Everyone has had the experience of meeting new people who know nothing about you in the neighborhood or at a cocktail party. Inevitably conversation will turn to discussing each other’s jobs. How do most of you handle this? Here is how it usually goes for me….
Q: What do you do for a living?
A: I am a real estate appraiser.
Q: What does that mean?
A: I value real estate.
Actually, that is not quite true. Okay, technically it is, but what is the value of real estate really? Real estate is given a value only based on what a seller is willing to settle for and a buyer is willing to part with. Of course, it is much more complicated than that (which is why appraisers are so needed), but that is the gist of it.
For a moment, I want you to think about the psychology of valuation. We often look at our job as the process of looking at data, discovering trends, and interpreting what a house or property would likely sell for in the present market. Yet, where does that value point come from? Decisions. Decisions of buyers and sellers in that marketplace. Thousands and thousands of decisions determine value.
Appraisal is not so much about pinning a particular number on an address as much as it is about quantifying the decisions of buyers and sellers in a particular area. Let me say that again. The process of valuation is not about deciding the price a particular home will sell for, but rather studying the numbers behind how people react with their dollars to certain aspects of real estate.
Of course, everyone reacts differently to a given circumstance which is why appraisal is not an exact science. You can never say that a deck is worth $2,000 all of the time in this area, because sometimes it is and sometimes it isn’t. Some buyers will pay more or less for a particular item. Some buyers will pay a given amount for an item on Wednesday and more for that same item on Friday. This is one of the reasons true, paired-sales analysis does not exist. About the only thing we can do is quantify how an average buyer might react to this item or that situation given enough data.
Why is this important? It is wise to step back from the trees once in a while to observe the forest. In our day to day of inspecting houses, finding comps, making adjustments, and reconciling data, it is easy to get caught up in process and forget what it is we are actually doing. Appraisers do not determine value and appraisers are not deciding what a particular home will sell for. Rather, we are more related to a social scientist than a Realtor®. We see the decisions that others make in a marketplace and project that data (past performance) on our current assignment.
Knowing this information might also cause us to be a bit more humble in our station. An appraiser has an important job, no doubt, but we are not the movers and shakers in a marketplace that some (mostly in the media) tend to think we are. Whenever I see an article blaming the appraiser for high or low values, I have to chuckle just a bit. They sure think we have a lot more power than we really do.
If you have any comments or would like to submit content of your own email comments@appraisalbuzz.com
Share this article
Written by : Dustin Harris
Dustin Harris has been an active appraiser since 1996. For the first 12 years of his career, he was working 60-hour weeks for under $100,000 annually. Then, he radically revamped his business model using principles of success that catapulted his appraisal business to over a million annually, all within 20 hours a week consistently. Since 2010, Dustin Harris (aka “The Appraiser Coach”) has been guiding appraisers towards business mastery, enhancing both profit and efficiency. With “The Coach,” you surround yourself with hundreds of successful appraisers across the nation. Your investment isn’t just in guidance—it’s a blueprint for guaranteed substantial returns. It’s what you have always dreamed your appraisal business would be.
4 Comments
Comments are closed.
Well said, Dustin!
I actually agree. Nice article.
Albeit brief and to the point, you have hit the nail on the head. Appraising is NOT an exact science but rather an estimate based on a collection of data, analysis of that data trying to determine a trend, and forming a reasonable conclusion of the analysis. Thus, why no two snowflakes are alike, neither is the reasoning and valuation procedures followed the same for two appraisers.
I wear both the agent and long time appraiser hats, the gap between the two fields is as wide as ever. While I left the “lending” side during the run up to the crash, I’m still active and use my skills with my clients and other agents. Since starting in ’89, I’ve seen fundamental similarities: most agents have little to no knowledge of what we do, most don’t care to learn and most tend to regard appraisers as the enemy.
I leverage my experience continuously, mainly by reinforcing the fact that an appraiser will walk through that door and that we have to look at things as they will. The key is to find the balance between all of the variables while understanding that the appraiser has pretty much been neutered by regs and underwriters.
Appraising remains a tough field, while we worked hard and put in insane hours my crews always had a bit of “college team” air as we knocked them out. Now….seems like Mylanta is the drink of choice.
I wish the AI and other associations were as effective as NAR in shielding the industry from the nonsense that’s been dropped upon it. I feel like I’m the only voice out there questioning how agents can get and remain licensed and have little to no idea of what they’re doing. The bar to entry is on the ground, yet the public cares less and the industry thrives on the fees.
And for the record – I rarely say I’m a broker with new folks. If pressed I drop the “consultant” role and describe myself as an “appraiser selling real estate”.