In real estate transactions, particularly in income property lending, the role of appraisers is vital. Understanding the different types of appraisers, their qualifications, and their impact on the lending process is crucial for lenders, borrowers, and real estate professionals.

Types of Appraisers

1. Fee Appraiser: An independent appraiser hired by the public, as opposed to a staff appraiser working for a lender. Most lenders prefer appraisers designated by them to avoid potential collusion between borrowers and appraisers.

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2. Staff Appraiser: Works directly for a lending institution.

Professional Designations

M.A.I. (Member, American Institute of Real Estate Appraisers): This prestigious designation requires extensive study and experience. M.A.I. appraisers are widely accepted by lenders, especially in unfamiliar markets, due to their expertise and credibility.

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SREA (Senior Real Estate Appraiser): Issued by the Society of Real Estate Appraisers. While theoretically comparable to the M.A.I., it hasn't achieved the same level of acceptance.

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SPA (Senior Real Property Appraiser): Signifies qualification for appraising income property and can be a cost-effective choice.

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SRA (Senior Residential Appraiser): Specializes in residential and small residential income properties.

State Certification

In Response to Federal Mandates: States like California have established offices to certify appraisers. Since 1993, properties tied to federal government agencies must be appraised by a Certified Appraiser.

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Levels of Certification: Include Provisional Certified Appraiser, Residential Certified Appraiser, and General Certified Appraiser, each with varying scopes of authority.

The Appraisal Process and Fees

Pre-Appraisal Site Inspections: Before ordering a costly appraisal, a preliminary site inspection can save unnecessary expenses.

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Advance Collection of Fees: It's advisable for residential loan appraisals to collect fees in advance to ascertain borrower commitment. For income properties, fees should be collected after the lender’s formal proposal is accepted.

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Selecting the Right Appraiser: For income properties, using an M.A.I. appraiser can increase the likelihood of the appraisal being accepted by multiple lenders.

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Responsibility for Fee Collection: Appraisers should collect their fees in advance to avoid disputes, especially if the appraised value doesn’t meet borrower expectations.

Practical Tips for Loan Officers and Borrowers

Loan Officers: Should emphasize to appraisers the importance of self-collecting fees to avoid liability for bounced checks.

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Borrowers: Encouraged to opt for more qualified appraisers like M.A.I.s for better acceptance and to justify the high cost of income property appraisals.

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Including Appraiser Credentials in Loan Packages: A copy of the appraiser’s resume and references should be included in the loan package for added credibility.

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The choice of an appraiser in a real estate transaction can significantly influence the outcome of a loan application. Understanding the different types of appraisers, their qualifications, and how they fit into the lending process is essential. Both lenders and borrowers must navigate this aspect carefully to ensure accurate property valuations and smooth lending processes.

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