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When I started in this business long ago, there was no such thing as a licensed appraiser or a certified real property appraiser. Certification and licensing simply didn’t exist.
In those days, it wasn’t uncommon for an appraiser to hand an apprentice (the term “Appraisal Trainee” wasn’t a thing yet) a clipboard, camera, and tape measure and say, “Okay! You’re an appraiser.” Theoretically, in those days, you were an appraiser from day one, even though you didn’t know what you were doing yet, and even if most banks wouldn’t hire you until you had some appraisal experience.
Sometimes, the “training” was not as thorough as it should have been. The guy I followed around on appraisal inspections didn’t really take the time to explain what he was doing. He essentially just handed me the dumb end of the tape measure to hold. That was my training.
It’s very likely that you are an appraiser. You know how to inspect. But what about that trainee you’ve been thinking of hiring? Do you want to take the time to have them tag along on several inspections? Wouly you see the value in sending a trainee to a detailed course on how to inspect property? How about this: If a trainee came to you with that class under their belt?
Sometimes, maybe you can’t do an inspection. Maybe there is a hostile tenant living there. Maybe the property is in foreclosure, and the client doesn’t want you going in. Maybe there is no “improvement to the property” to inspect, because the structure has burned down or been wiped out by a tornado. Maybe the property is too massive to properly inspect. The Opryland Hotel has thousands of guest rooms and eight restaurants. Are you going to inspect all of that? Are you going to measure it as part of the appraisal inspection? It would take you a year to measure it, and you’d still be wrong.
The Uniform Standards of Professional Appraisal Practice (USPAP) doesn’t require you to inspect anything. USPAP only demands that you must state whether or not you did an inspection. So, what’s the significance of the inspection?
Why We Inspect
As you know very well, the first thing we do when appraising a property is define the valuation problem to be solved. If there’s a house on the property, we need to know the characteristics of that house.
So let’s think about step one of the appraisal process:
- Identify the client and other intended users.
- Identify the intended use.
- Identify the type and definition of value.
- Identify the effective date.
- *Identify relevant characteristics of the property.
There it is. And you’re not just identifying the characteristics of the “improvement” (i.e., the house). You’re also identifying the characteristics of the property itself. Does it back up to a landfill? Is the topography rolling, level, or steep? Does the land limit the usability of the site?
That’s why we do an inspection — to identify relevant characteristics of the property.
A Gap in the Appraisal Curriculum
One thing that I’ve always thought was missing in real estate appraisal education was coursework on appraisal inspections. Most of the inspection training we receive as appraisers happens in the field.
And really, “in the field” can be a great way to get experience. When I was a young dad, I learned to be a soccer coach by . . . coaching soccer. I hadn’t planned to be a coach, but I showed up to practice with my daughter one day to find all these little kids standing around waiting. Another parent walked up and said, “I just got word that the coach isn’t coming. Can you help?”
I walked onto the field and told the kids to start kicking the ball. I had no idea what I was doing. So I showed up to a coaching clinic one day, hoping to get some training on how to coach kids’ soccer. It was December. There was snow on the ground. And the head of the clinic said, “The way you learn to coach soccer is to play soccer.” So they had us old guys out there scrimmaging, kicking a ball around in the snow.
I carried that idea back to my appraisal practice. You can learn a lot about inspections by inspecting. Ideally, you’d have some guidance. But at the time, there was no other choice but to learn by doing—no course, no booklet, and no guide for how to do an inspection. And even now, I don’t think there’s much coursework out there about inspections.
We at Appraiser eLearning want to help solve that problem. So a couple of years ago, I hired a videographer to follow me around on two appraisal inspections. I measured and photographed the houses, went into the crawl spaces and attics, opened and closed the windows, and explained everything I was doing along the way.
Since then, we have developed an inspection course at Appraiser eLearning. It’s an online, self-paced course called “Appraiser’s Guide to Appraisal Inspections,” so you can take it anytime you want. In the course, you get to ride along with me virtually while I’m looking at houses. It’s a very good introduction to what you’re expected to observe and document as you’re appraising a property. We give you an overview of best practices, bringing in helpers, and whether or not an inspection is needed—because sometimes, an inspection is not needed. We also talk about what the appraiser should look for when an inspection is needed.
This is an excellent course for a property data collector or a trainee appraiser just getting into the business.
If you’re a trainee, and you’ve gotten a copy of this magazine, you’re obviously doing everything you can to set yourself apart from the competition. Would you like to approach your next potential mentor with a detailed course on inspections under your belt? Might that imply that you’re committed to this business and doing everything you can to learn?
This course is not only for trainees. It’s also a good review for a seasoned appraiser. For example, did you know that most houses have an appliance that could explode if a certain safety feature is not properly installed?
Water heaters should have a temperature and pressure relief valve (a “T&P valve” or “TPR valve”) installed, either on top of the tank or on the side. It’s a safety mechanism to prevent pressure from building up and blasting your water heater out the roof. Some people call it a “pop-off valve”. It works by popping off to discharge steam and hot water if the water temperature exceeds 210 degrees or the pressure reaches 150 psi.
I know you’re not a home inspector, but you and I can easily check that water heater to see whether it has one of these safety devices. I once appraised a house that had an electric water heater. There’s no gas exhaust vent, but it should have a TPR valve. Instead, this water heater had a bolt where the pressure relief valve should have been. This was a conventional loan, not an FHA. I took a picture of the bolt and reported the issue to my client. They called and said, “But Bryan, it’s an electric water heater!”
I said, “So what?” Pressure builds up in an electric water heater just like it does in a gas water heater. I reported the valve problem, and the lender made the homeowner repair it. The young lady buying the house met me there one day because the bank wanted me to photograph the repaired valve. I apologized to her and explained that when there’s a safety issue, it’s my job to let the client know.
“No, you don’t understand,” she said. “I want to thank you. My dad wouldn’t let me even think about moving into this house until this was fixed.”
That was nice to hear.
In summary, inspections are crucial to identify relevant characteristics of the property. Trainees, you can get a jump start on practical training in this business. Mentors, you can now have your trainees take a course on inspections prior to taking them into the field for that first “in-real-time” inspection. Appraisers, this course offers you a refresher on inspections.
Check out Appraiser eLearning’s new self-paced online course, Appraiser’s Guide to Appraisal Inspections. You’ll get to ride along with me on the inspection, but I won’t make you hold the dumb end of the tape measure. And unlike the guy who “trained” me, I’ll explain the how and why of everything I’m doing along the way.