Most of us have all needed a real estate appraiser at some time. Any time real estate is purchased with financing, the lender will require an appraisal. Sometimes we just need an appraisal as a second opinion to help evaluate whether or not to buy land, a commercial property or a house. Lastly, the IRS requires appraisals for estate tax returns and gift tax returns. The reason for the appraisal can affect the type of appraisal you need.

One type of appraisal is just an informal appraisal performed by someone who is familiar with the real estate being appraised but is not licensed. The most common use of this type of appraisal is to merely get some idea of what the asset is worth. For example, Landowner may be interested in selling his farm but he does not have a good idea of the value of the land. Landowner needs an appraisal of the land. In this situation, Landowner may ask a realtor or auctioneer for an opinion on the value of the land. The realtor or auctioneer will use their experience in selling land to give an opinion on the value of the land to Landowner — an appraisal.

While the realtor or auctioneer may have a very good idea of the value of the land, they may not be a licensed or certified appraiser. This can be a very important issue. Lenders will always require an appraisal from a licensed or certified appraiser. Additionally, the IRS typically considers a “qualified appraiser” to be a licensed or certified appraiser. So, while the realtor or auctioneer may have provided an accurate appraisal of the land, it would not be accepted by many institutions. It should be noted that some realtors and auctioneers are also licensed or certified appraisers.

Licensed/certified appraisers have a duty to provide the client with a good faith appraisal of the property. The licensed/certified appraiser can be liable if the appraisal was not done in good faith or the appraisal contains errors, which causes the value to be wrong. That is, a licensed/certified appraiser has liability for the appraisal whereas a non-licensed/certified appraiser likely does not have any liability.

So, what is the difference between a licensed appraiser and a certified appraiser? Generally, appraisers are ranked as follows:

1. licensed appraisers first

2. certified residential appraisers, and

3. certified general appraisers, who have the most rigorous certification requirements.

In Ohio, a certified appraiser has more educational and experience requirements. A certified appraiser is usually required to have a college degree or a significant number of hours of college classes related to real estate. A licensed appraiser is not required to have any college classes. A certified residential appraiser is required to have 1,500 hours of experience and a certified general appraiser is required to have 3,000 hours of experience. The experience comes in the form of an apprenticeship with a certified appraiser. As the education and experience requirements indicate, it is a not easy to become a certified appraiser.

A certified residential appraiser can appraise non-complex residential properties with any value as well as other types of properties with values less than $250,000. A certified general appraiser can appraise any type of real estate with no value limit. Other than small pieces of land, farmland should be appraised by certified general appraisers.

The best way to find an appraiser is to ask friends, neighbors or lenders for referrals. If you are unable to find an appraiser through referral, you can find farm appraisers through the American Society of Farm Managers and Rural Appraisers (asfmra.org). This group provides networking and educational opportunities to its members related to farm and farmland appraising.

The next time you work with an appraiser, be sure you understand his or her credentials. A non-credentialed appraiser may be fine for an informal occasion but if you need an appraisal for an official purpose or for a lender, you should have at least a licensed appraiser and possibly a certified appraiser. Do not hesitate to ask an appraisal for their certification, as well as what experience they have, especially when the appraisal may involve unique issues such as grain setups, livestock buildings or land improvements.

Moore is an attorney with Wright & Moore Law Co. LPF. Email him at [email protected], or call 740-990-0750.