Being a good appraiser requires having local knowledge about neighborhoods and their surrounding areas. A real estate appraiser who knows this information will perform more accurate appraisals consistently. Everyone wants to be good at their craft, so it is important to become knowledgeable and study the information, especially if you’re new to an area. It’s true— real estate appraisers, including residential and commercial real estate appraisers, must have geographic competency. However, an appraiser’s office location or where they reside doesn’t necessarily dictate their geographical competency. Being geographically competent, simply put, is being aware of the area, and possessing the skills and resources needed to competently complete the appraisals.
USPAP’s competency rule requires appraisers to be adept with the market they’re working in. This can be fairly simple because, generally, appraisers will be working in similar areas and markets. However, that is not always the case. The competency rule generally applies to a new appraiser, or when an appraiser is required to perform work outside their general zone. Failing to have the proper knowledge is not only unethical, but also illegal. The reason that local knowledge is important is purely based on accuracy, and being unfamiliar with a number of aspects in a given area can lead not only to bad appraisals but can end in a lawsuit. If you are looking to become more successful in your career as an appraiser, make sure to learn about these topics.
1. Architectural Styles and Building Requirements
Architectural styles that some people love are viewed by others as outdated, or requiring too much upkeep. A buyer’s preference will determine how much they’re looking to spend on a property. For example, if ranch-style homes are more prevalent and desirable in the area, then the appraisal should reflect that. Knowing your local market will help you to understand the value of one building over another in a certain city, neighborhood, or state. Not knowing this information is detrimental to your reputation. Therefore, it is important to keep in mind not only the architectural style, but also the supply and demand factors related to property type. Also, not knowing the building requirements of a given city can hurt your appraisal.
2. Planning and Redevelopment
Cities and neighborhoods go through changes over the years, and, without the proper research, an appraiser who is new to the area would not know how they have changed, either positively or negatively. A once-quiet town could become inundated with corporate migration, or business closings which would affect the value of property in the area.
3. Property Tax and Special Assessments
It is important to know how property tax varies between neighborhoods, as it can drastically affect a buyer’s decision. Using comps from a different neighborhood could poorly affect the value of a property, regardless of whether the neighborhoods are in the same city, or even just blocks away.
4. School Districts
Neighborhoods can have both subtle and unsubtle differences, depending on where they are located. These differences can greatly affect the value of properties. If an area has a top-rated school district, the property value is going to be higher. Buyers, especially during a home appraisal, are likely to spend much more on properties in a good school district because they are able to save money on private school.
Learning Local Knowledge
So how do you gain this knowledge if you’re new to a specific area? One option is to find a mentor who can help guide you through. If that is not an option, perform thorough research analysis of your market area through MLS records and the internet. This, unfortunately, can take a couple of months to learn—without accepting any assignments—although, you could do appraisals for yourself and have someone check for accuracy to put your skills to the test. Once you complete your research, you will likely feel confident in your geographical knowledge of the area, as well as your ability as a real estate appraiser.