6 bank and credit union questions on appraisal reviews
Appraisal reviews are complex. Sometimes the review is over 200 pages long and should be scrutinized for accuracy. We work with banks and credit unions each day and six questions kept popping up, so we thought you’d benefit from having these answers readily available to you too. So without further ado, here are the top 6 questions we hear most often:
1. Who can complete an appraisal review?
Regulations advise the review should be completed by someone who is qualified based on education, expertise and independence. While the regulations don’t specifically say you need an appraiser to perform reviews, we have found it is the best way to ensure you are getting quality appraisal reviews.
Pro Tip: Always be sure to use a certified general appraiser for commercial reviews and certified residential appraiser for residential reviews.
2. If I need to correct an issue in an appraisal, should I go back to the appraiser?
Ultimately, you should go back to the appraiser with issues or corrections that need to be completed. Many appraisal review firms will not communicate revisions to the appraiser or ask for corrections and revisions, which can lead to a variety of issues with your review. The appraisal review’s file will say there are issues that need to be corrected, but do not have the documentation on how or if these issues can be remedied. Unfortunately, many times the appraisal management vendors don’t go back to the fee appraiser for corrections because their staff lacks the expertise to discuss and debate the issues. Make sure your AMC is qualified to go to bat for you.
3. Do you complete a comp check for USPAP compliance or just look at the value?
While it is important to make sure you’ve followed basic regulations in your appraisal reviews, it’s vital that you not only check for USPAP compliance but check the value. In your commercial reviews, they should walk through all 3 approaches to calculating the value and discuss their reasonings to support these valuations. They should have sound supporting methodology to back up each valuation for the sales comparison, cost and income capitalization approaches.
4. What’s the difference between state licensed and certified residential appraisers? Does it really matter?
There is a difference and it does matter. Beware of “state licensed” residential appraisers vs. certified residential appraisers. Even though it’s relatively new, state licensed appraisers are not allowed to perform appraisal work on all properties. MountainSeed requires all residential appraisal reviews to be completed by certified residential appraisers. We don’t even hire state licensed appraisers. Maybe it’s time to consider the type of licenses your current vendor or internal staff have?
- Licensed Real Property Appraiser: “Someone who is qualified to appraise non-complex one to four units having a transaction value less than $1,000,000 and complex one to four residential units having a transaction value less than $250,000. This classification does not include the appraisal of subdivisions” cited from the Appraisal Institute.
- Certified Residential Real Property Appraiser: “Someone who is qualified to appraise one to four residential units without regard to value or complexity. This classification does not include the appraisal of subdivisions. To be a state certified residential appraiser qualified to do appraisals for federally related transactions, a state must have requirements that meet or exceed this minimum standard” cited from the Appraisal Institute.
For your commercial appraisals, you’ll want to make sure your appraisal management vendor only has commercial appraisers completing your reviews.
5. Is an MAI the same as a commercial appraiser?
While all MAI designated appraisers hold at least the certified general appraisal license, not all certified general appraisers have the MAI designation. Here’s how you achieve this prestigious designation:
- The MAI designation is held by appraisers who are experienced in valuation and evaluation of commercial, industrial, residential and other types of properties, and who advise clients on real estate investment decisions. The current requirements an appraiser must fulfill to receive the MAI designation are as follows (Source):
- Education for the MAI designation
- Hold an undergraduate degree from a four-year accredited educational institution
- Receive a passing grade on 13 exams that total 400 hours of classroom instruction and test the appraiser on basic to advanced principles, applications and comprehension
- Receive a passing grade on the General Comprehensive Examination
- This is a two-day, four-part modular exam. It covers anything in the Appraisal Institute’s required examinations, current appraisal literature and the Appraisal Institute’s Bylaws and Regulations
- Appraisal Experience Required for MAI Designation
- Receive credit for 4,500 hours of specialized experience, over at least a three-year period
- Demonstration Report for MAI Designation
- There are several options in completing the demo report. Whichever option is chosen, the demo will prove the candidate has a full understanding of how to write, substantiate and defend value conclusions.
Fun Fact: 60% of MountainSeed’s staff is comprised of MAI designated appraisers.
6. How long does an appraisal review take?
A thorough commercial appraisal review, reviewed by an appraiser with appropriate licenses should take roughly 4 hours to complete. If you have any issues that need to be corrected, clarified or supported in more detail, the review can take much longer.
