What do farmers and appraisers have in common?

Soon, a part time job! 

Recently, the appraisal threshold for residential properties – those with 1 -4 units – was proposed to be increased from $250,000 to $400,000. That proposal will likely find solid ground. According to an article published in Valuation: Insights and Perspectives for Real Estate Appraisers, this change would increase the share of regulated transactions exempted from the agencies appraisal requirement from 56% to 72%. With the median home price in the state of Wisconsin never reaching half of the new proposed $400,000 threshold now or for any month in the last 10 years, it looks like the figure could be much higher.

In April of 2018, the appraisal threshold for commercial properties was increased from $250,000 to $500,000. The commercial appraisers focusing on providing services within the lending industry are already feeling the effects, especially in the smaller, rural markets.

This means that any new money extended, from a federally regulated lending institution (bank or credit union) that is less than $400,000 for a residential property or less than $500,000 for a commercial property, will not require an appraisal by a licensed and/or certified appraiser.  Instead, an evaluation will be required. Per the Board of Governors of the Federal Reserve System, “Evaluations provide an estimate of the market value of real estate but could be less burdensome than appraisals because the agencies’ appraisal regulations do not require evaluations to be prepared by state licensed or certified appraisers.”

The intended goals of this change are to increase lending efficiency while reducing costs associated with property acquisition.  In the short term, this may work but not without unintended cost and consequences.  The last real estate recession occurred for a whole host of reasons like “ninja” loans, subprime mortgages, adjustable rate loans and parties to the transaction that didn’t have the borrower’s best interest in mind. We can all see clearly now, but while it was happening, most just assumed someone smarter knew what was going on.

Real estate agents, lenders, title companies, etc. are set to benefit if a transaction is closed. If a transaction fails to close, the real estate agent doesn’t collect a commission, the lender does not make the loan and the title company doesn’t get to collect the fees associated with title insurance. However, for a majority of the time, the appraisers gets paid regardless of the outcome.

Appraisers that didn’t hit the “magic number” in the past were passed over for another appraiser who could.  To stay employed, some appraisers had to adjust their moral compasses and find a way to hit that “magic number” or they were left to find a new career.  When the last real estate recession began, many fingers and much blame were pointed to the appraiser that killed the deal.  Maybe this time around, the cause of the problem will be for the lack of an appraiser? Will the blame will be put on the appraisers for not providing their services?

Many appraisal organizations are sounding the alarm and calling for action from the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.

When an evaluation can be completed by anyone (including the real estate agents, an employee of the lending institution providing the loan or a newbie at the title company) are we not just setting ourselves up for another market failure?

Do I need a commercial real estate appraiser or a residential real estate appraiser?

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The main difference between a residential real estate appraiser and a commercial real estate appraiser is the property type in which the appraiser is LICENSED and COMPETENT to appraise.

When in doubt, hire a Certified General Real Estate Appraiser who will perform the appraisal or refer you to a competent residential appraiser.

In summary, there are 3 types of real property appraisers:

#1 Certified General Real Property Appraiser

The appraiser holding this license can appraise any and all types of real property.  This can include a single-family home, a daycare, a winery, a warehouse, a gas station, a highway bypass, a downtown apartment building or even the stadium of your favorite athletic team!

#2 Certified Residential Real Property Appraiser

The appraiser is qualified to appraise one to four residential units without regard to value or complexity; from a $1 single-family mobile home to the biggest home in Wisconsin!

#3 Licensed Real Property Appraiser

The appraiser is qualified to appraise non-complex 1-4 units valued less than $1,000,000 and complex one to four residential units having a transaction value less than $250,000.

If all else fails, contact your local bank to seek whom their approved appraisers or utilize www.appraiserusa.com!

At Masters-Hall Appraisal, we are certified as a General Real Property Appraiser, so we can appraise any residential or commercial property and would be happy to extend our services!

How do I find a real estate appraiser?

An appraiser, per the definition of The Dictionary of Real Estate Appraisal 5th Edition, is “One who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective” while an appraisal is “the act or process of developing an opinion of value.”

Real estate appraisers fall into two categories, residential and commercial. A residential appraiser will either hold the license of a Licensed Appraiser or Certified Residential Appraiser. A commercial appraiser will hold the license of a Certified General Appraiser.

A residential appraiser can appraise any residential structure consisting of 4 or less residential living units (four unit, tri-plex, duplex and single family residence) in addition to a variety of vacant land parcels.

A commercial appraiser can appraise any residential or commercial property that may include, but not limited to, single family homes, any vacant land parcels, residential subdivisions, multi-unit apartment complexes, gas stations, standalone office buildings, mixed-use residential/commercial properties, industrial warehouse, lumber yards, mobile home parks, hospitals, convenience stores, hotel, land taking for eminent domain, condemnation for public use, water parks, athletic stadiums, conservation easements, agricultural lands, dairy facilities, butcher houses, banks, grocery stores, restaurants, crematories, parks, race tracks, gravel pits, quarries, tree farms, and any other physical structures regardless of the size, age, condition, value or location.

Selecting the right appraiser is as key as selecting the right banker. Finding the right appraiser may be a tricky endeavor as most of us are not familiar with a real estate appraiser until we purchase our first home or make our first investment.

#1 Way to find a real estate appraiser: Use a search engine

The easiest way to find any appraiser is through an online search engine such as google, yahoo or bing. Simply type in your home city and state along with the type or appraiser you need, which is dependent upon the property you would need appraised. For instance, “Middleton Wisconsin Commercial Appraiser.”

#2 Way to find a real estate appraiser: Visit your bank

The next best and possibly less complicated route would be to talk with the closest bank to the property in which you need appraised. Walk right in and ask for the names of three appraisers in which the bank has on their approved appraisers list.

#3 Way to find a real estate appraiser: Online Appraiser Directory

If you are like the vast majority of individuals and will be utilizing a lending institution, the bank or credit union will take care of the entire appraisal process for you.  Most lending institutions will be utilizing these site to source their appraisers.  Masters-Hall Appraisal is listed though both of these online directories and ready to serve our Clients.These sites are www.appraiserusa.com and appraisal institute.

Let us know if you have other ways of finding the appraiser that meets your needs!

Will my appraisal affect my assessment?

Will my appraisal affect my assessment?

Will my appraisal affect my assessed value?

Will my appraisal affect my taxes?

These are three most common questions that we receive and the short answer to these questions is a likely “no” while the long answer may be a “yes”. It all depends upon where that appraisal goes, what the appraisal states and who lands their hands on the appraisal.

An appraiser provides an appraisal while an assessor provides an assessment. An appraiser does not provide an assessment, and an assessor does not provide an appraisal. Although both an appraiser and assessor provide an indication of value, the use of that value is different.

In most cases, an appraisal is typically ordered by a lending institution (bank or credit union) on behalf of a borrower when a person or group is looking to purchase a property. The appraisal is ordered so that the lending institution can have an unbiased indication of market value for a mortgage.

An assessment is performed by an assessor on behalf of a community. The assessment provides an indication of value for which real estate taxes are then calculated upon to provide the revenue necessary for community operations. The assessment indicated for each property is established so that the tax burden is evenly and fairly distributed throughout the community. In short, a smaller, older home will result in less tax burden than a larger, newer home.

If your appraised value is higher than your assessed value, chances are that you’re paying less than your fair share in tax burden and should remain quiet. Inversely, if your assessed value is higher than your appraised value, you may be paying more than your fair share of tax burden and should speak up.

For more specific questions, please contact an appraiser in your area. These professionals can be found at www.appraiserusa.com, or feel free to email me directly at tyson@mastershall.com.