Becoming a Certified Appraiser
We recently interviewed Mandy Rhodes, an appraiser with AgChoice Credit Farm Credit. Mandy has held a number of positions during her tenure at AgChoice, and recently passed her state certification exam to become a certified general real estate appraiser. Today, Mandy will share about the process it takes to become an appraiser and her perspectives on the importance of an appraisal during the loan process. Click here for the full podcast:
Could you share with our listeners what prompted your interest in appraisers and then your interest in becoming a certified general real estate appraiser?
It definitely wasn't easy. I've been with Farm Credit for a little over 10 years now, and I had the privilege of working in various departments. In one of the roles that I was in, I was able to help our appraisal department part-time and I've always had an interest in real estate. I used to actually think I wanted to be a realtor, but then in the process of buying our first house, I realized I didn't really want to have to work nights and weekends and be at my clients back in call.
It’s funny how things come full circle. When I was helping the appraisal department part-time, I fell in love with the whole process. I enjoyed the research beforehand at the courthouse, trying to find deeds, and researching the history of the property and how often it transferred. I love geography. The maps and the history of the properties is what really drew me in.
Let’s talk a bit more about what it takes to become certified. Could you share with our listeners about that process?
You can be a residential appraiser, or you can be a general real estate appraiser. Residential is what it sounds like, and then a certified general appraiser is more of your commercial properties and income producing properties. I am a certified general appraiser, which means it took a little bit longer and the requirements are a little more stringent. You have to have a four-year degree. You have to have a bachelor's degree. My bachelor's degree is in business administration. Then in order to get your trainee license, you have to have somebody that's willing to take you on. It's almost like an apprenticeship. You have to have a mentor that has been certified themselves for at least five years and is willing to put in the hours with you and put a dual signature on your reports. They have to review everything. They have to be willing to put their name and license on the line along with you.
I was fortunate enough to find that. Once I found my mentor and got my trainee license with the state, then the real work started because you have to have 300 classroom hours. It's eight to nine training classes on the different approaches to appraisal. You learn what real estate markets look like, property descriptions, statistics, and all kinds of math. You must have 300 classroom hours, and then on top of that you have to have 3,000 hours in the field. Your first 300 of those 3,000 have to be supervised. Your mentor has to find it in their schedule to be able to do the property inspections with you. Then you have to log 3,000 hours.
Once you have your degree, your classroom hours, your 3,000 field hours, and you have been a trainee with the State of Pennsylvania for no less than 36 months, then you submit everything to the state. They review it and they give you the green light to take your exam. It's a 125 question, six-hour exam in order to become certified. Once you're certified, in order to make sure you know what you're doing for years to come, you have to have 28 hours of continuing education every two years, which is when we renew our licenses.
We have to renew our state license every 24 months. Within those 24 months, we have to have 28 hours of continuing education. One of those classes has to be PA law to make sure that we're keeping up on changes in this State of Pennsylvania. One of the other classes is our USPAP updates. USPAP is what governs us. It's the Universal Standards of Appraisal Procedures. Those two classes go into the 28 hours and then it's almost like college electives. We can take classes that we're interested in. If we find a niche market or something that we want to know more about, as long as it is in an approved class with the state, then it qualifies.
That is certainly no small feat. Congratulations again for getting through that, Mandy.
Thank you. I definitely celebrated when I passed because it was a long time coming. COVID hit and it actually pushed my certification out about a year because all the testing centers closed down. I actually had one more class that I needed to take in order to take my exam, but nobody was holding classes. I could have been done in 2020, but I didn't get certified until November of 2021, because I had to wait for everything to open back up. I definitely celebrated when I passed that's for sure.
Mandy, you have had a unique perspective as an appraiser since you've held a number of other positions that cover aspects of the loan process here at AgChoice. Why do you feel an appraisal is such an important part of getting a loan?
Appraisals are an integral part of the lending process, whether it be for AgChoice Farm Credit or any other lending institution, because the appraiser is really kind of the gatekeeper. They let the lender or institution know what the market value is on a property that they're hoping to lend to. Typically financial institutions will only lend to a certain percentage of what the property value is. In order to make sure that they're adequately collateralized they need us to give them that information.
The appraisal can also be a safety net for the borrowers or buyers and sellers and the lender when a higher than market value sale happens. The buyer might not be aware of the discrepancy. It allows the borrower or the buyer to renegotiate the sales price, and it makes sure that the lender doesn't take on undue risk. Most sales agreements with a property purchase would have a clause in there for financing and a minimum appraisal amount.
As an appraiser, we can use three different approaches to determine a value. The first and most common approach is the sales comparison approach. We use verified sales in the subject market area and compare head-to-head to the property that is being purchased. Some factors that might impact the value of the property would be location, access to the property, and school district. Being in the Farm Credit Association, we look at soil and soil classes.
If there is a primarily wooded tract and our subject is open crop land and it's class one or class two crop land, they're not going to be a good comparison. We have to make sure that we have a good database of verified sales in order to have similar properties, to be able to do a head-to-head comparison.
The second approach would be the cost approach. With that one, we look at the land underneath the buildings and then the replacement cost of new buildings less any depreciation. Typically, this approach is used on new construction, whether it be a new home, or a new machine shed, or a new building, or something being put on a farm
Then the last approach, the third approach, is the income approach. That's used typically on commercial properties. For ag commercial type properties, we use the income approach on your larger dairies, poultry facilities, or hog facilities. It can also be used on retail and commercial properties.
An appraiser can use one or more of these approaches to come up with a final value. It just depends on the property and what makes most sense. Keep in mind that appraisals can help with tax appeal, estate settlements, if a person just wants to know what their property is worth for estate planning, or to pass it on to a family member.
As we conclude is there anything else you'd like to share with our listeners about appraisals?
I would say that appraisals are an important part of the loan process, but it's also important to know that there's many appraisal independence requirements that we have to follow. I had mentioned USPAP, which is the Uniform Standards of Professional Appraisal Practices. Appraisers have to follow that guidance, and we are subject to review for accuracy and technical errors. I will also say that we are completely separate and completely removed from the credit process. In all of our classes they remind us that we have to remain unbiased and impartial. We have to maintain a high level of integrity because that's our name and our license on the line.
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