How Real Estate Appraising is Like a Track Meet
So maybe I have been to one too many track meets in the hot Texas summer sun. Perhaps I had to write too many compare and contrast stories in English class ( Mrs. Bass and Mrs Miller would be so proud). Since we have 7 kids all who have participated in track and field events and one who is currently a college track athlete at Prairie View A&M University ( Go Panthers!!) and another one who is running college Cross Country at Central Christian College (Go Tigers!!) I have been to a lot of track meets. This past weekend we were at the TAAF Regional track meet for two days. While there I began thinking about the comparison between track meets and real estate appraising. Like I said perhaps it's the Texas summer heat but here goes:
* There's More to it Than What is Commonly Thought- Many think of track meets as just people lining up on the track coming out of starting blocks and racing but there's actually a lot more than just running a race in track. There are many different types of running events from the 100 meters, 300 meters, the 400 meter, the 800 meters, the 1600 meter, the 3200 meter, along with hurdles and relay races. They're also multiple Field Events such as the Shot Put, Discus, High Jump, Triple Jump, Long Jump, and Pole Vaulting. At the college level, there is also Hammer Throw, Javelin and the Steeplechase where athletes jump over hurdles and water. Each athlete will find which event they are most suited for as very few athletes can do all events well. Typically the sprinters don't perform well at the distance races and vice versa.
Just as there is a more than just one event for Track & Field, there are many different types of appraisals. Most people think of the most common type of real estate appraisal which is for lending purposes when buying or refinancing a home. The appraisal is for the lender. This is the type of appraisal that I discuss most in my blog however they are many other different types of appraisals that are done. There are pre-listing appraisals that are done for home owners or realtors when trying to decide how to properly list a a property. There are divorce appraisals used in property settlement cases. There are relocation appraisals that are used when companies relocate employees and need to anticipate the sales price. There are REO appraisals which are done when a property is foreclosed. There are drive by appraisals that are performed where an interior inspection of a property is not performed. There are estate tax appraisals and tax appeal appraisals. There are of course commercial appraisals which are typically long narratives for commercial property. Every appraiser will find his/her niche in appraising.
* There are Many Rules and Regulations: I am always surprised at the number of rules and regulations found at track meets. There are rules about how you start out of the blocks, relays have a certain area allowed for exchanges and if the exchange is outside the area your team is disqualified. Field events have many rules- you cannot jump over a line in long and triple jump, throwing events have rules of how you enter and exit the ring. There are Olympic rules, state rules, and local meet rules,regarding alternates for relay teams, and even where spectators can be, where coaches can be. At the regional track meets we have to bring our child's birth certificate to insure they are competing in the correct age group. Here is a link to the list of rules for the TAAF meet that our youngest two kids are competing in this summer (TAAF Track & Field Rules 2015) to give you an idea.
Appraising too, has many different rules and regulations. There are national rules that all real estate appraisers follow called the Uniform Standards of Professional Appraisal Practice (USPAP). The are state regulations that each appraiser will follow. Along with national and state regulations there are also rules and guidelines for FannieMae (FNMA) for appraisals for secondary market loans and each individual lender will also have their own guidelines and restrictions. Some of the guidelines found by lenders are use of sales within six months or located within a certain distance. Some appraisals can only be completed by Certified Appraisers. Some lenders do not allow the use of Appraiser Trainees. There are confidentiality rules about what the appraiser can share including with a borrower. There are additional rules and guidelines for FHA appraisals.
* It Has Evolved and Changed: In many ways Track Meets today are the same as they were 50-100 years ago however some things have changed. Most significant is the number of female athletes that compete in Track Meets. Although women first competed for the first time at the 1900 Games in Paris there were only 22 out of 997 athletes. Before the 1980s, there were no women's distance races in the Olympics. I know that when I was in high school ( dare I say 27 years ago) there were no girls on the track team and we had one girl who ran Cross Country. Track Meets today are really evenly matched in all events. Technology has also assisted in measuring and timing of events. The poles used in pole vaulting used to metal (yikes) and today they are made of a more flexible fiberglass material.
Appraising has probably had more change and evolution than Track Meets. Real estate appraising began out the Great Depression of the 1930s. The Society of Residential Appraisers as part of the United States Saving and Loan League and the American Institute of Real Estate Appraisers under the National Association of Real Estate Boards (Now the National Association of Realtors) Things also changed in the 1980's with the savings and loan crisis which resulted in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) Out of FIRREA came the requirement that all appraisals be performed by licensed appraisers. In 1987 the Appraisal Foundation implemented the Uniform Standards of Professional Appraisal Practice (USPAP). The Appraisal Foundation continues to change and revise the USPAP. We take USPAP update courses every 2 years. More recently with the housing meltdown of 2007 , the Federal Housing Finance Agency (FHFA) implemented the Home Valuation Code of Conduct (HVCC) in May of 2009. This was part of the Dodd-Frank Act and established more appraiser independence prohibiting lenders and third parties from influencing appraisals. The newest change in the appraiser profession is the implementation of FNMA's Collateral Underwriter which began this year. This is a review tool used for all appraisals that are a part of the secondary market to determine risk for lenders. This has required appraisers to show more and more proof of their adjustments as the tool will flag appraisals. We are in uncharted waters with CU and there is a strong emphasis on the use of regression analysis. This is leading to longer turn around times for appraisals. In addition to all of these rules and industry changes, more female appraisers have entered the profession. Appraisers are predominantly male but according to the Appraisal Institute 26% of all active real estate appraisers are female and I am proud to be one of them.
What do think? Have I been in this Texas heat a little too long? What are comparisons you can find? What did I leave out?
As always, if you have any questions about real estate appraisals let us know at www.dwslaterco.com.
Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use. This information is NOT intended to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or other potential real estate or non real estate purpose. If you’d like to obtain additional information or order an appraisal for your specific needs, please contact us at www.dwslaterco.com.