Not all appraisers are equally qualified. A fee appraiser is an appraiser for hire by the general public, as opposed to a staff appraiser working for a lender. As a general rule most lenders will not accept an appraisal from a fee appraiser unless that particular fee appraiser was designated in advance by the lender. This is to prevent collusion between the borrower and the appraiser to bring in an inflated property value.
There are certain professional “designations” that an appraiser can earn that will give him more universal acceptance by lenders and therefore increase the demand for his services. These designations are earned by a combination of classroom instruction and supervised work experience according to very strict standards established by professional associations of appraisers.
The most highly coveted is the M.A.I. designation, which stands for Member, American Institute of Real Estate Appraisers. Most lenders lending in a remote area that they are not familiar with will require that the appraiser be an M.A.I. This designation requires years of study and thousands of supervised appraisals, and is somewhat equivalent to the C.P.A. designation in accounting. Because of the demand for their services, M.A.I.’s often command appraisal fees of two and three times those of the average fee appraiser for appraising the same property, and most M.A.I.’s have work backlogs of at least 3 weeks. Because of the prestige and fee premium offered by an M.A.I. designation, few M.A.I.’s will risk their designation by conspiring with a borrower to over value a property. The M.A.I. designation is the one designation that most lenders will accept, even if they do not know the appraiser personally.
Another highly respected designation is the SREA designation. This designation stands for Senior Real Estate Appraiser and is issued by the Society of Real Estate Appraisers. In theory, the SREA designation is supposed to be directly comparable to the MAI designation, the only difference being that it is issued by a different trade group. There was even some talk several years back that the American Institute and the Society might merge. The merger fell through however, probably because the American Institute did not want to share their special reputation. While in theory an SREA designation is supposed to mean expertise directly comparable to that of an MAI designation, the reality is that the SREA designation has never achieved the same universal acceptance.
The SRPA designation is just one step below that of an SREA designation, and stands for Senior Real Property Appraiser. This designation signifies that the appraiser is well qualified to appraise income property. It is often is good compromise, if discussed with the lender in advance, between a lender’s desire for an MAI appraisal, and the borrower’s desire for a more reasonable appraisal fee. The SRA designation stands for Senior Residential Appraiser, and is just one step below that of an SRPA. It is a respected designation, signifying expertise in residential and small residential income properties (apartments). SRA designated appraisers are often working hard on their SRPA designation, and therefore can produce good quality commercial appraisals at a very reasonable fee. It is even more important, however, to check with the lender in advance.
In compliance with Federal mandates, the State of California has recently created the Office of Real Estate Appraisers (OREA) which now certifies appraisers. Effective in 1993 all properties upon which loan will be placed that will be insured or sold by any Federal government agency must be appraised by a Certified Appraiser.
There are three levels of appraisers. The lowest designation is the Provisional Certified Appraiser. This appraiser has satisfied much but not all of his educational and experience requirements. He may appraise single family dwellings, but has only one year to complete his mandatory training.
The Residential Certified Appraiser designation is higher. This appraiser may appraise residences and some 2 4 unit buildings up to a certain dollar value.
The highest designation is General Certified Appraiser. This appraiser may appraise any type of property.
Appraisal fees on residential loans should always be collected in advance on residential loans. The collection of the appraisal fee in advance is a good way for a Loan Officer to verify that the borrower is sincere.
Appraisal fees on income property transactions should not be collected until a formal proposal has been issued by the lender and accepted by the borrower. Income property appraisals are simply too expensive to re-do if the lender refuses to accept the appraiser you selected. Borrowers should be encouraged to pay the extra amount required by an MAI appraiser because if the original lender turns the loan down, there is at least some chance that the next lender will accept the appraisal.
Loan officers should also insure that they emphasize to the appraiser that the appraiser is responsible for collecting his own fee, even if the Loan Officer calls in the appraisal order. It is unwise for a Loan Officer to guarantee checks or appraisal fees. Many Loan Officers have been sued by appraisers when their client’s check bounces. Appraisers should collect 100% of their fee in advance. This prevents messy situations that arise when a borrower is disappointed in the value arrived at by the appraiser.
It is customary and proper to ask a new appraiser for a copy of his resume and references. All experienced appraisers have these already prepared and are happy to supply them upon request. Avoid any appraiser who refuses to supply a copy of his resume and references. It is a good policy to include a copy of the appraiser’s resume and references directly behind the appraisal in a loan package. Most MAI appraisers automatically include their resume and references as an integral part of their appraisal package.