What I’ve always loved about working in the appraisal field is the opportunity to get out into the community daily. Being immersed in the local real estate market has helped me develop a keen insight into the economic factors that influence properties in my community of Massachusetts. Part of the reason we write this blog is to share with you what we’ve learned from our practical experience. There’s not a lot of public education out there regarding the subject of appraisal and the valuation process, so we’ll bridge the gap here.

The Inspection

The inspection is the first and probably the simplest step of the appraisal process. As soon as we receive an order, we confirm all the information and reach out right away to property owner, borrower, or point of contact to schedule the inspection. When possible, we get a jump start by completing inspections the same day, or at least the following morning. That gives me the most time to write the report and fulfill our service promise to clients.

From there our goal is to get the report researched, written, quality checked, and delivered in as few days as possible, sometimes as little as 48 hours for residential reports.

Gather Property Info and Confirm Details

After we’ve photographed the property and the neighborhood, we return to the office and start our research. We pull a property tax profile to compare listing info with tax data to check for errors or inconsistencies. If anything needs to be confirmed, we inquire with the appropriate parties to ensure the validity of the report. We’ve learned from our mistakes (not too many) and know that it’s much more efficient to confirm property details before, rather than needing to rewrite and re-review the report due to erroneous data. In the high-stakes world of real estate investment, accuracy and accountability are critical.

Comparable Selection & Adjustments

Once we’ve sorted out the property specs, we move on to the most fun part (in my opinion) of the appraisal process: selecting comparables.

Searching for comparables is kind of like a cross between a matching game and a fun Google Maps session, which I’m fairly certain both are universally enjoyed by all ages. Just as you might search through active and sold listings on your favorite real estate listings site, we use professional data sources to identify on and off-market transactions. We use both MLS and tax sale data to make sure the report accurately reflects the retail and investment submarkets.

If you’re using the substitution method on your home or investment property, make sure the data source you’re relying on is current; many of the consumer real estate websites have incomplete, inaccurate, and obsolete data. I start off by filtering for properties sold within the last 6 months. That’s generally a good figure in a stable market. If the market is moving very quickly, you can shorten the search window to 3 months or less. We then further filter location and property aspects such as age, condition, style, living area, and other key characteristics.

Once I’ve found the best sold comparables, I move on to isolating the most similar active listings on the market; those with prices, features, conditions and marketing times that are representative of the overall market and inventory (we want to make sure the listing is relevant and no undue influence skewed the value or days on market). All that remains at this stage is to make adjustments, both positive and negative, to account for the value of the differences between each property and our subject.

Income and Cost Approaches

When we’re working on a commercial or multi-family appraisal, we also utilize the income and cost approaches. As the names imply, these strategies use either the net operating income (NOI) of the property (former) or reproduction/replacement cost (latter). I particularly enjoy using these methods, but I also love numerical and technical pursuits.

These methods usually require more time and diligence than what is necessary for a residential appraisal. Fortunately, data is more abundant that ever. Regional commercial market databases allow us to create advanced regression models to indicate estimated value, in far less time thanks to modern processing power.

Reconciliation – What are the numbers telling us?

Next, we need to bring it all together and make a conclusion. To make the most accurate estimate of value we need to review the report as a whole and look at what the numbers are telling us. While the market may be rising overall in a community, the value of specific property types therein may be declining due to changing tastes and consumer habits. If we didn’t segment the data by the same property type, our entire report and conclusion could be faulty.

During this reconciliation phase we evaluate how each market signal interrelates and influences the probable value of the property. At this point, I look at all the comparables and rank them by their similarity to our subject. In the case of income or special use properties, we’ll compare the results of each appraisal approach (substitution, income, and cost).

QC – Quality Control

It could be asserted that quality control (OC) is the most important step in the process. After we’ve prepared the report, we work together to review each report to ensure oversight, accuracy, and absence of bias. Rather than only one reviewer having the final say over suitability, each report goes through review by multiple certified SRA and MAI appraisers.

This is where an efficient business model can make the real difference in appraisal report turn times. While the appraiser may complete the inspection and report in a few days, some appraisal management firms take up to two weeks to get through quality control. Working together as a team lets us get this process done in a few hours rather than a few weeks.

To see this process in action, click here to place an order in less than 5 minutes.

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When you need an appraisal, you need it fast. There are very few instances where there’s lots of time to wait for a report. The speed and gravity of the real estate closing and investment analysis process demand prompt reports that feature intensive detail, accurate adjustments, and solid reconciliations.

As valuations play a critical role in the real estate industry, it’s important to spend some additional time evaluating the best provider for your valuation needs. Reports that are questioned or rejected by lenders and investors lead to delays in closing and lost opportunity.

Technological advancements in market/property data collection, regression modeling techniques, and project management allow modern independent appraisal firms to deliver reports unmatched by larger firms that work through a network of contracted appraisers that are often sent out of their geographic and property class area of expertise.

You might think that a fast report means the potential for errors in a hastily prepared valuation; however, speed comes not from skipping important considerations in the appraisal process, but from having an expert in-house team that acts quickly to conduct the inspection, prepare the report, and ensure accuracy.

Speeding up the Process and Delivering Quality Reports

Many businesses and individuals in the real estate market are accustomed to waiting 2-3 weeks or longer for an appraisal report. This is attributable to fact that most reports are sourced through appraisal management companies that add unnecessary delays to the process.

Working directly with local appraisers affords you greater quality and speed by eliminating the unnecessary bureaucracies inherent in large organizations that don’t retain their own appraisal staff and don’t place customer service or efficiency at the forefront of their corporate values.

Rather than casting the net wide, independent appraisers focus on understanding the Massachusetts real estate market and delivering reports that reflect the unique factors present in each submarket on the shortest time scale possible.

How to Balance Speed and Quality in a Massachusetts Appraisal

Conducting the inspection and preparing the report are only half the story. Quality control or (QC) is equally vital to ensuring that your reports are top-notch. Here the efficiency and accuracy come in utilizing SRA and MAI designated appraisers to review each and every report. Reviewers look at the market data, comparable selection, adjustments, and every detail to ensure consistency and that the conclusions are rational and well-supported.

But it goes further: is the report professional in appearance? Is everything grammatically correct? Do the subject and comparable photos show the pertinent details to accurately assess condition, location, and functional utility? Does the report give you a complete picture of all the internal and external factors that influence the value of the property?

All of these aspects of a valuation are critical to ensure the legitimacy of the report, guarantee accuracy, and positively reflect on your organization (if you’re ordering as a business). Poorly prepared reports not only damage the credibility of the client when forwarded to lenders and investors, but also can cause real financial and liability issues if at a later point the value is discovered to be erroneous.

If you’re a homeowner or investor that’s ordering a report on your own behalf, the same considerations apply, but often the stakes are higher. When you’re crossing your fingers, hoping for a smooth closing, it’s best to partner with appraisers that are part of your community and place not only the quality and speed of the report as priorities, but also excellent customers service and the willingness to stand by their work, answer every concern, and make prompt revisions where needed.

For personal and business valuation customers alike, spending a little extra time researching local appraisal firms, reading their reviews, and asking questions about their process and follow-up support will ensure that your transaction has a positive outcome in the short and long term.

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