When financing a luxury property, it is crucial to find a qualified and unbiased appraiser who will conduct a fair assessment of the home. These tips will help you find the right person for the job.
Look at their Qualifications
When choosing a real estate appraiser Phoenix, AZ, hire someone with the proper qualifications and credentials.
There are three designations for AZ appraisers:
- Licensed Residential Appraiser
- Certified Residential Appraiser
- Certified General Appraiser
Individuals typically start as Trainee Appraisers before obtaining any of these designations.
To become a Trainee Appraiser, individuals must meet the following requirements:
- Be at least 18 years of age
- Have a Social Security Number
- Complete 75 hours of appraisal-related education and the Appraiser Qualifications Board (AQB) supervisor and/or trainee course
- Accomplished application form, to be submitted to the Real Estate Appraiser Division
- Work with a Certified Appraiser to serve as their supervisor
To become Certified Appraisers, individuals must fulfill the following requirements:
- Appraisal education
- Work experience
- Registration with the Real Estate Appraiser Division of the Arizona Department of Financial Institutions
The Arizona DFI serves as the regulatory agency for appraisal companies, appraisal management companies, and individuals that appraise the value of Phoenix real estate in line with federal guidelines.
As Trainee Appraisers, individuals are mentored and supervised by an experienced Certified Appraiser, who will teach them appraisal methods, research methods, and techniques on gathering and interpreting data.
Understand the Roles and Responsibilities of an Appraiser
The job of an appraiser is to provide an accurate and unbiased estimation of a home’s market value. They may be self-employed, run their own practice, or work as an in-house appraiser for a financial institution or an appraisal management company.
Their roles and responsibilities vary depending on their designation:
- A Licensed Residential Appraiser evaluates primarily non-complex or typical residential properties with one to four units. When working with this kind of appraiser, the transaction value cannot exceed $1,000,000. They may appraise complex properties provided that the maximum transaction value does not exceed $250,000.
- A Certified Residential Appraiser must have a Bachelor’s degree or higher in addition to the basic requirements. They must also complete 200 hours of appraisal education and at least 1,500 hours of appraisal experience within a 12-month period.
They may appraise residential properties with one to four housing units regardless of complexity and transaction value, as well as non-residential properties with one to four units given with a transaction value of no greater than $250,000.
- A Certified General Appraiser holds the highest credential in Arizona’s appraisal industry. This appraiser can evaluate all property types regardless of complexity or transaction value, with no limitation on the scope of their work.
In addition to residential properties, a Certified General Appraiser may appraise a portfolio of commercial properties on behalf of institutional investors.
Since these appraisal reports will serve as the basis for making informed but high stakes investment decisions, there is a very low margin for error, which is why site inspections and extensive research are required.
To obtain this designation, appraisers must meet the following requirements:
- Bachelor’s degree or higher
- 3000 hours of relevant appraisal experience over 18 months
- 1500 hours of non-residential appraisal work experience
- 300 hours of appraisal education
Know the Difference Between Complex and Non-Complex Appraisals
Non-complex residential properties refer to standard properties or properties that don’t diverge from other homes in the area in terms of size, age, location, zoning, architectural style, ownership, and market value.
Complex properties, also known as atypical properties, differ from other homes in the area in terms of:
- Neighborhood or location (due to property size, zoning laws, property rights)
- Acreage or site size
- Unique or distinctive architecture
- Age (historic homes and new construction homes in a historic neighborhood or neighborhood with older housing stock)
- Mountain, beach, lake, and oceanfront homes
- Luxury homes
- Stigmatized properties
Since a luxury home is considered a complex appraisal, you must work with an appraiser who is qualified to assess the value of the home.
The Arizona School of Real Estate and Business defines luxury properties in Phoenix as homes in the $1 million price range, while ultra high-end luxury properties are priced $3 million and more.
When it comes to luxury homes, appraisers must conduct more research in order to find the best comparable properties (comps) and sales, and analyze them closely to make the appropriate adjustments for differences in the appraisal report.
For instance, a non-complex appraisal for a standard home usually includes one to two similar active listings or pending sales and three comparable sales at minimum.
A complex appraisal for a luxury home, on the other hand, typically includes three to four active listings and pending sales, as well as four to five comparable sales.
Familiarize Yourself with the Appraisal Process
When applying for a jumbo loan to finance a luxury purchase, the lender will call for an appraisal to be conducted by a certified appraiser.
There are two widely used appraisal methods for residential properties:
- Sales comparison approach – This approach compares the home with several comps that have recently been sold in the area. This takes various components like age, architectural style, lot size, and square footage of both finished and unfinished living space, as well as features like fireplaces and garages.
- Cost approach – Often used for new construction homes on the basis of reproduction costs, this approach provides a cost estimate of structural replacements if the property were to be destroyed, as well as certain factors like land valuation and depreciation in determining its worth.
In addition to conducting a property inspection, the appraiser may also use the latest Arizona multiple listing service (MLS) reports and county courthouse records to support their findings.
An appraisal report includes the following information:
- Description of the appraisal process
- Market trends affecting property value
- Comparative market analysis
- Size and overall condition of the property
- Permanent fixtures
- Home improvements
- Serious structural issues (i.e. damp basements)
- Description of the surrounding area (i.e. new or existing developments)
- Photos, sketches, and maps
When buying luxury real estate in Arizona, work with a top producing luxury Realtor. Carol Royse has 33 years of experience in Phoenix luxury properties. Get in touch with Carol Royse Luxury Division today to start the home search.