Thursday, 28 October 2021 | The Latest Buzz for the Appraisal Industry

“I do Non-Lender Work…” is the New CrossFit

You can hardly post anything on an appraisal forum or social media without the first 17 comments stating, “I do non-lender work.” This response reminds me of the fitness culture several years ago, when it felt as though everyone I met would first tell me that they did CrossFit, sometimes before even stating their name. Despite the way such statements are often delivered, it’s important to admit that these people are on to something.

Expanding your appraisal practice through non-lender work can lead to many benefits including increased revenue as well as greater independence and efficiency. Below are just a few of the ways appraisers can utilize their expertise to diversify their practice and earn the many – yet sometimes elusive – non-lender work opportunities that exist in today’s market.

Taking Advantage of Opportunities with Attorneys

I’ll start with an easy one that is shouted from the rooftops at industry conferences. We all know that there is appraisal work for attorneys, however, you might not know that there are many ways in which attorneys can utilize good appraisers. Divorce work is the most common, but attorneys also need valuation expertise for estate valuations, business disputes, tax litigation, bankruptcy proceedings, and expert witnesses (a per hour fee). Marketing your appraisal services to attorneys can lead to some very lucrative opportunities.

Becoming a Go-to Appraiser for Realtors during a Confusing Time in the Industry

Real estate agents and appraisers are taught different methods of valuation both in qualifying and continuing education as well as in the field. The fundamentally different ways we are taught to value a home can be one of the most frustrating differences between agents and appraisers, however, it can also lead to great opportunities.

Nobody can deny that we are living in a very strange era for real estate. In many markets, there is no rhyme or reason for list prices and cash sales, and in my own market, an inordinate amount of buyers are purchasing homes sight unseen. While this climate is very confusing for many realtors, it’s also an opportunity for appraisers to partner with successful agents in their market to perform pre-listing valuations and valuations for cash buyers. You can make a solid living by being one of the go-to appraisers in your market on the real estate agent side of the business – especially now.

Profiting from (Credible) Measuring Services

Everyone is looking to capitalize on the booming real estate market. One of the most baffling services offered to real estate agents currently comes from newer real estate marketing companies, many of which lack any true experience or education. These include measuring services from individuals who have never heard of ANSI standards, have no concept of what above and below grade means, and think a full interior-only, unfinished basement with dirt mounds, a dirt floor, and a ceiling height of 5’5” is considered a bedroom.

As an appraiser, you are an expert in measuring houses and determining the proper square footage. This education and experience is invaluable and can be marketed to real estate agents, not only as a service to provide correct measurements, but also via their marketing efforts. It can be presented in a way that real estate agents can use in their MLS listings and packets they are preparing for buyers. You really can provide a marketing service for real estate agents that can be both credible and profitable.

Becoming a Remote Appraiser

This tip is my favorite because it allows me to dream about operating an Upstate South Carolina appraisal business while on a boat in the Florida Keys. There are many products coming to market that can be used to become a fully remote operation. Mobile inspecting web-based applications, clients who are leaning on hybrid reports and video conferencing for expert witness testimonials, and education opportunities are just a few ways in which an appraiser can be fully remote. Diversifying your practice to use these products and services can give you the true independence and freedom that you may dream of.

Diversifying your appraisal practice has many professional benefits including mitigating the risk of a slowdown across the real estate market or economic change, in addition to gaining a newly expanded network. However, the most important benefits are lifestyle-based. You can earn more revenue. You can pick and choose who you want to work with. You can become more independent and more efficient. You can work remotely from a Sloppy Joe’s bar in Key West. But perhaps most importantly, when someone posts any appraiser question or comment on social media, you can be the first to comment with:

“I do non-lender work.”

Have any comments or would you like to submit content of your own? Become an Appraisal Buzz Forum Member and comment below or email comments@appraisalbuzz.com.

Responses

  1. Of course I agree with you. It is what I have been doing for 40+ years. I attached this article because I encourage “teaching” the difference between Fannie Mae Form and an appraisal prepared for litigation.
    How the legal environment endangers appraisal practice -by Roger Durkin
    January 15, 2021 – Appraisal & Consulting

    Roger Durkin
    Durkin Law PC
    This article is directed at all appraisers including real estate appraisers, business appraisers, art, antique, machinery, equipment, sports memorabilia, jewelry, coin, or collectibles. An appraiser is a person who provides a defined economic exchange value opinion of the rights inherent in the ownership of some tangible or intangible property. It has to do with divorce appraisals and IRS related appraisals.

    Appraisers are dominated by dogma that has engrained itself in the practice of appraisal. Who or what made it law that there are three and only three approaches to value? Adjusting comparable sales is an exercise in subjective guessing. Most of you know it. When is the last time any real estate appraiser did a matched-pair study? Who made the Fannie Mae type form appraisal applicable to valuations in divorce, decedent estates, gift tax, charitable donation, petitions to partition, bankruptcy, environmental damages, or shareholder disputes?

    There are many issues that can cause an appraiser professional negligence liability. I will limit the subject to just two areas, marital estate appraisals and IRS related appraisals.

    Just because you have a credential to appraise residential properties does not automatically make you competent to appraise for gift tax, charitable donation, decedent estates or marital estates. USPAP Competency Rule requires the appraiser to be familiar with an intended use, specific laws, and regulations. You should not ignore laws and regulations about lead paint, lead pipes, asbestos, oil storage tanks, or other toxic material. Typically, the appraiser states he/she is not qualified to identify environmental issues. You cannot use willful blindness. A 50-gallon drum with skull and cross bones on it is obvious. If you ignore it, you could be liable. Common knowledge tells you that environmental issues affect value. If you are valuing 30 acres plus, there is the Archaeological Survey Act, the Wetlands Act, the Rivers Act, the Endangered Species Act, and so on.

    Divorce Appraisals

    It is an appraisal report used to assist in the division of the marital estate assets. The largest marital estate assets are the marital home and/or family business. The typical real estate appraiser automatically pulls up a “non” Fannie Mae General Purpose Appraisal Report Form called “Gee-Par.” Some appraisers continue to use the 1004 form. Who cares? Most attorneys’ concern about an appraisal is the final value and how it affects their case. Lawyers are not as concerned how the report is presented, so long as it is defendable. If the only tool in your appraisal tool box is a form appraisal, you need to learn how to write a narrative appraisal report.

    Issues in divorce appraisals include the appraiser incorrectly identifying the Intended Use, Intended User(s) and value type and source definition. The appraiser usually identifies the Intended User as the client who hired the appraiser. Seldom does the appraiser get the Intended Use correct. The words used to describe intended use are usually, “for internal use”, “client personal use”, etc.1 The Intended Use in a divorce is to assist in a division of marital assets. The appraiser tends to identify the intended users as the client. Intended users are foreseeable and include the divorce attorneys, the divorcing parties, and potentially the Mass. Family Court. Usually the appraiser identifies the type of value as Market Value citing USPAP or uses the Fannie Mae 1004 preprinted market value definition citing Fannie Mae #B4-1.1-01.2 USPAP itself does not contain a citable definition of market value. The standard in Massachusetts divorce is fair value, first established with Bernier. The court emphasized, where valuation of assets occurs in the context of divorce, the judge must take particular care to treat the parties not as arm’s-length hypothetical buyers and sellers in a theoretical open market, but as fiduciaries entitled to equitable distribution of their marital assets.

    Bernier I, 449 Mass. at 775-776, citing G. L. c. 208, § 34. The appraiser should know something about Mass Gen Laws Chapter 208, § 34, containing fourteen factors that a judge must consider in dividing a marital estate.

    The form appraisal, especially Fannie Mae, has a different Certification than required by USPAP. The appraiser warrants in #25. “Any intentional or negligent misrepresentation(s) contained in this appraisal report may result in civil liability and/or criminal penalties including, but not limited to, fine or imprisonment or both under the provisions of Title 18, United States Code, Section 1001, et seq., or similar state laws.”

    In the division of marital assets, there are often opposing expert appraisers. The wife (or husband) is buying the house. You do your client a favor and come in with a low appraisal. The other appraiser is much higher. Split the difference is typical. One of the parties will be damaged. So, is it typical to sue the intentionally biased appraisers for professional negligence and you might be turned-in to the state license board? Do I need to cite the dozens of such appraisal negligence cases.3 You are not the lawyer in litigation appraisal! You should not be a team advocate. Do not negligently or intentionally taint the value opinion. It happens too often.

    Decedent Estates, Gift Tax,

    and Non-Cash Charitable

    Donation Appraisals

    The value definition for a decedent estate is fair market value cited at IRS Reg. §20.2031. The state uses that definition. The Intended Use is to support the filing of 706 estate tax returns. Similarly, if you are providing an appraisal for gift tax or non-cash charitable donation, the IRS definition of value is slightly different. The Intended Users of a decedent estate appraisal include the client, personal representative, estate attorneys, accountants and potentially the revenue service. You better know that the IRS may critique your appraisal.

    I have had students argue that the IRS should not be identified as an Intended User. You need to know about Circular 230, IRS Notice 2006-96 4 and the Pension Reform Act of 2006. Circular 230 is cited as 31 CFR (10). The Regulation has applied to appraisers and CPAs since 2006.5 The IRS has increased enforcement through fines, penalties, disbarment to curb abusive tax avoidance. If you provide appraisals for decedent estates, gift tax or charitable donation, you are giving IRS related tax advice. You may have liability. Many appraisers are simply uninformed about Circular 230.

    Litigation related appraisal work is significantly different from mortgage related appraisal work. Litigation involves the courts, lawyers, legal concepts, case law, statutes, state, and federal regulations. Fannie Mae guidelines are not law. Fannie Mae can blacklist the appraiser. Litigation related appraisal mistakes can put you out of business. Divorce, shareholder disputes, petitions to partition, gift tax, probate disputes, trusts, non-cash charitable donations and decedent estates require you to know about applicable laws and regulations.

    Roger Durkin is an attorney with Durkin Law PC, Boston.

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