Inside Real Estate: What Appraisers Do

Lenders usually require an appraisal done before financing is approved. That is done to make sure that the lender is not authorizing more money than the property is worth. There is an organization, the Appraisal Foundation, which establishes national qualifications and standards for practicing appraisers. Then each state has its own requirements. If you want to find a licensed appraiser on your own, you can go to the Appraisal Institute. You can enter your zip code and find a list of appraisers who are members of the institute. You can also find out about those initials after the appraiser's names, like MAI, SRA, and SRPA.

But what do appraisers do? When picking a listing price for your house, you could look at recently sold properties, currently listed properties, and properties that were taken off the market without selling. Appraisers look at recently sold properties, but they also look at so much more. They look at the national, regional, and even neighborhood trends. They look at the physical conditions of the property. When they compare the property to other properties, they are usually looking at market value.

Once an appraiser has done the market research of your house, the neighborhood, and real estate trends, the appraiser analyzes the information usually using three approaches. They are the sales or market approach (comparing it with other properties sold), the cost approach (how much would it cost to rebuild it at today's prices), and income approach (how much money, like rent, could be gotten from the property). He or she picks the "highest and best use." If your house is in a residential neighborhood, its highest and best use is usually to be used as a residential property. He or she reconciles the estimated values to get the final estimate. Then he or she prepares a report with all of that information.

The most important thing to remember is that the appraiser doesn't create the value of the property. He or she does research and then verifies the value with the appraising tools.

Inside Real Estate: The Fair Housing Act In Action

Let's talk about what the Fair Housing Act basically means. Ignore the exceptions for now. Let's say I'm a Colorado real estate broker and someone comes in to buy or sell a house.

Let's take two imaginary people. We'll call them Jang and Vanar, using names from a "neutral baby name" site. We will say that they are two people, but beyond that I don't know anything about them: their genders, ages, nationalities, functionalities, or beliefs. One or both of them could need my services.

If one or both want to sell a house and I create a legal contract with them to list and sell the house, I would want to see the house and get the best value possible, which means showing the house to anyone who qualifies financially and is interested in that type of housing.

If one or both want to buy a house, and if I have a policy of asking people to prequalify financially, I would ask the prospective buyer to do that first. If I am truly acting without discrimination, I treat everyone equally. I find out what kind of housing is wanted and I try to show places that will work.

Basically, if we ignore the exceptions (housing for only those over 55 years of age, religious or private clubs, someone convicted of involvement with illegal drugs), it is not okay to treat someone differently when selling, buying, renting, leasing, etc., because of their family status, ethnicity, age, religion, gender, or physical or mental disability. The only way to differentiate people is on their "ability to pay" or for economic reasons.

Inside Real Estate: The Fair Housing Act

In the United States, there are federal laws regarding housing discrimination. They are actually about eliminating discrimination when people want to buy a home. This topic is really important. To start with, Title VIII of the Civil Rights Act of 1968 (Fair Housing Act), prohibits discrimination in the sale, rental and financing of dwellings based on race, color, religion, sex or national origin. This was amended in 1988 to include discrimination because of disabilities or family status. At the United States Department of Justice, Civil Rights Division, the latest Fair Housing Act directive is spelled out, including how to file complaints and criminal penalties.

What are the exceptions? Who is exempt from following these laws when selling their property to someone?

There is an exception to the family status (children or pregnant women in the family) which is based on the Housing for Older Persons Act of 1995 (HOPA). To qualify for the exception, the housing development must advertise that it is for older adults and there must be a person who is 55 years of age or older living in at least 80% of the occupied units. If you want more information about the "older people" exception, it's available in the Federal Register for Friday, April 2, 1999.

Religious organizations and private clubs can still limit their property to just their own members as long as the restriction is only based on religion or club membership. Also exempt is someone selling their own home as long as that person doesn't own more than three homes at a time. Another exemption is an owner who lives in a unit of a fourplex or smaller.

However, if the person or property doesn’t fit into any of these categories, he or she does not have to worry about discriminating against someone who has been convicted of illegally manufacturing or selling "controlled substances" (drugs). It is okay to not sell their property to someone like that.