Opinions of Value

Your source for appraisal news and trends

PAVE Action Plan Released, AI Provided Input

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This month, I encourage you to think about your colleagues, peers and mentors who have guided you throughout your career. For me, my career as an appraiser began in my final semester of college, where I took a real estate appraisal course that was taught by an MAI, Ph.D., using “The Appraisal of Real Estate,” 7th edition. On the first day of class, the students were tasked with completing a narrative residential real estate appraisal that was due on the last day of class. We were provided with a list of local SRA designated appraisers, so we’d have access to a mentor and the necessary data found in an appraisal office.

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4 Innovative Commercial Building Features That Could Prove Difficult to Appraise

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This post was written by Max Shafer, an editor at Innovative Building Materials.

As design and fabrication processes continue to improve with technological advancements, there is no shortage of innovative building materials to hit the market on a regular basis. While these materials offer exciting prospects for commercial building owners in terms of sustainability and energy efficiency, they can cause some issues for appraisers who have not had extensive experience assessing their long-term value. To help in this regard, the following breakdown looks at four innovative commercial building features that may prove difficult to appraise.

1. Transparent Interior Walls

Commercial buildings continue to employ the open floor plan for their interiors. Among the benefits of fewer walls and more open spaces include:

  • Increased natural light flow
  • Greater customizability of space
  • Enhanced collaboration and connectivity among patrons

Despite the benefits of fewer interior walls, the COVID-19 pandemic reminded building owners of the importance of providing separate spaces. This has led to a rise in glass curtain wall partitions.

While these mobile, transparent walls help ensure separation while maintaining the benefits of an open floor plan, they do present some challenges for appraisers. Should they be viewed as real property or chattels? Do they provide value to all types of building tenants?

2. Modern Updates in Historic Buildings

There is a major push in the commercial building industry to reclaim and repurpose historic buildings instead of building new structures. While this process has many cost and sustainability benefits over new construction, it can be difficult to maintain the historical integrity of a building while simultaneously equipping it with the most innovative new features.

There are some companies who perform admirably in this regard, such as manufacturers of historic steel windows that can retrofit the highest quality window solutions that are nearly indistinguishable from the historic building’s classic aspect. However, this creates some challenges for the appraiser. Do the new windows add or detract from the building’s historic DNA? How can you accurately assess the longevity of a building whose components have such extreme variance in useful lifespans?

3. Radiant Floor Heating

Radiant floor heating is an innovative subfloor heating system that steadily disperses heat in an even, stove-like manner throughout the day. It can significantly reduce HVAC costs by eliminating cold pockets in a commercial building.

Despite the clear benefits of a radiant floor heating system, there are some concerns that may be difficult for appraisers to place a value on. For example, repairing the system can be a bit time consuming, leaving sections of the floor inaccessible for extended periods. Furthermore, as other aspects of the building become more energy efficient, the long-term cost benefits of having a radiant floor heating system become a bit muddled. 

4. Solar Panels and Other Green Technology

There is no denying that producing clean energy through the use of PV cells is a desirable feature in commercial buildings. Not only can creating renewable energy lower utility costs, but it can help businesses comply with government-mandated environmental standards.

The challenge when including solar panels as part of an appraisal hinges on a few factors:

  • Deployment of new technology – as PV technology continues to improve and the market gets increasingly crowded, will existing solar panels become “obsolete?”
  • Durability – how much investment will be required for upkeep and maintenance? Will the existing solar panels withstand severe weather or natural disaster?
  • Longevity – how long before solar panels lose their ability to hold a charge?

In addition to solar panels, the same can be said for other green commercial building products that have not been subjected to years of scrutiny. Some examples include:

  • PV window treatments
  • Cooling bricks
  • Self-healing concrete

Appraisers: what types of innovative commercial building features do you believe could prove difficult to appraise?

Max Shafer is a contributor to the Innovative Building Materials blog. He is a content writer for the construction and home improvement industries with an interest in landscaping, outdoor remodeling, and interior design. Max is focused on educating homeowners, contractors, and architects on innovative materials and methods of construction that increase property value, improve sustainability, and create a warm and welcoming ambiance. 

Technology Can Aid, Not Replace, Appraisers

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This post was written by Appraisal Institute President Jody Bishop, MAI, SRA, AI-GRS

New and exciting technology is all around us: we can speak to our cars, use robots to clean our floors, and control our heating from an app on our phones. Big data and artificial intelligence have changed how integrated our lives are with tech. At the Appraisal Institute, we’re hardly tech phobic, in fact, appraisers use technology frequently in their daily work. The typical software packages used by appraisers leverage an assortment of technologies and resources that help appraisers analyze local markets, including practical applications of “big data.”

We’ve seen several companies, however, developing software intended to mimic or supplant human appraisal, with Zillow being the most prominent example. Through their “Zestimate” platform, the company argued it could make real estate investment decisions based on their automated valuation model. When it comes to the biggest purchases in our lives – our homes – an expert who sees, walks, and touches a home to understand its individual value on the market will almost always generate a more credible, reliable opinion of value than what a tech model can offer. At the Appraisal Institute, we say that an appraisal should mirror the market, not speculate on it. When it comes to AVMs, we shouldn’t guess, either.

For so many of us, the COVID-19 pandemic has accelerated the use of technology to ensure safe access to the goods and services we need. In the appraisal profession, this has also been the case, especially in the residential market. To ensure safety of all involved, it makes sense that appraisers would take advantage of the benefits that technology and, in some cases, an off-site appraisal can provide.

Appraisers can rely on hardware such as drones, or applications such as FaceTime or Zoom, to see the exteriors or interiors of a property if it is unsafe to visit a home in person. Appraisers should carefully examine these technologies, however, to assess fraud or data flaw risks and potential liabilities before relying on them.

Ultimately, there are fundamental differences between an AVM and an appraisal. Our Designated Members bring a high level of quality and control that outvalues an AVM, and even in the pandemic, appraisers can use technology to help keep them safe, without technology cutting out all the benefit an appraiser brings to a valuation.

An AVM’s primary assets are relatively low cost and a comparatively quick turnaround time. But you get what you pay for. Think of an AVM as a piece of information about a property, which is based on various public records or multiple listing service data, and little else. Often, both sources have incorrect, outdated, and unconfirmed data that reduces the reliability of the information. AVMs are completely unable to inspect a property to determine quality and condition. They also cannot evaluate complex issues, such as whether a property faces any economic or physical obsolescence that might dramatically impact the salability and value of that home.

A home purchase is a serious undertaking and deserves accuracy and detail that only an expert appraiser can bring. Appraisers use their experience and education to determine which comparable sales to use and what adjustments, if any, to make. They are trained to apply the most applicable methodology when generating an opinion of value, and that training helps ensure a property’s value isn’t above – or below – what it should be. Appraisers dedicate themselves to being lifelong learners – and are constantly learning about the new trends and policies in appraisals through required courses and volunteer trainings.

Appraisal Institute professionals with the MAI, SRA, AI-GRS or AI-RRS designations provide demonstrated knowledge well beyond the minimum that licensing, or certification implies. Tools can be helpful, but secondary, to a well-trained appraiser’s education, experience and ethics.

Buying or selling a home is most people’s largest financial transaction – and knowing the true value of a property is crucial in setting prices or making offers that credibly reflect the specifics of a single home within the market. AVMs such as the “Zestimate” perform most accurately on homes with few updates or upgrades, such as floor plans and in communities where there are many houses of the same style. Yet, what they miss are the details – details that expert human appraisal will identify and which can be the reason why a home’s value is higher, or lower, than its neighbors. The closer you zoom in, from a city to a community, to a block, to your home – the less reliable an AVM model gets.

Even in the pandemic, we continue to believe that a traditional appraisal with a full inspection by our highly-trained Designated Members is the gold standard of security for all parties involved in a real estate transaction. At the Appraisal Institute, we stand by our appraisers, and the significant value they provide to lenders and consumers.

Looking Ahead with AI President, Immediate Past President

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Last month, as the 2021 presidency for Rodman Schley, MAI, SRA, was coming to an end, he sat down for a discussion with incoming 2022 President Jody Bishop, MAI, SRA, AI-GRS, to discuss their service to the Appraisal Institute and their goals for the year ahead.

Among the topics discussed are:

  • Rodman’s advice for Jody as he begins his role as AI president
  • Jody’s priorities for 2022
  • Rodman’s proudest achievement from 2021
  • Jody’s reasons for pursuing leadership with AI
  • Rodman’s plans now that he’ll have more time on his hands

Please enjoy this engaging discussion between AI’s outgoing and incoming presidents. To learn more about them, visit the Leadership page on the AI website.

Appraisal Institute Celebrates 90 Years

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Appraisal Institute Celebrates 90 Years 
The Appraisal Institute will celebrate its 90th year in 2022, kicking off a year-long celebration of this incredible organization and its long history of serving the profession. This milestone is a testament to the hard work of thousands of AI professionals who have contributed to the advancement of the organization every day for nearly a century. 

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AI Board of Directors Approves Strategic Priorities for 2022

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Nov. 26, 2021

Dear Appraisal Institute Colleague:

I’ve got a lot of great news to share this month, including the Appraisal Institute’s new strategic priorities, as approved by the Board of Directors at its November meeting. Please join me in celebrating these developments from our organization.

AI Board of Directors Approves Strategic Priorities for 2022

If you haven’t already heard, I’m proud to share that the Appraisal Institute Board of Directors at its Nov. 11-12 meeting in Chicago approved the Strategic Plan strategies that will guide the organization’s efforts in 2022, and beyond.

The adoption of these strategies is a major step forward as the organization looks to the future and will allow the Appraisal Institute to maintain its long-held position as the valuation profession’s thought leader. The Strategic Plan is the culmination of much careful thought and deliberation and is a critical step that we all can be proud to have accomplished!

As a reminder, the Board approved the overall Strategic Plan at its August 2021 meeting, and the strategic planning process included input from AI professionals who responded to surveys regarding membership needs. I can’t emphasize enough how vital that membership input was to the process, and I express my sincere gratitude to all who participated. As previously announced, the Strategic Plan includes four Goals:

  • The Appraisal Institute will protect and improve the value of affiliation.
  • The Appraisal Institute will provide leadership toward a unified and inclusive profession with diverse perspectives.
  • Appraisal Institute professionals will be consistently sought out by users of valuation services.
  • The Appraisal Institute will improve the diversity of its affiliated professionals.

In 2022, the organization will pursue those goals with a focus on the following Board-approved strategies.

  • Modernize AI’s education delivery system and products.
  • Modernize technology, such as social media and communication methods, and a review of the website.
  • Develop a plan to recruit and retain AI professionals.
  • Implement PAREA.
  • Develop a diversity, equity and inclusion (DE&I) action plan.

These strategies will positively impact the following Board-defined objectives in the coming year and beyond by increasing:

  • The value proposition of affiliation;
  • AI professionals’ retention rates;
  • The breadth and diversity of individuals new to affiliation;
  • Diversity among AI leadership;
  • Opportunities for AI professionals to identify and gain knowledge to enhance their professional services;
  • Efforts to eliminate irrelevant and inappropriate barriers to entry into the profession;
  • Opportunities to obtain relevant experience in the profession; and
  • Positive perception of the organization among key growth areas.

Objectives have a three-to-five-year timeframe and will be reviewed periodically by the Board of Directors.

The aforementioned strategies will guide the Appraisal Institute’s efforts in 2022, and the overall Strategic Plan will be implemented in phases over the next several years. Some of the efforts that begin in 2022 are expected be completed next year, while others may take several years to fully implement.

The Board of Directors and Strategic Planning Committee will regularly review the Strategic Plan and adjust priorities as needed. Further information regarding the Strategic Plan will be available in the near future and I encourage you to stay tuned to Valuation magazine, the monthly President’s Message, Appraiser News Online and AI’s social media channels. Further, AI’s Executive Committee, and other leaders, will happily address these issues at future region and chapter events.

While the organization has always carefully looked at its priorities, and how to best serve its membership and the profession, this Strategic Plan has become the North Star guiding the organization and will ensure that AI professionals, and future appraisers, have the opportunity to thrive and are recognized as a vital component of the real estate ecosystem.

AI Receives Pathway to Success Grant from TAF

The Appraisal Foundation’s Board of Trustees announced Nov. 16 that it awarded the Pathway to Success Grant to the Appraisal Institute for the development of a PAREA program. The competitive grant application was reviewed, scored and recommended for approval by a team representing Foundation trustees, sponsoring organizations and the Appraiser Qualifications Board.

The Appraisal Institute will receive the full grant amount of $500,000 to build its PAREA program in collaboration with its partners, provided that program development continues to hit predetermined milestones. The AI Board of Directors approved the development of PAREA in September, committing more than $2 million toward the development of a PAREA program.

The Pathway to Success Conditional Grant is designed to open up the appraisal profession to a new generation of appraisers. The grant requires that the PAREA program be brought to market within two calendar years and is conditional on the completion of the project. The grant also stipulates that participant priority be given to veterans, minorities and those in designated rural areas.

PAREA is an alternative pathway for aspiring appraisers to gain their required experience hours to become a certified appraiser. Historically, the only option for an appraiser to complete their experience hours was through a supervisor/trainee model that requires the aspiring appraiser to find their own supervisor. PAREA is currently accepted in 20 states, and that number is set to increase as more states adopt this alternative pathway.

As I noted in the news release that was distributed about PAREA, “One of the Appraisal Institute’s top priorities is to create a pathway for a diverse new group of individuals to enter the valuation profession.” “The Appraisal Institute is excited about this terrific collaboration and we’re proud to help the next generation of appraisers.”  


Appraisal Institute Board of Directors Adopts 45-Day Notice Items

The Appraisal Institute Board of Directors voted to adopt three 45-Day Notice items during its Nov. 11-12 meeting in Chicago. The 45-Day Notice items address Designated Member Status, Compensation Committee and Standards of Valuation Practice.

Read more about the Board’s actions at its November meeting here.

New Seminar Provides Overview on Accessory Dwelling Units
Accessory dwelling units are on the rise across the country amid the ongoing shortage of housing inventory. If you work in a market where ADUs are prevalent, I’d recommend you check out AI’s new in person seminar, “Valuation Overview of Accessory Dwelling Units” on Dec. 10 in Chicago.

The seminar provides an overview on ADUs focusing on the description, legal concerns, valuation methods and techniques needed to value them. You’ll learn about the valuation challenges and discover how the recent changes in the secondary mortgage market selling guidelines now provide more guidance and flexibility in valuing and financing ADUs. This seminar will help you complete appraisal assignments with ADUs competently.

To learn more about this exciting new offering, click here.

“Basic Appraisal Procedures” Course Launches Next Week
The Appraisal Institute’s new course, “Basic Appraisal Procedures,” will help participants apply the principles and concepts learned in the Basic Appraisal Principles course, including: defining the problem, collecting and analyzing data, reaching a final opinion of value and communicating the appraisal.

The course will guide participants through the sales comparison approach, including researching the market, verifying information, selecting units of comparison, conducting a comparative analysis, making adjustments and reconciling conclusions.

Special Thanks to Immediate Past President Jefferson Sherman

I was proud to celebrate the service and commitment of Immediate Past President Jefferson Sherman, MAI, AI-GRS, at our November Board meeting. Jeff has been a steadfast presence in our organization for years and we look forward to his continued dedication to the Appraisal Institute.

Jeff shared the following message:

Thank you Appraisal Institute for the honor of being your 2020 president, and thank you Rodman Schley for a tremendous year of leadership; it truly does take a team. We are so strong because of our membership, chapters, committees, the national Board of Directors and our outstanding staff. You all have helped to place us on the cusp of great opportunities. Stay tuned.

Other News Around the Appraisal Institute
And here’s some other important news from the Appraisal Institute: 

  • Interested in completing your demonstration of knowledge requirements for your MAI designation at an accelerated pace? Learn more and register now for the General Demonstration Report-Capstone Program: https://bit.ly/3FKYPxD
  • The Appraisal Institute continues to expand its social media activities. Be sure to follow AI on Facebook, Twitter, Linked In, YouTube, and its blog, Opinions of Value.