Appraising: at the crossroads of art and science.

Author:Bradford, Jeff
Position:VALUE JUDGMENTS
 
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THE APPRAISING INDUSTRY IS AT A TIPPING POINT. The appraiser population is aging and many have chosen to retire early rather than deal with increased regulations, reduced fees and higher workloads. [paragraph] Interestingly, as new regulations and guidelines are imposed, more emphasis is being placed on having appraisers perform the valuations. So the question is, as the number of qualified appraisers declines, who is going to perform these mandated appraisals?

In fact, many wonder if appraising as we know it today will even be in existence 10 years from now. The answer is probably not. Appraising is starting to undergo a dramatic transformation. It's going from the art of appraising--to the science of appraising.

To understand how the appraisal industry arrived at this point, we need to look back to the early days of the profession. Since the late 1800s, appraisal firms have been using the comparable sales approach to determine market value. Because no two properties were identical back then, it took a person with considerable experience who was skilled in the art of appraising to assess the differences and to determine a value.

It was during this period that the theory of valuation and the three approaches to value (sales comparison, income and cost approaches) were formalized. In an attempt to impose some form of standardization and self-regulation, the American Institute of Real Estate was formed in 1932, followed by the Society of Real Estate Appraisers in 1935.

It wasn't until the 1980s that standardized reporting was implemented with the creation of the Uniform Residential Appraisal Report (URAR).

Over the last 25 years, the Uniform Residential Appraisal Report has become the gold standard for property valuation. Anything less was considered inferior. Appraisal books and classes were written and developed to teach appraisers how to produce this report, and industry standards were written to guide appraisers in performing this appraisal.

Legislation was enacted to regulate and enforce its use and even to define an acceptable range of fees. Software was developed to produce this report with remarkable efficiency, and specialized transaction platforms were created to efficiently transmit it between appraisers and their clients.

The entire appraisal infrastructure, including all residential appraisers, became focused on delivering appraisals based on the URAR. All this automation eventually led to a commoditization of the residential...

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