Posted on July 14, 2022
A Day in the Life of a Commercial Real Estate Appraiser
Ask almost any commercial real estate appraiser and they’ll tell you: their work is anything but an exercise in box-ticking. After all, hiring someone with the qualifications, licenses, and certifications to determine the market value of properties as different as a data center and a high-rise apartment complex means contracting for the kind of professional services only a highly trained specialist can provide.
In other words, hiring a commercial real estate appraiser means choosing to consult — and often collaborate — with an expert in their field. Regardless of their seniority, the compass of their geographic competence, or the granularity of their property type know-how, all appraisers leverage a unique combination of hard and soft skills.
Keep reading to learn how LPA Team members Mark Arvé (Managing Director, LPA Dallas), Ellen Hevenor (Managing Director, LPA Dallas), Will Snider (Director, LPA Fort Worth), and Cassidy Springer (Senior Associate, LPA Fort Worth) spend their workdays, manage their workloads, and help their clients achieve their business goals.
1) Conducting Property and Market Research
According to Cassidy, the bulk — and arguably most important part — of her day is dedicated to research. “We truly do take the time to do our due diligence,” she says. “If we have 20 leases to go through, it’s really important that we go through each one and arrive at a complete understanding of what we’re appraising. A surface-level reading is going to miss some information that could drastically change our opinion of value.”
Ellen agrees. Although reviewing reports created by her Team is one of her primary responsibilities, she leads by thinking and acting like a researcher. “Before I even look for formatting issues, grammatical errors, typos — things like that,” she explains, “I get into the nitty-gritty of the report. I review comps, making sure the analysis is factually correct and that all the formulas add up.”
Ellen adds that almost every project comes with its own research challenges. “More often than not, location is a factor. For example, a multifamily development in a rural community is very different from one near the heart of Fort Worth,” she says. “Sometimes, larger markets have more data to work with, such as more comps and more surrounding similar developments. In newer markets — and there are a lot of those in Texas right now — you need to dig deeper into the database. You also just need to do some detective work.”
Likewise, Mark emphasizes that this research neither begins nor ends with comps. “Data fills in many of the details,” he notes. “But, to complete the picture, you have to have some understanding of how buyers and sellers will behave in the market. That’s where the art of appraising comes in.”
Will, whose area of specialization is right-of-way and eminent domain (ROW/ED), defines the research he does as “trying to be precise with imprecise data.” How so? “There will always be elements in our appraisal that oblige us to rely on assumptions that we’d rather not make otherwise,” he points out. “Maybe we never hear from a property owner whose land is going to be taken for public use. Maybe we never get into see the building on that land. So we will often assume the interior condition is similar to that observed from the exterior.”
That said, Cassidy, Ellen, Mark, and Will all believe that LPA is a uniquely collaborative environment in which to conduct research. According to Ellen, “All of our office doors are always open. Everybody is willing to help out.” In Mark’s view, LPA’s commitment to the Core Value of Teamwork makes a measurable difference for clients. “We have considerably more information at our disposal than most firms that don’t work in a collective manner like we do,” he posits. “That collaboration and investment in sharing knowledge and expertise gives users of our appraisal services access to a superior product.”
3) Creating Reports
Appraisers also get hands-on with the properties they value. According to Cassidy, “It’s really important that we take the time when we’re on the inspection to measure and make sure the recorded square footages are correct. It’s pretty easy to look at a floor plan or survey and get a sense of the actual structure, but sometimes those materials are out-of-date.”
In fact, Cassidy often visits a property before she gets too far down the rabbit hole of research. “It’s best to get each building inspected as soon as possible,” she reveals. “Inspection gives me a real sense of the building’s condition, its features, and so on. Having actually experienced the property, I can say that X, Y, and Z make for good comparisons. And anything that helps make pulling comps more efficient helps me meet my deadline.”
But a tape measure isn’t the only tool appraisers use to inspect a property. “Inspection requires strong communication skills,” observes Mark. “This is where you have the best opportunity to talk with your property contact and get answers to your questions.”
What kinds of questions? That varies depending on the property type, the market, the client, and their reasons for procuring an appraisal. For that reason, says Ellen, she views inspection as an excellent opportunity to provide mentorship and coaching. “As new employees are training, we visit properties together so they can get comfortable on inspections and see firsthand how to pose the kinds of open-ended questions that make discovery possible,” she says. “As they build their confidence and experience, they can become more independent with the inspection process.”
Mark concurs. “The macro level cannot be neglected. That means asking high-level and open-ended questions like: ‘What makes this property attractive at this price?’ ‘What support did your team receive to arrive at this value?’ ‘How do you see the subject’s lease rates compared the market?’ ‘What’s the state of occupancy, and where do you see vacancy rates headed? What insights lead you to that conclusion?’”
Therefore, appraisers are constantly honing their interviewing skills. “The goal is to accurately capture the mindset and premises on which the parties are working. This helps ensure we are seeing the market as other market participants do,” Mark explains. “Understanding ‘the story’ behind a transaction can give light to the motivations not easily determined only by the financial figures. Ultimately, buyers, sellers, and lenders are the participants making the moves, i.e., producing the resulting data, that we need to analyze in order to develop credible, market-based opinions of value. Experience teaches that knowing the ‘why’ behind a transaction is often more important than just knowing the ‘facts’ of a transaction. But that ‘why’ is only discovered via communication.”
2) Inspecting Properties
Appraisers are writers, and the valuation reports they write typically contain many pages of narrative description, figures, tables, and more. Although each report has to be carefully composed and assembled, it also has to be delivered so that clients have ample time to review all documentation, request clarifications and changes (if needed), and submit everything required to make their closing date.
Moreover, market conditions play a significant role in determining each appraiser’s reporting workload. For example, Cassidy indicates that she’s often working on multiple appraisals simultaneously. Many will take between two and three weeks to complete, but some could take as many as six weeks. “Sometimes, because we’re working in a such a huge market, we get portfolios containing multiple different properties,” she says. Seasonality is a consideration too.
However, as each of our respondents noted, LPA gives appraisers the wide latitude they need to achieve the firm’s goal of always on-time delivery. “There’s no such thing as a one-size-fits-all project management solution here,” says Will. “It’s not uncommon for something totally out of our control to delay an ROW/ED project. So we’re frequently pivoting, adjusting to shifting timelines, and helping each other assess overall capacity. The worst thing that can happen is that we overpromise and underdeliver.”
Although she works on very different properties — including such special purpose niches as car washes and veterinary clinics — Cassidy’s experience is very similar to Will’s. “Everyone has a different workflow depending on the complexity or simplicity of the property they’re appraising,” she says. “At LPA, I feel 100-percent supported in adopting a workflow that’s comfortable for me.”
Besides, as Ellen stresses, what matters most is that the final report meets LPA’s uniquely exacting standards. “We adhere to a format that’s very specific to LPA. Because of that, quality control involves much more than copy editing and proofreading,” she details. “Our reports are designed to be both eye-catching and easy to read. We incorporate as many color photos as we can. We want each report to be very cohesive and professional — to stand out from what other firms produce. But we’re most concerned with creating a positive user experience. So quality control usually comes down to making sure each report delivers exactly what the client needs, especially if that involves exceeding their expectations.”
Or, as Mark puts it: “There’s the matter of trust. Our reports have to reward the trust our clients put in our property expertise and principles.”
4) Managing Relationships
“Appraisers are much more interactive with their clients than many non-appraisers realize,” says Will. “To deliver the best value to our clients, we have to allow them to get to know who we are and who LPA is.”
Mark’s clients, many of them operators of going concerns in the hospitality space, have different business objectives than Will’s. Yet Mark agrees, observing that raising the bar for client service is a pillar of LPA’s company culture. “At the end of the day, we represent our clients,” he says. “If we do our job right — ask the right questions, take care of the property contacts, pull accurate and relevant data, deliver our report on-time and with a high degree of professional polish — then we’re helping them manage their important business relationships too.”
Ellen affirms Mark’s observation, saying, “‘No revision necessary’ is some of the highest praise we can receive from our clients. That’s when we know we’ve done the best possible job listening to our property contacts and working as a team to deliver an appraisal that can meaningfully inform the client’s decision-making process.” Adds Cassidy: “I do a lot of proposed construction, which entails handling repeat business from several developers. And I had a phone call with one of them recently where they told me, ‘I’m always glad to learn you all are doing the appraisal because you know what questions to ask upfront and you don’t eat up my time with a ton of back and forth. You all just know what to do.’ We love hearing feedback like that and it validates everything we do here to make LPA a different kind of appraisal firm.”
Will also asserts that maintaining a robust and diverse network is key to an appraiser’s professional growth. “We have an incentive to go to meetings and join organizations both within and outside of the appraisal world,” he says. “Of course, this allows me to make connections with people, like engineers and the agents that manage ROW/ED projects, who may be looking for what LPA can provide.”
Ultimately, as all our respondents make clear, working with an appraiser is all about the appraisal process. Methodology matters, as do professional ethics, frequent and transparent communications, and an understanding of how the data points in any given appraisal report add up to actionable business intelligence. Moreover, market conditions may be changing from moment to moment. Having a trusted partner advising you at every turn can accelerate the process of acquiring, analyzing, and deriving the optimum value from that intelligence.