Bill Pastuszek, Shepherd Associates

Real estate appraisers appraise real estate, except that what we really value are the rights in real property represented by the real estate. But, real estate is tangible.

Looking at, and inspecting, the real estate is a critical part of the process. It’s critical enough so that we state that we have inspected the property in the cerification of the appraisal and report the results of our inspection in the body of the report.

Most appraisers would not think of sending in a report without fully inspecting the property and get very worried when not all of the property can be inspected. Likewise clients want to ensure that properties are adequately inspected and often require the appraiser provide proof, i.e., with photographs, sketches, etc.

Recent changes to FHA requirements suggest that appraisers might want to reconsider the wording associated with property inspections. FHA requires a different, and more comprehensive look at properties, more akin to what a home inspector does (but not a home inspection, as FHA hastens to add.) Many appraisers who have looked at the new requirements seem to feel that what is being asked is similar to a home inspection and possibly requires a level of competency that appraisers don’t have or aren’t willing to exercise within the limits of an appraisal assignment.

The Free Dictionary defines “inspection” as “1. to examine closely, esp. for faults or errors. 2. (Military) to scrutinize officially (a document, military personnel on ceremonial parade, etc.)”

Given that the term “inspection” suggests a process that appraisers may not be engaging in, it may be useful to explore some other terms that might better explain what an appraiser does when entering a property.

Here are some possibilities.

“Observation.” Appraisers observe: they observe the market, the property. This process suggests that data is collected and analyzed. Out of this arises conclusions that relate to the assignment conditions. The FHA handbook uses this term: “The appraiser must observe the physical condition of the plumbing, heating and electrical systems.”

“View.” This is a term often applied to legal situations where the judge or the jury are taken on a trip to “view” of the property, possibly the comparables.

“Examination.” This connotes a process that might even be more detailed and in depth than an inspection. Appraisers often examine financial statements but the term is not usually applied to buildings.

“Walk Through.” This is a term often used in commercial brokerage and suggests a visual but not entirely casual tour of a property by brokers, buyers, and even appraisers. The term is descriptive as it suggests activity that is focused on the subject’s condition but to a lesser degree than that of a building inspector.

There are combinations of terms that convey what we do. “Site Visit,” or “Property Visit” sounds like the appraiser is going to stop by but won’t be there long.

There are probably some other terms that would be suitable. It might be time to consider replacing the concept of inspection with other more accurate language that describes what we really do. The world out there is too full of liability and blame, ready to go after the unwary appraiser.

At this point in the cycle, realistically stating what we do is crucial. We should provide precise physical descriptions and enhance understanding to our public - brokers, lenders, and homeowners - of what we are expected to do, to observe and record physical characteristics in order to accurately value the real estate. By doing this, we can leave inspections, examinations, and expert opinions to those qualified and appropriately compensated to do so.

Bill Pastuszek, MAI, ASA, MRA, heads Shepherd Associates, Newton, Mass.