Appraisers adhere to national guidelines to find property value

by Lynn Lofton

Published: October 4,2004

Gulfport — Residential appraisers are more highly regulated than other sectors of real estate. Their work requires precise skills and attention to detail. They are often put on the spot with requests to assign a quick value to a piece of real estate. Plus, there are other hazards, according to Stuart Huffman, one of 110 certified appraisers in Harrison County.

“We fight pets that people say won’t bite but do, wasps, mosquitoes and hot and cold weather,” he said. “The hardest thing is dealing with people who don’t understand the appraisal process and think we can just put down a number.”

Appraisers must have a working knowledge of Fannie Mae, Freddie Mac, FHA and VA guidelines and are considered subject experts on real estate matters, he said. The uniform residential appraisal report is a lengthy one that requires a careful inspection based on national standard guidelines and measurement of the outside of the property. Although an appraisal is typically good for six months, data from all reports is kept for five years because appraisers must be able to prove their numbers for that length of time.

“We must be ethical in assigning true market value to something,” Huffman said. “Realtors can list property for whatever they want and they may find a buyer for that price, but we have a strict set of standards to use.”

Huffman said he looks at short-term historical data of similar properties to help determine what a house should be worth. Because Mississippi is a nondisclosure state, the selling price of real estate is not published at the courthouse. Appraisers use a knowledgeable third party or the Multiple Listing Service to determine selling prices.
They also look for cracks in concrete slabs and termite damage. Their work is not the same as a home inspector, but appraisers can make the appraisal subject to a home inspection.

A 1,500-square-foot house takes one hour to inspect, two or three hours of research and two hours to write a report, he said. Three to five days is a typical turnaround time on the Coast for an average house with no unique features. Huffman says 178 houses per month are being sold on the Coast (Hancock, Harrison and Jackson counties) with an average selling price of $135,000, which is stronger than most other areas in the state. He says that’s an $11,000 increase over one year ago. He feels real estate prices are rising because there’s more demand as the fast growing area runs out of land, especially in Biloxi. The war has also impacted the cost of concrete and steel.

Huffman, 44, says appraisers must prove their proficiency to lenders to get on their lists to do appraisals. “The lenders decide who does an appraisal and we are the eyes and ears of the lender,” he said. “We’re hired to insure that the loan has something substantial to put a lien on and we are there to protect the bank. We must say the value is there.”

The appraisal fee is not based on whether or not the loan closes and appraisers get paid no matter what.
A Realtor before he became an appraiser, Huffman says that experience is an asset and he maintains his broker’s license.

The Harrison County native sold real estate with Coldwell Banker Alfonso Realty and was the top producer in 1995. Prior to that, he was training officer for the 112th Military Police Battalion of the Mississippi Army National Guard. He served in Desert Shield and Desert Storm as a military intelligence officer.

“I was burned out when I came back and ready to do something different,” he said. “The typical millionaire in the U.S. is in real estate so it seemed like the right thing for me.”

Wanting knowledge to invest in real estate led to his decision to become an appraiser. Appraisers must serve a three-year apprenticeship under a certified appraiser. When no one locally wanted to train a competitor, Huffman turned to his childhood friend David Winstead, who’s an appraiser in Mandeville, La.

“We’ve known each other since we were six years old and kept in touch and I had talked with him while I was a realtor. He’s my buddy,” he said. “I taught him computer skills and he taught me appraisal skills. It was definitely advantageous for both of us.”

In the business now for eight years, Huffman said there was a time when appraisers were not so strictly regulated. National guidelines were put in effect because of the problems with savings and loan institutions. Licensure is through the State Real Estate Appraisal Board. Appraisers are now required to carry errors and omissions insurance if they do work for federally insured lenders. Each appraiser determines the amount of coverage he carries. Huffman said premiums went up 100% this year.

“We walk a fine line and get pressure every day to give a house a certain value,” he said. “I find a polite way to tell people that I won’t lie about the worth of a house.”

He says a typical scene is a social setting where someone asks for an approximate value of his or her house. His usual answer is that he’ll be happy to come by and give them a formal appraisal.

“It’s a good career field and I have no regrets about going into it,” said Huffman, who has four associates working with him. “I enjoy working with people and feel that appraisers are tuned in to the heartbeat of a community. They know what’s going on and are ahead of the curve.”

Contact MBJ contributing Lynn Lofton at mbj@msbusiness.com.

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