competently cover several counties (even across state lines, with additional credentials). Some appraisers become an expert in markets that are counties or states away from their home or office.
Geographical competence isn’t stagnant. You may be very familiar with an area where you used to live, or where your child goes to school, or the like. But are you currently familiar with factors such as zoning or building code changes, changed planning uses, and economic influences such as corporate in-migration or business closings?
5. Access to data and tools to perform appraisal reviews
Resources such as commercial databases, MLS, and cost service resources (e.g., Marshall & Swift) are necessary at times, so that you can verify information and data contained in the WUR. Sometimes, in larger MSAs, you may dispense with MLS as a data source, because most MLS listings are residential properties. This could become an issue if you are reviewing in an outer-circle or expanding suburban area or small town in the path of growth, because in these areas the local agents and appraisers may rely on MLS for both residential and commercial property data. If you don’t have access to a pertinent local data source, you may not be able to complete the review assignment effectively.
6. Personal skills and aptitudes
To perform appraisal review work, you should be comfortable in using multiple software applications and comfortable with general computer technology, possibly working with multiple monitors and managing a paperless document system.
Numerical reasoning and good judgment are valuable skills to have as a reviewer, as you may need to assess the reasonableness of quantitative data presented, interpret graphs, verify calculations, and confirm the accuracy and appropriateness of numerical evidence contained in the WUR.
Furthermore, you should be professional, inquisitive, informative, instructive, and intuitive. And you’ll need to be comfortable with writing an organized, logical, and persuasive analysis.
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