Small Commercial

[Phil Snyder]

I've gotten a request to do a small commercial building (5K sq. feet, nothing crazy).

Question is, if I am geographically competent, have comps, and a decent knowledge of the local market.......

Licensing mentions limits on "Federally related transactions". Goes on to say if the "transaction amount" exceeds $250K. Neither of these come in to play, this is a private valuation request, pre-listing.

Whats stopping someone who's Certified Residential from completing this report?

Thoughts?

 

[Ken B]

What does your license permit you to appraise?

 

[CANative]

Licensing mentions limits on "Federally related transactions".

That doesn't mean that a certain license level is required for certain types of properties. It means that no license is required to perform appraisals that are not Federally related. Anyone can do an appraisal for a fee.

Make sure you know what you're doing. If something goes wrong and the file goes to the state agency they'll probably treat you harsher if you hold a residential license versus a commercial license. I don't know that for sure but that's what I would suspect.

Maryland M/FRT

State Operations and Requirements


State statutes governing appraiser certification and licensing can be characterized in three ways:

Mandatory (Man) - Certified/licensed appraisers required for any service for which an opinion of value (evaluation or appraisal) for real property is developed;

Mandatory for Federally Related Transactions (M/FRT) - Certified/licensed appraisers required to perform appraisals in any federally related transactions and real estate related financial transactions when Federal law requires the services of such appraisers; and

Voluntary (Vol) - Certified/licensed appraisers not required for any appraisal/evaluation assignments. If appraisers wish to perform appraisals in such federally related transactions and real estate related transactions, appraisers can choose to become certified/licensed and submit to the State's regulatory jurisdiction.

https://www.ASC.gov/State-Appraiser-Regulatory-Programs/StateOperationsAndRequirements.aspx

 

[Ken B]

I'm stealing Mike's thunder, but this is what MD says:

.01 Appraiser Classifications.

A. An individual who is a licensed real estate appraiser is entitled to provide real estate appraisal services in connection with noncomplex one to four residential units having a transaction value less than $1,000,000, complex one to four residential units having a transaction value of less than $250,000, and commercial properties having a transaction value of less than $250,000.

B. An individual who is a certified residential real estate appraiser is entitled to provide real estate appraisal services in connection with one to four residential units without regard to value or complexity and commercial properties having a transaction value of less than $250,000.

C. An individual who is a certified general real estate appraiser is entitled to provide real estate appraisal services in connection with all types of real property without regard to value, complexity, or whether the property is residential or commercial.

I would say if your property has a value less than $50/SF and you are competent to appraise it, go for it. But what I post on the internet will have no influence on any State Board decision.

 

[CANative]

Ken, is the scope of work applicable to any valuation service or just federally related transactions or when otherwise required (like GSEs, FHA, etc.)?

 

[Phil Snyder]

Breaks down like this:

Certified Residential Real Estate Appraiser: May provide appraisal services in federally related transactions with:

1) One to four unit residential properties without regard to value or complexity; and,
2) Commercial properties having a transaction value of less than $250,000

 

[CANative]

California is also a Mandatory/FRT state. The FAQs from BREA regarding unlicensed appraisals offers this:

6. How can I gain acceptable experience as an unlicensed appraiser?

Acceptable experience may be accumulated as an unlicensed appraiser in any of the following ways:

By providing "significant professional assistance" to another appraiser and having the duties you performed identified in the report. If at least 75% of the professional appraisal work is performed by the unlicensed person and the appraisal conforms to the Uniform Standards of Professional Appraisal Practice (USPAP), this experience would qualify for up to a maximum of 400 hours of credit;

By performing the entire appraisal process under the direct supervision of a California licensed appraiser. The final conclusion to value is made by and the appraisal is signed by the licensed appraiser, with you and the duties you performed identified in the report. If the unlicensed person performs all appraisal methods customarily used for a particular property type and the appraisal conforms to USPAP, this experience would qualify with an unlimited number of hours; and

By the unlicensed person completing appraisals him or herself in non-federally related transactions. In California, any appraisal completed for a federally related transaction requires a licensed appraiser. However, work performed for attorneys, private individuals, etc., are generally not federally related transactions and can be performed by anyone. If the appraisal conforms to USPAP, this experience would qualify with an unlimited number of hours.

More specific information should be obtained from the Handbook for Appraisers, from the BREA web site.

http://www.appraisertraining.com/FAQ.html

 

[Phil Snyder]

Guess that was my point. What bearing does the "federally related" part have on it (again, just an individual asking for a report).

Wrench in the mix is after speaking with the owner, the person whom I trained under for 2500 hours was the last person to appraise it, about 10 years ago (holds the same license as me).

Now then, I still understand that doesn't mean squat to an investigator.

 

[The Warrior Monk]

In addition to what CANative posted, the way many states work is that if you have a license, you are subject to license law. States typically adopt the minimum ASB requirements (for CR and CG anyway), which limit the CR's practice to properties for which the HBU is 1-4 family. Unless the state's law specifically notes that the CR can appraise all property types if the assignment is not a CG, then the state-licensed appraiser may only appraise the property with supervision, otherwise the appraiser is in violation of license law.

I strongly recommend that residential appraisers do not appraise commercial properties unless they have training and supervision. There are a whole lot of assumptions that are taken as a given in residential properties that are not a given in commercial properties.

 

[George Hatch]

Depends on your state licensing regs. In my state SLs and CRs can do non-res appraisals for non-FRTs and under other circumstances.


Your state licensing regs most likely will require adherence to USPAP, which itself has competency requirements with which you would need to comply.


The one thing I would seriously caution you about in this situation is to be mindful of the benchmark your work would be subject to. That standard of care is what the commercial appraisers would normally do in such an assignment. The fact that you're working beyond the scope of practice for your license will not be a defense if the work itself gets reviewed and found lacking.

While it's very possible, I have yet to ever see an appraisal on such properties from an unsupervised CR or SL that came even close to meeting the typical expectations for such an assignment. If you cloned someone else's report and modified those areas that are different from that assignment you could probably get close. That's what I did when I was first starting out, but I was working under supervision at the time.

Just be careful - I've seen a number of residential appraisers get into trouble doing this, mostly as a result of trying to rework the residential appraisal forms for property types that didn't fit them.


I had one instance where an SL approached me for consultation because the state was investigating a complaint. He had done an appraisal on a simple retail storefront building for a hard money lender and stuffed it on a residential form. He used the sales comparison grid in the form and made line item adjustments instead of using a price/sf unit of comparison. He also ignored the income approach even though the property was under lease.

The borrower in that assignment (who was not an intended user) submitted that appraisal to the county Assessor (also not an intended user) to appeal their property tax assessment (not the intended use). The County got mad about the report and sent it up to the state even though it didn't damage their interests. The state fast tracked the investigation and jumped it to the front of their to-do list.


Be careful out there.