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Can an Appraiser also Broker Real Estate?

Updated: Apr 20

The first thing appraisers learn in thousands of hours of mandatory education is the meaning of objectivity, and that anytime we are working on a contingency (commission) as an appraiser we are probably violating the Uniform Standards of Appraisal Practice (USPAP) and facing big trouble with FREAB (Florida Real Estate Appraisal Board).

Appraiser independence is highly regulated at the state and federal levels - we can't accept an assignment where our fee depends on the outcome of our appraisals (like a brokerage commission), a pre-determined value conclusion, or where we have any skin in the game.

We are required to observe appraisal policies that best serve the public interest. As a result, ordering an appraisal is like winding a toy soldier up and setting him or her along their path, not to be influenced one way or another by the backstory behind the assignment.

If you ever feel an appraiser is misbehaving, report them to your State body - FREAB in my case.

Broker's on the other hand, regulated in my state by the Florida Real Estate Commission (FREC), are required to act ethically but are of course paid by performance. They make a lot more money on their assignments than appraisers do, but just as an aside they work harder at their side of the business as well.

Now, if appraisers were paid by performance and they could benefit by over-valuing property (and in some cases agreeing to under-value), who could believe any appraiser? Suppose we agreed on a fee of $5,000 plus $100 for every $100,000 over $5,000,000, and your appraisal "came-in" at $5,100,000? Obviously, it would be human nature to doubt the appraisal.

So how can an appraiser even practice real estate sales and leasing as well? Isn't every contact with anyone in the business a chance to earn a commission - maybe now, or maybe later if they're impressed?

Part of my background is working with giants in the field - full-service brokers including CBRE and Cushman & Wakefield where the brokers sat in the next room and appraisers sometimes dabbled on the brokerage side, and sometimes - although rarely - made the jump "to the dark side" as they often put it.

I have no memory of anyone being accused of crossing the line and, in fact, appraisal skills were enhanced by the brokerage experience. After all, this is often one of the industry's objections to appraisals - that appraisers are out of touch and value estimates "lag" the market - and if an appraiser actually does a broker's job doesn't it correct any deficits?

In my personal experience, working on the brokerage side as well as appraisal has done just that - it has improved my skill level, understanding of valuation fundamentals, and discernment when faced with unique situations.

Before brokering my first deal, I checked with my E&O provider. They gave me a list of do's and don'ts but otherwise agreed it is completely "legal" to blend the broker and appraiser roles. Of course, they require separate E&O policies which makes adhering to the exclusive obligations and duties of each profession easier to follow.

Among my E&O's suggestions are not to include my MAI or SRA designations (nope, I earned those, and it serves the public interest to know that they have an alternative to brokerage for valuation issues). I will never touch an appraisal I've done for third party reliance on the brokerage side, however, which I believe would result in legitimate claims for either ethic violations or civil suits (maybe even criminal).

On the brokerage side, I use a "transition to brokerage services" clause in any listing or sale contracts that come from appraisal assignments. For example, a seller or buyer wants to know a reasonable price for their property, and I complete the assignment as an appraiser. Later, if asked to sell or lease the property for them under a transaction broker relationship, I would write a "transition to brokerage services" clause into the contract(s) and include it in any subsequent contracts or agreements.

Can I provide an estimate of value on the brokerage side without following the workfile rules under USPAP? I don't know - but I don't take the chance. All of my opinions are expressed in correspondence (one of the things we "sell" as appraisers is that we don't shoot-from-the-hip), so it is easy to include a brief notice that I am acting under FREC (commissioned) and not under FREAB (objective), etc.

Is there a financial benefit to working as a broker as opposed to an appraiser? I don't think so - the two professions have very different timelines. Brokerage is very much a "what have you done for me lately" relationship with customers while appraisals are deadline oriented with a higher burden of credibility. It is not impossible to blend the two but works best when the appraiser has help. Fortunately, in my case my wife has had a very successful real estate sales career and we explain that she is the "people-person" while I'm the "numbers-person."

Also, brokers work very hard on bringing a deal to closing. It takes a long time. If I am going to gross $75,000 or 2.5% on a $3,000,000 sale, it can require about a year of constant-on-call from start to finish. I can sometimes see $75,000 months in appraisal, and never less than $30,000.

Our method is to work with people we like on the brokerage side - when someone is a friend it motivates us to go the extra mile with them, offer free value-added assistance, and see to it that they get a good deal. If we aren't "feeling-it" then we'll either decline or refer the opportunity.

But as an appraiser there is no better gratification than to see a successful transaction we've brokered. This is because appraisal is dry, isolated, and sedentary. If you are "just" an appraiser, try getting out of the box to another industry profession - brokerage, mortgage, consulting, etc. You'll find renewed energy for appraisal and new insights to market transactions.

Each profession make me better at the other, and regardless of the service I'm providing I challenge myself to be completely engaged; objective with my observations, conclusions and advice; and focus on the ball: an accurate appraisal or successful transaction.

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