One of the Appraisal Institute’s (AI) finest valuators, who received a distinctive designation recently from AI, talks about the understanding that educating one’s self beyond what is required, and taking initial steps towards becoming a better appraiser, will result in just that-becoming a better appraiser.
Kathy Kocour elaborated on some of the basic steps one needs to do when reviewing a report. In the pursuit of her designation, she completed both Appraisal Review Theory courses offered by the AI - Review Theory Residential and Review Theory General. Both, according to Kocour, define a logical roadmap of steps that are appropriate for both residential and commercial assignments beginning with the identification of the problem and ending with ultimately communicating the review opinion to the client, she said.
Additionally, the Review Case Studies course required for the Designation then allows one to apply the review process to a real-life assignment.
“It is the steps outlined in these courses that have made me a better reviewer,” Kocour said. “I strongly encourage anyone vested in becoming a better appraiser or reviewer to pursue their review designation.”
Kocour applies her skills as a reviewer when working with the private wealth appraisals at UMB.
“At UMB, I am the review appraiser for the banking and trust services offered through UMB Private Wealth Management, a division within UMB Bank,” she said. “Therefore, the overwhelming majority of appraisals which I review are high-end homes exceeding $1 million or more, where expeditiousness is key and appraisers are challenged by a lack of comparables. I review the complex properties for quality assurance, maintaining compliance with standard FIRREA requirements, and verify that all third party appraisals conform to generally accepted appraisal standards as evidenced by the Uniform Standards of Professional Appraisal Practice (USPAP), as well as the principles/requirements of safe and sound banking.
“Since the properties are typically complex and high-end, they also have greater risk which means that the appraisals are subject to a higher level of review. I quickly learned that appraising high-end homes can be extremely challenging,” Kocour added. “Paired sales simply don’t exist for artificial turf for your dog or a three-story slide that transports your kids from their bedrooms to the basketball court in the basement.”As part of Kocour’s position and duties, she also assists in residential validations by obtaining comparables and substantiating market data.
In addition to the valuation side of her position at UMB, Kocour also provides appraisal related training and assistance to other associates on the UMB Private Wealth team. She has found that knowledge is key, and working closely within your team to help other non-appraisers understand the appraisal process is crucial in helping to set expectations for our clients.
AI established its professional appraisal review designation program in response to the growing and critically-important role the appraisal review plays regarding risk management and mitigation for many clients/users of appraisal services.
AI President Jim Amorin told Valuation Review, in an earlier interview, that “appraisal reviewers play an important role in the residential real estate market.”
Kocour does recognize some common mistakes appraisers will make when it comes to risk management and mitigation.
“Again, it is our responsibility as reviewers to insure that the value within the appraisal appears reasonable and supported. Therefore, in my opinion, the two biggest mistakes that are made when it comes to risk management and mitigation are the lack of a reconciliation of value (especially important with a wide range of adjusted value indications) and an overall lack of supporting narrative within a report,” she said. “It is up to the appraiser to individually weigh the comparables and reconcile for any differences. This is especially important with complex properties where depending on the area; there may be a wide range of values, lack of sales, and over and under-improved properties.
“It is also up to the appraiser to clearly state how adjustments were determined: trend analysis, matched-pairs analysis, or simple surveys of the market. Without support for adjustments and a reconciliation of value, we run the risk of an appraisal taking on the appearance of a blind opinion of value which places us all at risk,” Kocour added.