Appraiser Archives - annarborappraisal

Why price per square foot is not the appraisers choice

Often, buyers and sellers are under the impression that it is simple to price a house by its square footage. Nothing is further from the truth, unless of course, all the comparable properties considered are within a couple square feet of each other and have the same quality and condition and are in the same immediate neighborhood with no variation in the value of the site.

Underneath all is the land. This means that a house that sits on a hypothetical 60×120 sqft site should have the same underlying value if the house were 1,000 sqft or 2,000 sqft. If land is selling for $50,000 for this 7,200 sqft lot, then the value of the land does not change in value because it has a larger or a smaller house on it.

Take this following visual for example, it includes median sales prices over time for all sales in an area, as well as median sales prices over time for houses that are between 800-1200 sqft. Notice how the smaller houses measured with the moving average trend line, are sold for quite a bit less than those that encompass the entire market (in this case, a school district). The median size for the houses within the school district as a whole in this sample, were largely between 2,050 and 2,250 sqft. The median size of the smaller houses was largely between 950-1050 sqft. Therefore, the median price would be expected to be half for the smaller houses than the market as a whole, but that is not the case. The median price of the larger market sales was around $360,000, while the smaller houses was around $225,000, or 37% less, not 50% less.

Take the same information looking at price per square foot, and the scenario is now flipped on its head. The blue moving average line is that of price per square foot, which favors the smaller houses, running around $225 per sqft on average while the wider market was showing around $170 per square foot, or around 24% less per square foot.

Another way to look at this is, what is the value of a Tesla per pound? What is the value of a Yugo per pound? Obviously, they are not the same. This is the same idea behind price per square foot for real property valuations. If you have questions about how an appraiser values a property, please reach out to your local appraisal expert and ask questions. Better yet, if you need to know the value of a property, engage a professional to help answer your questions.

Hopefully this helps clear up why it is that appraisers do not simply use the price per square foot method in determining the value of a property.

Probate – proceed with caution

Probate can be a complicated process for the personal representative, who likely only handles this type of situation once or twice in a lifetime. For some people, such as the attorney, or the agent who handles many estate related sales, the process makes sense. To the individual tasked with being the representative however, they likely only have a cursory understanding of the process. A proper assessment of the value of the decedent’s real property is particularly difficult for the layperson anyone who is unfamiliar with real estate transactions.

When determining date of death values for the decedent’s assets, the temptation may be to use assessment data in order to arrive at the opinion of value as of the date of death, but is this working in anyone’s best interest? Is the assessment data a good indicator of value? Does having a value that is substantially higher or lower than actual value hurt those involved?
In order to determine whether or not these sources are reliable, I pulled twenty random sales in the area, and compared their sales prices to the assessment data. The TCV is the True Cash Value.

This random sampling of twenty sales that occurred in the area, compared to assessment data, shows assessment information both above and below sales price, and only two instances within a five percent variance (which is the variance that most appraisers consider the tolerance they look for in terms of acceptability). That means that assessment data would only have been useful ten percent of the time, depending on what was considered an acceptable variance.

The most reliable and defensible number will come from a formal appraisal, conducted by a certified real estate appraiser. Throughout the valuation process, the appraiser analyzes and reconciles the collected data to arrive at conclusions regarding the final value opinion. In the final reconciliation, the appraiser considers all the available data and uses knowledge, experience and professional judgment to arrive at a final opinion for the property.

The cost of an appraisal is minimal compared to the potential tax burden of an inappropriately provided basis. Equally important, a report of this caliber may help substantiate your claim that the values within the report are well-founded and accurate.

Belser Estates and Chelsea Ridge

Description
Belser Estates and Chelsea Ridge are connected to each other through common streets, and tend to function as one neighborhood. The neighborhood is made up of two phases of Belser, plus Chelsea Ridge site condominiums. Belser Estates had 28 sites in the first phase and 46 sites in the second phase. Cook Builders developed Chelsea Ridge to the immediate east which contains an additional 60 sites. There may be additional land to the east but not part of this brief neighborhood description.

The oldest houses I found in the Belser Estates was from 1989, and newest in 1997. The newer houses in the of Chelsea Ridge began around 2002 up through 2005. One newer house in Belser was noted, built in 2015. The housing is a mixture of single-story ranches, colonial style, some contemporary properties and a couple Cape Cods. Chelsea Ridge mainly has colonial style around 2,000-2,500 sqft but with variety.

The northern boundary of the neighborhood is Dexter-Chelsea Road and the Railroad tracks adjacent to it. The railway is active and includes both Amtrak passenger trains, as well as freight trains. The southern boundary is a field south of Darwin, and Meadowview Dr just south of that. To the west is Freer Road, and to the east is undeveloped land which appears to have been slated for an expansion of Chelsea Ridge based on street extensions. This neighborhood is on the far east side of the city of Chelsea, within city limits, and serviced by the municipal water and sewer lines. Schools are proximate with the middle school around a half mile west, and high school about 0.75 miles south. The downtown corridor is less than a one-mile walk.

Changes over time
So, what has happened in this local market over the years? I took information from the Ann Arbor Area Board of Realtors MLS through a map search and laid out the adjusted sales price and adjusted sales price per square foot since 2005. The data is presented in two graphs below. Both show a dip in prices from 2005 through 2010-2012, and then increases since that time. Overall, both are showing higher today than prices from 2005. The earlier top of the market seems to be 2006 related to price per square foot and 2005 on sales price. This does follow what most area agents and appraisers have tracked, that of the market starting a decline in late 2005 locally, although it appears slightly later in this neighborhood based on these sales.

Only MLS sales were tracked as I do not have the ability to pull information on for sale by owner data onto the spreadsheet. Normally most sales do go through the MLS. The most recent sales closed in August and September 2018, at $334,900 and $325,000. Two houses are on the market within the development, both under contract, both have asking prices above that of the recent sales at $349,000 and $349,900. We have to wait and see what they sell for. The fact that houses are under contract with higher asking prices than the recent sales can again indicate an increasing market.

There are indications that our local market is quite active again, including the number of properties under contract in addition to any changes in price (there were two sets of properties in Chelsea Ridge that sold and resold between 2017 and 2018 which indicate an increasing trend in that period but do not necessarily equate to today). Open house activity can give a great view of how active the market is, as do absorption rates. Lack of inventory can cause overbidding when there is simply not enough supply to meet demand. Every market segment can be different, and one market within the same community may have adequate supply and not be experiencing overbidding, while others may exhibit a shortage. With only five MLS sales in Belser and Chelsea Ridge in 2018, it is not showing as a very active market, but with both listings under contract, there is no supply either.

When in need of valuation services, consider contacting your local appraisal expert. Appraisers provide unbiased, independent, and competent researched opinions.

Saline MI – Wildwood

Every town seems to have a neighborhood which has broad appeal. In Saline, Wildwood is one such neighborhood. Here occupants find wooded lots, walkout basements and proximity to many area amenities. What I thought my readers would find interesting is how this specific market has changed over time, measured over the past 12 plus years as well as what I see happening now. The sales information is gleaned from the Ann Arbor Area Board of Realtors MLS and does not include For Sale by Owner properties.

This first image is a scatter graph of the adjusted sales price of each sale from 2006 to 2/28/19. Prices are clearly trending upward.
The next graph shows the adjusted price per square foot in the same period. Price per square foot is meaningful, in that in a data set that contains different size properties, it can normalize some of the increase that might show if the recent sales are larger properties.

This graph also clearly shows an upward trend in price in Wildwood.
Another way we could look at this is with a chart laid out in how many sales per year occurred, what the average and median sales prices were, the average and median sizes, and average and median price per square foot. This type of information could be useful in showing where the majority of change occurred. So far 2019 has only two closed sales, but these were on average, smaller houses.

The graph that follows uses the average and median sales prices compared to each other from the data above. The blue bar is the median, which is my preference in measuring a market. This layout is helpful in seeing there was a slight dip in the market between 2008 and 2011, with the greatest increase in 2016.

Continuing in the same vein, price per square also shows an increase, but with 2018 running slightly below 2017 in general. If an appraiser indicated the market was slowing, based on this data, they would be correct, to an extent. The past three years showed similar gross living area both in the average and median sizes, with 2017 having slightly smaller sales than 2016 and 2018, meaning the expectation is that the price per square foot range would be higher. That is precisely what shows below, while the graph above shows an increase.

What is the saying? There are three kinds of lies: lies, damned lies, and statistics.

As of 3/1/19, the MLS showed no active available listings in Wildwood. There were three properties under contract. The lack of available properties in a subdivision that has steady turnover, indicates higher demand than supply, which in turn tends to drive prices upward.

All of this information is to help the consumer understand the various elements of the market an appraiser may study to measure what is happening with the market at any given time. Since appraisals are snapshots in time, understanding the market is a major component of the analysis.

You can access my website for information about appraisals, and what services I can provide. Please think of me for your private appraisal needs. https://annarborappraisals.com

Monthly market snapshot

Mixing up the way I do the monthly report a bit. In addition to the normal information about the absorption rates and where activity is as of a certain date, I have also included a two-year summary of price changes in each area. Hope that you all find this interesting, and as always, if you have questions, reach out to me, either via phone or email.

Without further ado, the monthly inventory in each market is showing from as low as 1.13 months, to as high as 3.56 months depending on the area. The area with the most inventory however, is actually showing as such due to the abundance of new construction exposed as “to be built”. This means the properties are not immediately available. Since I have run this data in the same manner consistently, I am carrying on with including all market exposed properties through the MLS, but Saline is not as saturated as it appears at first blush.

The market overall is undersupplied, with most areas around two months or less. Since this data includes every listing and sale within each school district, for submarket data, it does not apply. It is useful in measuring where activity is, but as always, you have to look at the market segment in which a property operates.

Based on the contract to listing ratios (CTLR on grid), the greatest activity is in Lincoln school district, followed by Ypsilanti and then Ann Arbor. The areas that are showing as leaning towards a buyers’ market are Manchester and Dexter. Saline is tilting towards a balanced market. Chelsea, Whitmore Lake, Lincoln, Milan, Ypsilanti and Ann Arbor are in seller’s market territory again.

It looks like spring may have sprung.

What about changes in price over time? Again, this is larger market data, not specific to any particular submarket section. These are arrayed by school district, and each data point is one-years’ worth of data at a time, moving forward in a monthly manner. This eliminates seasonality and is useful in seeing more nuanced changes. Looking at this information, it is easy to see that Dexter increased, but there is a decline over the past couple of months. Stability in pricing is seen in Chelsea, Saline, Ann Arbor and Ypsilanti based on the trend lines over the last four or so months. Prices have increased across the board in the past two years but also have slowed or even declined in places. Still, in comparison with two years ago, we are increased on the macro market segments.

If I take this information and put it on an easy to read grid and it is easy to see that over a two-year period, most of the markets are in the double-digits in increases, however the past year was not so kind to Manchester, Dexter, Saline and to an extent, Ann Arbor. The increases in these areas were smaller, and in some cases, negative. The largest increases in the past year were found in Milan, Ypsilanti and Whitmore Lake. This makes sense when observing the median prices, which are lower in those areas, with the outlier being Manchester. My take on this is that as some markets have become expensive for the average buyer, they have moved into different, lower priced markets, which are putting pressure on increases in those areas.

I am continuing to observe our market on every appraisal I develop and communicate. Markets can change quite rapidly, and each market will have a number of submarkets within it. All of this information is presented in a broad manner for ease of reading. All information is culled from the Ann Arbor Area Board of Realtors MLS and is assumed accurate.

Appraisal process for consumers

Consumers see only a small portion of the appraisal process. What consumers often see is the appraisers visit to the property, and the written communication. They do not see the process that the appraiser goes through in developing their opinion of value. My hope is that this piece will help consumers understand a bit about the appraisal process, beyond the number that is of vital importance to almost everyone who picks up an appraisal report.

Appraisers start with identifying the problem to be solved, including who the client is, and what the intended use of the assignment results are. It includes the type of value; the effective date of value; the characteristics of the property that are relevant to the problem; and whether there are any conditions that are placed on the assignment that need to be considered. These include extraordinary assumptions (assumed to be true specific to a property, but not known for certain) and hypothetical conditions (contrary to fact). Clients can be lenders, they be attorneys in litigation or consumers who need a problem solved among others. The intended use can be for mortgage financing, for establishing a value in an equitable dissolution issue, or it can be for buying a house without a loan. There is a myriad of reasons someone may wish to have an independent opinion of value. Characteristics of the property that are relevant are those elements that an appraiser considers as contributing to the value of the property. They can be quite varied, and are truly the appraisers call.

From this initial identification flows the appraiser’s decision on what needs to be considered in developing their opinion. Does the appraiser need to visit the property? How detailed an observation do they need to make? What types of sources are they going to consult in the research? These all form the scope of work determination. After that, the appraiser needs to consider data collection and property description, including analysis of the market area, the subject property itself, comparable sales, listings, cost and income if they are relevant.

After collecting all of this information, the appraiser analyzes the data. They analyze the market, including supply and demand factors, and any marketability issues. They study the highest and best use of the property. They research the site value and the different approaches to value are considered. After all of this is completed, the appraiser takes the data and approaches and reconciles it into one or more value indications, and then to one final value conclusion (which may be a point value, or a range, depending on the client’s needs).

The final step in the process is the report. This is where all of the analysis that took place comes together in what you see and read. Reports can be very brief, addressing only the points that are required to be addressed per our standards, or the report can be detailed and address everything under the sun. Of course, the report can be in between as well. The point is that the report should not require the client to take a “leap of faith” to understand how the appraiser got from point A to point Z. It should be completed in a way that is meaningful to the client and does not mislead them with erroneous or incorrect information. Ideally the report will take the client on a journey to understand how the appraiser looked at the data and how they came to their conclusion. Appraisal reports should be clear and help lead the client to a logical conclusion. Even if the client does not agree with the results in the end, they should always be able to understand how the appraiser got to their conclusion.

If you have any questions, please feel free to contact me.

Why hire an appraiser?

There is a myriad of reasons that someone would need an appraisal, from mortgage financing, to estate planning, relocation, litigation, among others. This piece relates to work engaged directly by a private client specific to that client’s needs. A testimonial is included as it shows how this type of work can be a direct benefit to the client, plus it was such a nice one that it bared sharing.

An appraisal seeks to answer the question the client has, and the report that is received is the communication of that process. Clients do not see, unless it is explained, the thought process that goes into developing the appraisal. Because of that, the reporting process is critical. Reporting needs to communicate enough about the process and the property to help the client understand how the appraiser arrived at their opinion. It should not require the client to take a “leap of faith” to understand how the appraiser ended up where they did. After all, we are hired to answer a specific question so that our clients can make an informed decision.

As much of my work is for private individuals who have various needs, I want to make sure that I explain what I have done, and what the problems particular to the appraisal at hand are. Some problems are more complex and require more explanation. Some are more straight-forward, but I still want to be sure that my client understands what I did and why I did it. Clients do appreciate the explanation, whether or not they appreciate the answer. Even if they do not like the answer, there should be enough information offered that they can understand the rationale behind it.

On private assignments I will often ask my clients whether the report was helpful, and sometimes ask for testimonials for my website so that other potential clients can see how an appraisal has benefitted them. I recently completed a very complex assignment where explanation was greater than typical due to the uniqueness of the situation and problem to be solved. My client wrote the following for my testimonial page:

“Rachel Massey was actually recommended to us by another appraiser in the Ann Arbor area who could not fit us into his schedule. Given that she is a competitor, I was surprised when he freely admitted that “Rachel is the best around,” and now I know why. Indeed, we were very impressed with Rachel Massey’s services! Our market appraisal was a challenging one in that we were purchasing a lake property which included a very old, tiny cottage in pretty rough shape. Because houses do not go up for sale very often on this particular lake, finding comparative values was difficult, especially given the condition of the house itself. However, Rachel proved to be extremely knowledgeable about how to accurately assess lake properties. In the end, she provided us with an extensive, detailed report that far exceeded our expectations. It gave us all the data we needed to be able to offer a fair, market-based price for such a unique property. My husband and I would wholeheartedly recommend Rachel Massey’s services to anyone who is in the process of buying or selling a home!”

Now of course if there was an issue or disagreement with the analysis, I want to hear it as well (but not on my website) and be offered a chance to provide further explanation if something was not clear. It helps me better understand where I can improve the communication process going forward.

If you have a question that requires a thoughtful, independent answer, please consider hiring a professional appraiser to help. Interview the appraiser about their processes, and about how they communicate the report. Interview them about their knowledge of a specific problem that is to be solved and ask for recommendations if at all in doubt. An independent appraisal specific to the problem that you need solved is an invaluable tool that should not be overlooked.

Westridge of Dexter

Westridge in Dexter

Pass under the historic Dexter Railroad Bridge heading west, and on your right, along the curve towards Pinckney, is Westridge subdivision. Like many developments that took place during the housing boom of the late 1990’s and early 2000’s, this development was a roaring success until the local real estate market started to hit the brakes in 2005. Most houses in the development were built between 2000 and 2006, although there were a handful in 1999 and 2007. The remaining lots started to be sold off to individual builders and new construction began again in 2010. The development splits between these older and newer houses, with the newer houses primarily situated on the northern side of the neighborhood, although there are scattered newer houses throughout. Only a couple vacant sites remain at this writing.

Houses are tract built, but with variety. There is ranch style, colonial, and some transitional houses with first-floor owner’s suites. Many have walkout basements and back to wetlands or wooded areas. Some back to walkways or parks. There are smaller houses, just north of 1,300 sqft, as well as some larger houses closer to 3,000 sqft. The newer houses tend to be higher priced and with modern upgrades as expected.

Westridge has a fortunate location adjacent to the Huron River and attendant park systems. It is along the Border to Border trail, offering easy access to both recreation and to the city center through a well-maintained pathway. This is particularly attractive in that there are no walkways along Island Lake Road, near the Railroad Bridge, making pedestrian traffic potentially life-threatening otherwise. The pathway that connects the subdivision to the downtown core requires only a few blocks walk, and many buyers consider this a particular selling point for this development.

Newer subdivisions appear to have been hit fairly hard during the Great Recession, at least locally. Westridge was no exception. The Ann Arbor Area Board of Realtors, from where my research is gleaned, maintains listings back in time, but only in a robust manner to 2006. In a map search (above) of the development, I found sales back to 2001, but only a limited number. The data that follows is a scatter graph of all sales at their adjusted sales price, over time. Following that, is a yearly chart showing differences in sales prices per year, and at the end is information about current activity.

As is seen in this scatter graph, the market declined to a low point between 2008 and 2009, and current prices are well above the prices seen in 2001-2006 before the decline.

Laying this out in a yearly manner makes this information a bit more readable. The data below shows only median adjusted sales prices and price per sqft for simplicity purposes. Caveat on the data is that between 2001 and 2003 there were only minimal sales retained, and the number of sales started to increase in the MLS in 2004. Nevertheless, this information shows how the market declined over time and how it has recovered and exceeded previous prices. In the median adjusted prices, there is a blip upwards in price in 2005 followed by a decline to 2009. The 2010 price jump relates to size, therefore the next chart that follows shows price per square foot.

Looking at price per square foot the data shows the peak in 2003, declining steadily from 2004 through 2009. In my experience as a local appraiser, this appears more reasonable. I recall, in mid-2006 telling my husband the market had dropped around 10% and I didn’t see it going much lower. Oops.

The median Sales price since 12/5/17 (one year to the date of this writing) was $400,000 and the median asking price $420,000 on a 2,145 sqft house. There are currently two offerings in the development not under contract. The median asking price is $372,450 and a median 2,047 sqft house. Asking price is lower than the previous asking price of the sold properties by 11.32% and median size difference is 4.57%. Therefore, this information shows that prices may be down, as the asking prices are lower still than the difference in size. There are two properties under contract, and their median asking price is $369,900 and size 1,967 sqft. That means the asking price is 11.93% lower and the size is 8.3% lower, still indicating there is a decline potential.

Until we have a bit more data it is hard to call, but as an appraiser this information is meaningful, and I would not be calling the market increasing in spite the recent price increases noted in the charts above. For those of you actively participating in this market, please pay attention to “chatter” from buyers, sellers, agents and appraisers. Who knows exactly what will happen going forward, but there are indications that the market is changing.

Why the contract?

Why does the appraiser need the sales contract?

This is a question we hear over and over again. It seems counter-intuitive, that if an appraiser is hired to come to an independent opinion of market value in a sales situation, that they would require a copy of the contract. There are a couple reasons that the appraiser will request the contract.

One is that it is a requirement of the Uniform Standards of Professional Appraisal Practice (USPAP) to which appraisers must comply. Specifically, the appraiser needs to comply with Standards Rule 1-5 (a), which is:

When the value opinion to be developed is market value, an appraiser must, if such information is available to the appraiser in the normal course of business: analyze all agreements of sale, options, and listings of the subject property current as of the effective date of the appraisal; and (b) analyze all sales of the subject property that occurred within three (3) years prior to the effective date of the appraisal.

This is the development standard, meaning when the appraiser is doing the analysis portion of the assignment. The reporting standard, the meat of what the public sees, applies to Standards Rule 2-2(a)(viii). In it, the comment section, third paragraph is:

When reporting an opinion of market value, a summary of the results of analyzing the subject sales, agreements of sale, options, and listings in accordance with Standards Rule 1-5 is required. If such information is unobtainable, a statement on the efforts undertaken by the appraiser to obtain the information is required. If such information is irrelevant, a statement acknowledging the existing of the information and citing its lack of relevance is required.

As noted above, analyzing and reporting on the contract is a requirement of USPAP. This is the primary reason you will be asked for a copy of the sales contract.

Another reason that you will be asked for a copy of the contract is to analyze what the meeting of the minds was, as the negotiation process can be meaningful. If the house was listed for $250,000 and there were five offers from $250,000 to $260,000 and it sold for $260,000, then the seller was in a very strong position and it is evidence of a seller’s market. If it was listed for $250,000 and sat on the market for six months, before getting an accepted offer at $200,000, then the buyer was in the best position. What if this house sold for $240,000 and the appraisers’ sales were from $220,000 to $245,000, and the value indication was $238,000? What if the adjusted range of the sales was from $235,000 to $240,000, but the most similar of the sales was $240,000 and adjusted at the same? Even if the indication from other sales was $238,000, that $240,000 was also supported, and it was the most relevant sale. If the appraiser opted for that $238,000 value instead of considering the negotiated contract between willing buyer and willing seller, they may be remiss. It is one data point in a series of other data points, and should be considered. Now of course, if the best indicator was $235,000 and there was only one odd sale supporting $240,000, we would expect the opinion to be at $235,000. There is normally some swing in range, in which one sale will stand out as better than the others. This is one of the reasons that the appraiser asks for a copy of the contract. It is also one reason that appraisers do not average adjusted sales prices, as there is often one or two sales that are more similar to the subject property than the others.

If the lender underwriters could make a decision based on the adjusted and unadjusted range of values, it would make this contract analysis less important. Unfortunately, a range of values has not been accepted by the government sponsored entities as a viable position, in spite of it being most relevant from the appraisal standpoint. As long as a point value is required in the reporting of the value opinion (and required by USPAP), appraisers will need to keep analyzing the contract. It bears repeating however, that an appraisal should never be a “bulls-eye” and if the value falls lower than the sales price, then it is quite simply possible that the property sold over market value. This happens in particular in highly undersupplied markets, or with buyers who are unduly motivated or lack knowledge of the market. The appraiser’s role as the unbiased third party is critical at that juncture. Reading the tone of the market and completing a true market analysis is vital, as markets are fluid.

Regardless of whether the appraiser is able to obtain a copy of the contract, they still need to address what steps they took to obtain it, and they need to analyze the listings of the property. Although USPAP addresses listings current as of the effective date of the report, the Fannie Mae/Freddie Mac forms go further with the specific question “is the subject property currently offered for sale or has it been offered for sale in the twelve months prior to the effective date of this appraisal?” That means that even if it is not offered for sale today, but was offered for sale six months ago at $200,000 and is now under contract for $250,000, there is going to be a need to discuss what happened in the interim. Did the market change drastically in those six months, such as the city being awarded the second Amazon Headquarters? Did the house undergo substantial renovation? Was it taken off the market six months ago in order to mitigate the problem points with buyers, such as installing a new roof and a new kitchen after complaints indicated those were huge sticking points? The appraiser is going to have to address it regardless, if the report is for mortgage financing.

Even though it may seem strange that the appraiser is requesting a copy of the contract, or even asking about prior listings, it is part of our due diligence process. It is a requirement of our professional standards. Please be forthcoming with all information that has been negotiated, including any sales concessions or repairs that may be on a separate addendum. Afterall, it is part of what is required of the appraiser in their analysis of the sale.

When it is slow…

The blogosphere is ablaze with tales of woe, with appraisers saying how little work they have and how slow it is in their areas. It is amusing (in a sad way) when one thinks of the past couple years push towards lightening requirements to become an appraiser. This was done because of a perceived shortage. Many appraisers were saying there is no shortage, and the current lack of work in much of the United States is part and parcel the effect of that truth. This is not a piece about the reduction in requirements for become an appraiser, but instead one about what we can do that is constructive, during this slow time.

Slow times happen. Having been in the appraisal profession since 1989, I personally have experienced at least three very slow times. One time was so bad, that I was fortunate to be able to procure a couple of assignments per month. Others were not so bad, but definitely put a stress on finances and being able to pay for the necessities of life. One of the very real problems with slow times, is that we tend to have little reserves set aside that we can use to improve ourselves, but there are options that do not involve a lot of money. Some of the things we can do during these slow times are expensive, but also help set us up for better positions when the market improves.

What are the things we can do when we find ourselves twiddling our thumbs for lack of work?

We can consider learning how to become a public speaker. Toastmasters is a great way to start. There are many opportunities for appraisers to speak in the public realm, from talking with Realtors; to meet and greets with lenders; to attorney function; to teaching courses. Toastmasters offers a structured environment to practice and advance through a series of assignments and feedback that help polish the presenter. Afraid of public speaking? Most people are. Start small. Start with groups of real estate agents in a more informal setting. We may find that this is not something that we want to pursue, but it does open doors to different types of work.

Read – Read appraisal texts that outline a problem that you have encountered in the past and want a better way to solve. There are many excellent appraisal texts that are available, including the extensive library found at the Appraisal Institute. There are also countless articles that are found online that can be printed and saved for later reference. Never underestimate the enjoyment that can be found in reading something that is not real estate or appraisal related as well. Now might be the time to tuck into a good novel or two.

Pursue a designation – No one comes out of the womb knowing how to appraise. We all have something to learn. Many designation paths are very education intensive, and put the candidate to the test of really being able to show what they know, and what they do not know. Consider buckling down to a course of study that will be intensive, frustrating, but ultimately extremely rewarding. Some that have considerable study materials and course work are the Appraisal Institutes designations, and also the American Society of Appraisers. Take a look at the resources at the end of this post and consider doing what it takes to earn a designation.

Blog – Appraisers are writers. We are technical communicators when all is said and done. We take a problem, complete an analysis that helps us solve the problem, and then express in writing what we did to solve it. If you like to write, consider blogging. There are so many topics that can be tackled, such as giving market updates in your specific area of expertise, writing about a particular problem or observation, or any of a myriad of ideas that can pop into your head. Blogging can be fun and is inexpensive, and a great outlet for those who are slow with work but want to write about what they see.

Take classes – Expand your knowledge base. Did you always want to learn about solar energy and how to value solar panels or other high-performance improvements? There are classes for that. Did you want to learn how to expand your services into doing expert testimony? There are classes for that too. Interested in doing eminent domain work? You guessed it, there are classes for that as well.

Vacation – It seems whenever we schedule time off, the flood gates open and work comes rushing in. I am not saying that we schedule something in order to have work come in, but Murphy’s Law does seem to come into play with this for some reason. We are often too busy to take time off, so when it is slow, why not? Even if we lack the funds, there are small vacations that we can take close to home. How about a day trip into wine country? Fancy craft beers? What about having a designated driver take you and a few friends to the different breweries within a few hours drive? How about a museum tour at the local university? Maybe rent a cabin in the woods for a couple of days and simply unplug?

Help each other – I was recently a casualty in a reduction of force. Because of that I have very few clients, and trying to get on panels in a down market is like pulling teeth. Many appraisers I know are helping me by referring me to their contacts at different lenders in order to provide that personal touch. Others are referring work they do not want to take. This is one way to help each other. Another way is to be available to bounce ideas off of, or even walk somebody through a problem. I had a very kind man help me sort out where I should focus my efforts in marketing, and in developing a new business model. Be there for other professionals. It always returns in spades.

When it is slow, sometimes we resort to behaviors that may not be wise in the end. It can be very difficult to remain positive when assaulted from all sides, particularly negative press in the media, and the whittling away at appraisal fees from clients.

Too much whining – a bit of whining does not hurt. It feels good to commiserate with others, but try to keep it to a minimum. Also, try to keep it off the internet if possible. Admittedly I am guilty as charged about whining, but am aware of it and try to stop it. It is tough out there, and it is hard to come to grasp with spending an entire professional career to improving yourself, only to see that some clients do not care. Instead of worrying about them however, find the clients who do care. They are out there, and part of the work we need to do when it is slow is identifying them and making the introductions.

Spiraling into negativity – this is part and parcel of the same problem of too much whining. One of the problems with the various Facebook groups and internet forums is that we read conspiracy theories (some of which may well be true) and put our own thoughts into them which can turn into a death spiral of negativity. Cut that out!!!!

Cutting fees – everyone does what they need to do to survive, but in my 29 plus years as an appraiser, I have never found cutting fees to get work to be the answer. There is always someone willing to go lower, and it becomes another form of death spiral, plus it is hard to pull back out of when things improve. Figure out what your time is worth and charge accordingly.

Having been through several cycles of decline in workload, I can offer the glimmer of hope, that it is a cycle we are in. The market in general goes in cycles, and we are likely at the top of a long upward climb in prices and activity. Interest rates had been held low for such a long time, that when they started ticking upward as they needed to do, a lot of work simply ceased to be. Prices may end up ticking downward, which could then spur more activity, and we will be busy again. People sell, and need appraisals. Homeowners take new jobs and relocation work picks up. We all die, and estate appraisals are needed. People do not always get along, and dissolution appraisals are required. At some point we will all be so busy that we will again be turning away work. Until then, do something to advance your career. Good luck with everything, and stay positive.

Resources

Toastmasters https://www.toastmasters.org/

Appraisal Institute https://www.appraisalinstitute.org/

American Society of Appraisers http://www.appraisers.org/