work with appraisers. Appraisers can be excellent sources of information about the issues and market forces affecting properties, giving lenders confidence in their underwriting decisions. Identifiable credentials are an important part of the selection process. Both the real estate and regulatory communities generally recognize designations awarded by the Appraisal Institute as signifying that an appraiser is qualified in his field. The "member Appraisal Institute" designation is awarded by the Appraisal Institute to commercial appraisers who : Meet a series of educational standards. Document their experience in appraising a variety of property types. Complete a demonstration narrative appraisal. Pass a nine-hour examination. The "senior residential appraiser" designation is awarded to residential appraisers who have met similar requirements. Other credentials could include additional professional designations, honors or teaching experience. Though not as widely known, the "counselor of real estate" designation is also highly respected. Appraisers with identifiable and recognized qualifications, such as professional designations and appropriate experience, are usually regarded with the most credibility. It is also prudent to inquire about disciplinary actions. One or more disciplinary actions taken against an appraiser could offset even the most impressive credentials. Another consideration is that the appraiser is certified in the appropriate state. Though the appropriate designation may mean that an appraiser is qualified to value most properties, it may not be sufficient for the specific needs of an assignment. Experience is also an important consideration, Do not make assumptions about an appraiser's background, regardless of how long he or she has been in the business. Inquire about the appraiser's experience with the specific property type you wish to have appraised. There are many competent and respected appraisers who are regarded as experts in evaluating office buildings and shopping centers, but some of these experts have never appraised a golf course or hotel. Similarly, great care should be taken in letting a residential appraiser tackle a commercial property, and vice versa. Also relevant is the appraiser's experience in local area. Appraisal requires developing opinions on the macroeconomic conditions of a market. The appraiser should be comfortable in answering questions about past trends and formulating opinions about the area's future. Before retaining any appraiser for the first time, we strongly recommend that you ask for and review one or more sample appraisal reports. It is best to review one report that is in the same geographic area as the property in question and another that is similar in property type. In reviewing the report, check for incorrect or outdated information that could indicate careless work habits. Clear, easily understood, and market-oriented valuation techniques are preferred. Unnecessarily complex methods are often difficult to evaluate, and could contain errors that are hard to detect. An example of this is discounted cash flow analyses, which involve forecasting income and expenses, estimating the property's value at the end of the investment - usually 10 years - and converting all this into a value estimate. Such an analysis may be reasonable, but it is more likely to contain theoretical and mathematical errors. You may have been diligent in selecting the right firm, but it is an individual who will perform the analysis. Be certain you know who will have this responsibility. Assess his or her qualifications. Do not assume that the people representing the firm to prospective clients will be involved in the assignment. It is common for more than one person to work on an assignment. Therefore, the appraiser who signs or co-signs the report may be relying in part on the work of others. Clarify the role of the principal appraiser; who will inspect the subject property? To sum up, proper selection of an appraiser is necessary for reducing the underwriter's risk and surviving regulatory audits. A qualified professional who understands the definition of the assignment and the scope of the work to be performed can play an integral role in the underwriting process.
