A Day in the Life of Appraising Iowa-Nebraska-Florida

The Market and Value Considerations

I do a lot of real estate appraisals for Appraisal Management Companies as well as Real Estate Settlement for private clients.  My value opinion or real estate appraisal must take into consideration all factors that affect value, not just the physical characteristics. The mortgage industry and lenders/bankers must take appropriate steps to ensure that the appraisers they use analyze not only the physical characteristics, but also the “market conditions”.  This includes analyzing listings, contract sales as well as closed or settled sales, and using the most recent and similar sales available as part of the sales comparison approach, with particular attention to sales or financing concessions.
When researching comparable properties for analysis, the first step is to look at the immediate subdivision, the homes within close proximity with similar locational influence.  While researching physical characteristics, such as gross living area, bedroom and bath utility, I also look at the “market conditions”.  
Market Characteristics:
Demand vs Supply Ratio, for a mortgage analysis you will see this calculated on a “Market Conditions Report”
Days on market (DOM) - This is the number of days a property spends listed for sale. If properties are being snapped up quickly by eager buyers, then demand might exceed supply.
Discounting – This is the difference between the original listing price and the eventual sale price. If buyers are eager, sellers don’t need to drop their asking price much.
Online search interest (OSI) – This is the number of online searches for property divided by the number of properties available. A high number means there are more buyers than sellers in the market.
Stock on market (SOM) is the number of properties for sale. The SOM is usually quite large in an oversupplied market. However, this figure can be deceptively low for small markets and deceptively high for large markets. So a better indicator is the percentage of SOM.
Percentage of stock on market -The percentage of stock on market, or the SOM%, is the number of properties for sale relative to the number of properties in the suburb. The vast majority of property markets will have an SOM% of less than 2.5%. 

For private appraisal services, I do the same analysis, however for  mortgage lending purposes, I am required to report on the primary indicators of market condition for properties in the subject neighborhood by noting the trend of property values (“increasing,” “stable,” or “declining”), the supply of properties in the subject neighborhood (“shortage,” “in-balance,” or “over-supply”), and the marketing time for properties (“under three months,” “three to six months,” or “over six months”) as of the effective date of the appraisal. I also must describe the reasons when the trend of property values is declining, supply is an over-supply, or marketing time is over six months. Fortunately we have been enjoying an increasing to stable market in the areas I perform appraisals; Omaha/Council Bluffs Metropolitan, as well as St Petersburg, Madeira Beach, Seminole, Clearwater area in Florida.     

Uniform Standards of Professional Appraisal Practice - USPAP

Did you know the appraisal process begins when you email or call about performing an appraisal?  I am going to ask you a lot of questions, not just your address.  The very first step is to figure out why you need an appraisal, and what are the circumstances.  I am not just being inquisitive.  

"Problem identification" is the first step in any appraisal assignment. Before determining the scope of work for the assignment, (the time which will be involved, the fee I will charge) I must identify the assignment elements as defined by USPAP:

Client and any other intended users
Intended use of appraiser’s opinions and conclusions
Type and definition of value
Effective date of appraiser’s opinions and conclusions
Subject of the assignment and its relevant characteristics
Assignment conditions

From a practical standpoint, I need to identify all of these assignment elements in order to understand the amount of time the assignment may take to complete.

Regardless if the property is in Omaha, Bellevue, Papillion, Council Bluffs, or any other surrounding communuity, we need to identify these specific elements as part of the first step in the process.  Often times clients are surprised I have so many questions, but it is truly necessary to proceed to the next step of the process. 

If you have questions, or would like to discuss the process, feel free to call.  I am easy to talk to.

Patty Smith
712-323-9004