Becoming a real estate appraiser is not as easy as it may seem. In the State of California, the governing body which licenses appraisers is called the Office of Real Estate Appraisers or OREA for short. The OREA oversees licensing of four levels of appraisers: Trainee, Residential, Certified Residential and Certified General. Here are the ten steps to become a fully licensed appraiser (Residential Level), one step above a Trainee level.
Many more articles can be written on each step. It generally takes 2-3 years from start to finish. Many people think that all appraisers do is go out to a home, measure it and think up a value. It takes many years to hone the skills necessary in developing an opinion of value. Since no two properties are alike, and all properties are unique, an appraiser’s ability to take all the experience they have and apply it to a new situation becomes key in the success of their business.
A minimum of three comparable properties are used in paired sales analysis. In many cases, a forth or a fifth comp is used to further validate the opinion of value. Once the appraiser adjusts the comparables, they decide on a value within the range of the values of the adjusted comparables. Another approach to value called the cost approach is often used to estimate the costs attributable to the land and the improvements on the land. Either way, adjusting comparables and considering the costs helps the appraiser decide on the subject’s value. However, ultimately an appraisal is an OPINION of value. This value should not be disputed by a homeowner or lender.
The whole job of a real estate appraiser is to develop an opinion of value based on the scope of work determined by the appraiser and based on information researched by the appraiser and given to the appraiser by the client. Scope of work, as defined by USPAP (Uniform Standards of Professional Appraisal Practice), is “the amount and type of information researched and the analysis applied in an assignment.”
On a most basic level, in residential real estate appraising, and for relatively simple properties (a house on a small piece of land, for instance), I generally use paired sales analysis. That is, other properties that have transferred recently, usually in the past 3-6 months, in close proximity, with similar size, features, utility and condition are compared to the subject property. Using dollar amount adjustments, the comparable properties are adjusted higher or lower to account for inferiority or superiority of that comparable property to the subject property.