Real Estate Appraiser

Real Estate Appraiser



Real Estate Appraiser
Vital Information
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Start-up Investment
Low - $3000 (for word processor and​ camera, using the​ family car)
High - $10,000 (includes an​ office, car lease, and​ some advertising)
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Break-even time - Two months to​ one year
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Estimate of​ Annual Revenue and​ Profit
Revenue $70,000 - $3 million (one person at​ low end; supervision a​ staff of​ appraisers at​ high end)
Profit (Pre-tax) - $60,000 - $500,000
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Real Estate Detectives
The function of​ a​ real estate appraiser is​ to​ determine what a​ particular piece of​ property is​ worth .​
Clients for​ this industry can be found in​ a​ number of​ different areas:
Government: every time the​ government condemns a​ property or​ reassesses taxes, they will need to​ know the​ value of​ the​ property.
Attorneys: whether they are distributing an​ estate or​ representing clients in​ a​ business partnership break-up or​ marriage where couples or​ partners must divide real estate.
Buyers and/or sellers: before listing or​ buying a​ home, individuals will want to​ know the​ value of​ their property.
Insurance carriers: before making property damage settlements, insurance carriers will want to​ know the​ current value of​ the​ property they are insuring.
Banks: loans are not made or​ a​ home foreclosed on without the​ value of​ the​ property being established.
Appraisers can either specialize in​ one of​ the​ above or​ just handle residential or​ commercial properties, but many larger companies cover all the​ bases .​
Not all areas of​ real estate are moving at​ the​ same pace at​ the​ same time .​
If an​ appraiser is​ able to​ handle a​ cross-section of​ the​ market, he can stay busy dealing with residential when commercial is​ soft and​ vice versa.
Method to​ the​ Madness
Real estate appraisers don't just look over a​ property and​ make a​ well educated guess when evaluating the​ worth of​ a​ particular property .​
Appraisers are required by the​ two professional societies that represent the​ industry -- the​ Society of​ Real Estate Appraisers and​ the​ American Institute of​ Real Estate Appraisers -- to​ apply the​ following approaches;
Cost Approach: First you ascertain all the​ separate parts of​ a​ property -- what was originally paid for​ the​ property and​ the​ structure (s) on the​ property .​
You're not looking for​ construction flaws so you don't need to​ be an​ engineer, but you do have to​ have a​ basic knowledge of​ construction .​
Then you need to​ establish what the​ construction costs would be if​ you were building today .​
Then you deduct the​ depreciation on the​ existing property since its purchase and​ construction .​
The end result: the​ cost of​ the​ property.
Market Data Approach: Comparing sales in​ the​ same community that compare with the​ property you are appraising .​
You must add any appreciation or​ deduct any depreciation and​ adjust for​ differences such as​ size or​ upgrades.
Income Approach: This approach assumes that the​ owner might wish to​ retain the​ property and​ garner income by renting it​ out .​
You would need to​ compare the​ rentals charged for​ similar commercial or​ residential structures in​ the​ same community and​ calculate what your client may make as​ a​ net income prior to​ mortgage payments.
Appraisers are expected to​ use all three approaches to​ arrive at​ the​ fair market value of​ the​ property they are appraising, unless there are no income-producing properties in​ the​ same area.
Determining the​ value of​ a​ property involves a​ great deal more effort than just going to​ the​ courthouse and​ finding out what similar property has recently sold for​ .​
It is​ necessary to​ determine the​ reasons a​ property sold for​ what it​ sold for. .​
An appraiser needs to​ look beyond the​ bottom line on the​ deed .​
Perhaps the​ negotiations stretched over a​ long period of​ time -- the​ deed (and agreed upon price) could be dated a​ year or​ two earlier than it​ was actually finalized .​
Perhaps a​ seller was in​ a​ bind and​ sold below market because he/she was making an​ overnight move .​
All of​ these factors must be examined when determining the​ property's value.
Here's where you really have to​ make like Sherlock Holmes .​
You will have to​ dig up clues through your detective work -- talk to​ the​ buyer and​ seller or​ the​ attorneys and​ real estate brokers involved in​ the​ sale .​
a​ good deal of​ an​ appraiser's fees are predicated upon their good judgement and​ their ability to​ get to​ the​ bottom of​ a​ real estate deal and​ find accurate and​ meaningful numbers.
You can really capitalize on your leg work if​ you are able to​ appraise more than one similar property within a​ reasonable time period .​
Most lenders require residential property comparisons no more than 6 months apart although commercial properties may stay current for​ a​ much longer period of​ time.
Nuts and​ Bolts
Few appraisers charge strictly by the​ hour .​
The type of​ appraisal required varies dramatically from client to​ client .​
For example, a​ bank may supply much of​ the​ back-up information and​ provide a​ form for​ you to​ fill in, thus cutting down greatly on the​ amount of​ time required to​ make the​ assessment .​
On the​ other hand, a​ homeowner may want a​ written report which requires more extensive research and​ a​ lot more time .​
Typically appraisers for​ commercial real estate take much longer than for​ residential properties .​
So when structuring your fee schedule, you will have to​ consider all of​ the​ above factors and​ many more.
Most successful appraisal firms fall under two categories: solo appraisers with no overhead and​ large firms with 15 to​ 30 employees .​
The in-between firms have problems meeting their overhead because they need the​ same data as​ a​ large firm and​ are not generating the​ income to​ meet the​ expenses.
A solo operator can easily run his/her office from a​ spare room in​ his/her home and​ needs to​ have a​ minimum of​ equipment: a​ telephone, tape measure and​ camera .​
You can use your own car to​ travel from property to​ property, and​ if​ you can type, buy a​ typewriter (or preferably a​ word processor) .​
You will also need to​ advertise, perhaps in​ professional banking or​ law journals or​ in​ the​ Yellow Pages.
To grow -- Yes or​ No?
Adding a​ partner will probably also mean adding office space and​ a​ full-time secretary .​
These two additions to​ your overhead can equate to​ 50% of​ your fees .​
And in​ supplies, car insurance, and​ taxes such as​ Social Security, and​ you're adding anywhere from 0% to​ 25% more your fees.
Marketing will become more and​ more crucial as​ you grow because you will want to​ grow as​ fast as​ you can in​ order to​ keep fees increasing at​ the​ same rate as​ your overhead .​
As mentioned before, medium-sized firms are not cost effective because three appraisers need as​ much data as​ 100 appraisers.
Networking will also help increase your deducting skills .​
If you have strong real estate contacts you may be able to​ go through their files instead of​ wading through stacks of​ information at​ the​ courthouse .​
a​ number of​ real estate appraisal firms join real estate organizations which provide updated sales prices and​ descriptions of​ properties.
Another area which can become income producing is​ real estate brokering .​
Some appraisers consider this a​ conflict of​ interest but there is​ no law against putting some of​ your profits into investments or​ development of​ properties .​
If you're a​ skillful detective and​ have confidence in​ your own abilities, who would know a​ good deal better than you?
Resources
Industrial Associations
American Institute of​ Real Estate Appraisers, 430 N Michigan Ave.,Chicago, IL 60611 (312) 329-8559
Society of​ Real estate Appraisers, 645 N Michigan Ave.,Chicago, IL 60611 (312) 346-7422
American Association of​ Certified Appraisers, 7E .​
Swin Dr.,Cincinnati, OH 45218 (513) 825-1603
For additional information helpful in​ setting up your new business, taxes, insurance, and​ much more refer to​ the​ Business Start-Up Fact Finder Manual




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