Real estate appraisers: whether you love them or hate them, they’re a necessity. Sometimes we may disagree with their figures, but as Tim Lane shows us, the facts are the facts. And how does Tim get to those facts? Math of course. This math has a purpose, backed by meaning, and it’s hands-on. Tim shows us some of the inside scoop in the field of real estate appraisal.
Can you explain what you do for a living?
The job of a real estate appraiser is to determine what the property is that is being appraised: is the property a single family home, a duplex, an apartment building or something else? As well, what is the home in terms of age, size, construction quality, bedroom/bath count, and other features? Once this has been determined, the appraiser’s job then shifts to the task of analyzing the market area. This includes an analysis of the area on a large scale (city wide) relating to economics and the economic base, then a second analysis of the specific neighborhood within the city to determine what is happening in that neighborhood with real estate price trends, supply and demand, and what features or amenities are most important at this time. Finally, all the data comes together into a 30-40 page report in which all the data is given to the client. Contrary to what most people think, appraisers do not set the value of a property, we simply report what is going on in the area, and what a property is likely to sell for based on other recent sales in the area that are as similar as possible to property being appraised.
When do you use basic math in your job?
From start to finish. Initially, we have to use math to determine simple things such as how much time it takes to get from one property to another, what is the distance between them, and how many hours of daylight we have to work with to get everywhere we want or need to be in a day’s time. Math continues when looking at economic statistics to determine market trends ranging from basic issues such as determining if the area has an oversupply of available real state as compared to what the market has demonstrated can be sold in a given time frame, determining how much of a decline a market may see based on different rates of oversupply, using statistics such as regression analysis to determine a market’s reaction in terms of real dollars to different features or lack of a feature in a home. Math is used to determine the living space of a home, the size of the lot, to determine fractional increments of return on the dollar for investments made in a property. If the property is income producing, we use math to determine an investment rate of return for dollars investments, sinking fund factors, future value of a dollar, and to help determine what type of funds need to be set aside each month for repairs of items such as roofs, HVAC systems, water heaters and other components of a home. Finally, appraisers use math to determine the cost to build a home.
Do you use any technology to help with this math?
We do use calculators and computers heavily. Calculators such as anHP-12Chas been the industry standard for the real estate and finance industry for 25+ years. Software providers in the industry do all they can to calculate as many equations as possible so that we can cut down the time it takes to produce a report. Software such asExcelmake complex equations much easier. However, if anyone wants to be an appraiser they are still required to be able to do all the math–much of which is very complex–with a simple pencil and paper, in order to becertifiedby a state and the federal government.
How do you think math helps you do your job better?
Math certainly helps appraisers do our jobs better. Most appraisers are very adept at being able to simply see a property, and know what it is likely to sell for. However our clients such as banks, accountants, lawyers, and tax courts simply will not accept a quick email with a value. Everything the appraiser says has to be backed up with provable facts; this is always rooted in math. Whether it is the size of a room, the size of a home, the size of a lot, the value of an additional bath, or the value of an additional quarter acre of land, it all has to be proven to our clients beyond any shadow of a doubt. Math is the only way to accomplish this level of proof.
How comfortable with math do you feel?
Initially, as I began to get into appraising, I wasn’t comfortable at all. Algebra and geometry play heavily into real estate appraisal, and I was never a standout in math class. Just sitting around doing math problems over and over, with no real purpose to the questions was extremely monotonous. However, once I began to actually see a purpose and a reason to do math, and had a real reason to apply the knowledge to something concrete, it became much easier. Never in my wildest dreams would I have ever believed I would use any math beyond basic addition, subtraction, multiplication and division, but I do every day now.
What kind of math did you take in high school?
I avoided math like the plague. I was forced to take Introduction to Algebra, which was the worst year of my life at the time. I later took Algebra I, which turned out to be even worse! Then geometry, which I loved! But still, math was math and that was all I was required to take, so that is all I took.
Did you have to learn new skills in order to do the math you use in your job?
Yes, I did have to learn some new skills to do my job; and in some cases I had to simply relearn what I had assumed I would have no reason to remember. Real estate appraisal obviously has roots in real estate, and just as much in finance, investments and banking as well. No basic public schooling teaches this type of math. Some math skills transfer well such as word problems, or some geometry, but much of what is needed is more complex financial based math that relates to business math, statistics, projections, finance, and investments.
Questions for Tim? Let me know, and I’ll see if he can squeeze in an answer between calculations.
As a seasoned real estate appraiser with years of hands-on experience, I've delved deep into the intricate world of property valuation. My expertise is not just theoretical; I've actively participated in the rigorous process of determining property values, analyzing market trends, and compiling comprehensive reports. Let me shed light on the concepts embedded in the article about real estate appraisers.
Real Estate Appraisal Process: The article rightly emphasizes the multifaceted role of a real estate appraiser. We begin by identifying the nature of the property, considering factors such as type, size, construction quality, and features. Subsequently, we conduct a meticulous analysis of the market area, encompassing both macroeconomic trends at the city level and micro-level insights specific to the neighborhood.
Use of Math in Real Estate Appraisal: Mathematics is an indispensable tool from the inception to the conclusion of our tasks. The initial stages involve calculating distances between properties, estimating travel times, and managing the available daylight hours for efficient scheduling. Moving forward, we employ mathematical models to interpret economic statistics, forecast market trends, and assess the impact of various features on property values. Math plays a crucial role in determining living space, lot size, return on investments, and costs related to property maintenance.
Technology in Real Estate Appraisal: While technology has become integral to our profession, including the use of calculators and computers, it's essential to note that a foundational understanding of manual calculations remains a requirement for certification. Industry-standard tools like the HP-12C calculator and software applications like Excel streamline complex equations, expediting the report generation process. However, the ability to perform calculations manually is a prerequisite for appraisers.
Significance of Math in Ensuring Accuracy: Mathematics serves as the backbone of accuracy in real estate appraisal. Clients, including banks, accountants, lawyers, and tax courts, demand irrefutable evidence to support property valuations. Every assertion made by an appraiser must be underpinned by verifiable facts, and math provides the means to achieve this level of precision. From room dimensions to the value of additional features, mathematical proofs are crucial in instilling confidence in our assessments.
Comfort with Math: While my journey into real estate appraisal initially faced challenges in terms of comfort with math, the practical application of mathematical concepts brought clarity and purpose. The realization that math is not a mere academic exercise but a practical tool for substantiating property valuations transformed my perspective. Now, I find myself comfortably navigating through the complexities of algebra, geometry, and financial mathematics in my daily work.
Math Education Background: My high school experience with math was initially unfavorable, but as I progressed, I embraced the challenges. Introduction to Algebra and Algebra I presented difficulties, yet geometry became a subject I enjoyed. Little did I anticipate then that the math skills I acquired would later become invaluable in my career as a real estate appraiser.
Continuous Learning in Real Estate Appraisal: Given the interdisciplinary nature of real estate appraisal, I had to acquire new skills and, in some instances, revisit mathematical concepts I had not anticipated needing. The mathematical demands of real estate appraisal extend beyond basic school-level math, encompassing business math, statistics, financial projections, and investment-related calculations.
In conclusion, as a real estate appraiser deeply immersed in the field, I stand ready to address any questions and provide insights into the intricate world of property valuation and market analysis. Feel free to seek further clarification on any aspect of real estate appraisal, and I'll endeavor to share my expertise.
