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Commercial Or Residential ? Pros & Cons

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Walter Anthony

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Hello,

I'm interested in pursuing a career as an appraiser. I'm trying to learn as much as I can about this field. So far, I've discovered a wealth of information just from reading all these messages. To all you people who have posted your advice, commentary and ideas on this website........THANK YOU !!

I'm trying to decide whether I should go to work doing residential appraisals right off the bat or if I should focus on commercial appraisals.

I was wondering if someone could explain to me WHY some people (appraisers) do mostly residential appraisals and other appraisers seem to do commercial appraisals. In the few classes that I have taken, I've heard these instructors say that they initially did just residential appraisals for the 1st couple years, but then it got somewhat monotonous and repetitive after a while, so they started doing commercial appraisals.

I'm guessing that Commercial Appraisers, with some experience, tend to earn more (annually) than the average or run of the mill residential appraiser. Is there a difference in income ??.....and if so, what is the difference ? Maybe a range or a guess would be helpful.

With that said, maybe that is not true (in some cases) either. I'm guessing that receiving appraisal work is not like receiving rations, where everyone gets their fair share. Perhaps the success of a residential appraiser (long term) is a function of how well he or she can market their services and keep the orders coming in.

I wonder if a residential appraiser can consistently average 5 to 7 residential appraisal orders per week ??.......in an average market ?

Maybe someone could tell me why some appraisers do commercial and why some mainly do residential appraisals. Can someone tell me what requirements must be met, for someone to earn their MAI designation ?? How long does this process take. I'm guessing maybe 6 to 10 years, but that's just a guess. I don't know.

LAST QUESTION : What are the advantages & disadvantages of doing either commercial or residential. What should I know upfront ?

Thanks

-Walt in Ohio
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
Whether an appraiser does residential or commercial depends. The typical answer to any appraisal question! Which field has the most interest for you? Which field do you feel the most comfortable? I have done ad valorem, commercial, governmental, residential, etc, etc. After trying many types, I decided I was the residential type and concentrated on becoming the best that I could be. But I would recommend starting in the residential field in a metropolitan area where there are a lot of cookie cutter type appraisals. Then as your knowledge, skills, interest develop--go from there. Become a specialist in one type of residential appraising (for me that is manufactured housing and very unique properties) or start investigating small commercial, then gradually become a specialist in one or more specific type fields. Or move to a small town and do every type of appraisal well.

So it all depends!
 

Stone

Elite Member
Joined
Feb 1, 2002
Professional Status
Certified General Appraiser
State
Wisconsin
I think residential is really important. The first levels of licensing really rely on residential hours. I started out doing both residential and commercial (rural lands) and the really nice thing about residential is that you get many more appraisals under your belt in a quicker time. The first couple of years I was barely getting one land appraisal per month done (that has sort of been the case the last year as well with the low interest rates causing re-financing to take up so much time). I am not sure how commercial buildings relate to this, but the learning curve is much slower with the commercial work I do.

Now, if you get involved with a firm that mostly does commercial, you may have someone who will be signing your reports for many years, and it may not matter how quickly you move through the earlier licensing levels. For me, it was important to get my Residential Certification in case something happened down the road and my mentor (my Father) was unable to work with me on the land appraisals. He is pretty young, and in good health, but I felt very confident in my ability to maintain a reasonable income once I was certified, and I am the type to worry about going backward financially.

The thing that I found interesting about doing both at the beginning, is the commercial work really makes you think about the appraisal process. Doing only residential work at first has the potential to make you think of the form as the appraisal. Doing non-residential work really helps with the reasoning behind the residential work. The drawback to doing both is the very different demands that each type requires. Lenders want residential appraisals ASAP, and it can be easy to put off doing work that you contracted to do in a 30-60 day period until a week before it is due, and then rush through it. Plus, the process of gathering data can be very different, and at the beginning when you spend much time thinking not only about the appraisal problem, but also about the whole process, you can find yourself forgetting to collect certain data that you have to go out again for. It can be pretty inefficient.

I guess what all this rambling (sorry, I do that) boils down to is who is going to hire you and what are your goals. It seems to me that you can't go wrong having a decent base in residential appraising. That is what most people think of when they hear the word appraiser, and you will probably be asked to do residential all of your life. Plus, as hard as it may be to be taken seriously when starting out as a residential appraiser, it is much harder to be taken seriously starting out as a commercial appraiser with no residential experience.

Again, I apologize for the random nature of this response. It is something I have thought about many times, but apparently I haven't organized it in my head yet.

Good luck with whatever you do, It is a pretty good profession.

Michael
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
20 to 25 residential appraisals a month is a load. It is easier to start out in residential. Takes more hours and more course work to become a certified general appraiser which is the license level in my state for commercial. Agencies placing assignments for commercial work look very hard at the experience level of the appraiser...not easy for a beginner to break into.

We have had a number of commercial appraisers switch over to residential because the work is easier, the assignments are quicker, and it is less cut throat. I personally know two MAIs doing residential. In the long run I believe the commercial end of the business will be more secure albiet more difficult to get started.

As for me and my shop.....it's residential all the way. In fact, I prefer to limit my practice to single family residential.
 

Richard J. Glesser

Junior Member
Joined
May 16, 2002
Professional Status
Certified General Appraiser
State
Michigan
Unless you've already got a strong background in financing, accounting, and business, you should restrict your initial few years to being and learning residential appraising. There is far too much to learn in just the appraising field to branch out initially. Do the residential and learn the techniques of appraising as well as USPAP. I find it difficult to do both and need to clear my desk of residential assignments for about a week to properly complete a commercial appraisal. We don't have enough demand for commercial appraisals to make it a mainstay of our income so we must do residential for at least a few good, steady clients. Getting ahead has been out of the question recently and has made it very difficult to complete the outstanding commercial and narrative reports. :usa:
 

Joe Gomberg

Sophomore Member
Joined
Jul 8, 2003
Another factor to consider down the road if you want to start your own shop... many lenders prefer or don't accept work unless you have a MAI designation. The residential world is FAR less critical in that regards, not to say that any designations you can get as a residential appraiser will save you some grief when your reports are reviewed. Did anyone mention more money on commercial?? (location/volume being the big factors in that ofcourse)
 
W

Walter Anthony

Guest
Hey,

This message is from WALT, the guy that posted the question. Thanks for the feedback you guys have provided so far. From what I'm hearing, it sounds like residential might be the way to go, at least from the beginning. That's what I had figured. I guess sometimes we just need to hear it from someone else.

Thanks,

-Walt :beer:
 
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