A Conversation With ... Ray Shermer

I’m one of 550 Uniform Standards of Professional Appraisal Practice instructors in the United States. About 10 years ago, I was teaching continuing education for certified appraisers. I saw a need for (teaching) people who want to get into the business and become professional appraisers. There are three steps. An appraiser has to have 120 sitting hours of the body of knowledge of the appraisal field. He or she also has to pass a state exam and apprentice under a certified appraiser. There are three categories of licensing: licensed, certified residential and certified general. I’m the only instructor that I’m aware of that (my students) go out and actually appraise houses. They’re vacant houses, and we appraise at least two houses during the 120-hour course.

How did you get into appraising?

I sold real estate on the side during my years in radio broadcasting, and I saw that the appraiser was always getting paid when I wasn’t, and I always saw the potential of what you could make. With a $250 minimum appraisal, if you do five a week, that’s not too shabby. I was in the business 27 years. I’ve been retired from active appraisals for a couple of years, though I’m still certified to do them.

What are some of the key issues your current students face in appraising?

Jan. 1, 2008, the hours are going to increase. Residential hours to 200, and general hours to 300, and residential appraisers have to have a two-year associate’s degree, and general appraisers need a four-year degree.

At the present time, there’s a problem around the United States with lender coercion. The reason the hours are going up is because authorities at the state level and the national level who regulate appraising feel that additional education might alleviate coercion in the sense that appraisers might be more independent. Whether that will work remains to be seen.

How does coercion affect appraisers?

If you had the ability to look at a list of sold properties in the (multilist), it would list houses that were closed for not only more than what the contract price was, but more than what they were listed for. They were over-appraised. It can happen once in awhile, but not just over and over again. It should generally close (at) no more than what they were asking for, because that violates what’s called the definition of value, whereby a willing seller and a willing buyer get together without any undue duress. Generally, (property) will not appraise for more than you’re asking for it … because you’re supposed to be a knowledgeable seller. … You should know approximately what you could get for it with the help of a broker. Then a lender comes in and asks for additional monies to maybe help pay off loans for that applicant, and then the appraiser gives more upon the asking of it (by) the lender, and it puts the value above what the property’s worth. I believe that this has skewed some property values in Springfield and all over the country. … I’m talking of a controversial (issue) here. People have to put food on their table, and lenders can subtly request additional value, and if you don’t give it to them, many times – generally speaking – then you don’t continue to get work from them.

What about the do-it-yourself trend in real estate? How does that affect appraisals?

There are some … companies around the country using what’s called an automated valuation model (such as) Housevalues.com. … They claim that they can appraise your house from a computer in Los Angeles. All they do … is give you a wide range, which any Realtor can give you. Plus, they contact a local Realtor and try to get your house listed. So they’re really more of a commercial enterprise, not really performing an appraisal.

What does performing an appraisal entail?

We inspect the property, similar to a house inspector. We have to notice if the roof is bad or (if) some cosmetic requirement should be met. We thoroughly inspect the house. We also find comparable sales that tell us what the house is worth after an adjustment process. The comparable sales are not always perfectly comparable, so you have to do some adjustment to equalize them to the subject house. That’s the market approach.

To perform a cost approach, like a builder would rebuild a house deducting for age, wear and tear, and add the land, and the cost approach should come in fairly close to the market approach. These are for single-family residential houses.

Commercial properties have a third approach, called the income approach, because investors look at commercial properties for the investment they can make, rather than amenities’ sake or appeal like you would look for in a house. Commercial appraising is more in-depth than residential. It takes more training to be a commercial appraisal.

What do you like to do for fun?

I’m going to England in August. I’ve never been to a foreign country. I read a lot about those places. And I’m teaching a broadcast journalism class at OTC in the fall.