As appraisers, the very first thing ingrained in us throughout countless hours of mandatory training is the cornerstone of objectivity. Any form of contingent engagement, such as working on a commission-based assignment, could very well be seen as a breach of the Uniform Standards of Appraisal Practice (USPAP), potentially inviting serious consequences from the Florida Real Estate Appraisal Board (FREAB).
The concept of appraiser independence is meticulously regulated at both state and federal levels. We are forbidden from accepting assignments where our fee is determined by the result of our appraisals or a pre-set value conclusion, thereby eliminating any personal stake in the game.
Our mission is to uphold appraisal policies that serve the public interest foremost. Hence, when an appraisal assignment is engaged, the appraiser is like a wind-up toy soldier, diligently following their path without any sway by the backstory of the assignment.
If you ever suspect an appraiser of misconduct, your state body - FREAB in my case - is the proper authority to report to.
On the other hand, brokers, regulated by the Florida Real Estate Commission (FREC), are expected to act ethically, but their remuneration is largely performance-based. They often pocket a larger sum for their services than appraisers, but it's worth mentioning that they also invest more effort into their side of the business.
Consider this - if appraisers were compensated based on performance and could benefit from over-estimating or under-estimating property values, how much faith could one place in their appraisal? Envision agreeing on a fee of $5,000 plus an additional $100 for every $100,000 beyond a $5,000,000 appraisal, only to receive an estimate of $5,100,000. Naturally, one might question the credibility of such an appraisal.
This raises the question, can an appraiser simultaneously practice real estate sales and leasing? Aren't all interactions in the business opportunities to earn a commission?
Throughout my career, I've had the privilege of working with industry giants such as CBRE and Cushman & Wakefield, where brokers and appraisers often intermingled. While appraisers rarely transitioned fully into brokerage, their appraisal skills were undeniably honed through the brokerage experience. This countered a common critique - that appraisers are disconnected and their value estimates are trailing market trends.
Indeed, my personal experience of straddling both worlds has enhanced my expertise, comprehension of valuation fundamentals, and judgement when handling unique circumstances.
To ensure ethical boundaries are respected, my Errors & Omissions (E&O) provider offered guidelines when I started brokering. While they endorse the amalgamation of broker and appraiser roles, they insist on separate E&O policies to facilitate adherence to the unique obligations of each profession.
While I proudly display my MAI or SRA designations earned through hard work, I am cautious to never allow my appraisal work to influence my brokerage operations. To navigate this delicate balance, I employ a "transition to brokerage services" clause in any contracts originating from appraisal assignments.
Although there might be a financial appeal to working as a broker rather than an appraiser, the two professions follow distinct timelines and demand different client relationships. Merging the two roles is not an impossible task, but it works best with assistance. Fortunately, in my case, my wife, a successful real estate sales professional, is the perfect complement to my "numbers-person" persona.
On the brokerage side, we opt to work with individuals we genuinely enjoy - a personal connection makes us eager to deliver value-added assistance and ensure a profitable deal. As an appraiser, there's immense satisfaction in witnessing a successful transaction we've brokered.
If you're an appraiser considering broadening your horizons, delving into brokerage, mortgage consultation, or a related profession could inject a new dynamism into your work, along with fresh insights into market transactions.
In my journey, I've found each profession enhances the other. Whether I'm delivering an appraisal or brokering a transaction, I strive to remain entirely engaged, impartial in my observations and conclusions, and focused on delivering accurate appraisals and successful transactions.