D. Scott Murphy, CEO and founder of D.S. Murphy and Associates, joins host Carol Morgan for this week’s Atlanta Real Estate Forum Radio episode. Murphy discusses the residential appraisal process in this podcast segment and how it factors into today’s housing climate.

How is the current state of the housing market affecting appraisals?

When the volume of homes for sale dropped in recent years, appraisers took a hit. Appraisers build their opinions off recent sales, meaning they look at data from comparable properties sold in the last few months. The drop in sales has left them struggling to get that data for homebuyers.

“There is no rule as to how far back I go, but the rule of thumb is three to six months,” said Murphy. “So, if I don't have good recent comparable properties, it makes my job a lot more challenging.”

Increasing interest rates also factor in the sales cost of properties, sometimes creating a price tag higher than the appraised value. Since the early 2000s, the volume of homes sold has steadily decreased over time as interest rates rose.

“The better analogy is that we had our foot on the accelerator, and it was pressed to the floor, then we took our foot off the accelerator,” said Murphy. “And we've just kind of coasted and slowed down a little bit. So that's how the market's gone.”

However, federal rates lowered significantly this year, sparking homebuying activity across the country.

Murphy emphasized that the National Association of Realtors (NAR) settlement also factors into home prices especially when homes are listed above appraisal value. It has caused discussion about commission structures and transparency among all parties involved in a real estate transaction. Many sellers are following a traditional standard and include the buyer’s agent commission in the sales price. However, when buyers refuse to pay the commission or the buyer pays their agent directly, it can cause problems.

How can appraisers use the latest technology to improve the appraisal process?

The most common technology in the housing market today is automated valuation models (AVM). Heard of Zillow and Redfin Estimate? Those are both widely used AVM algorithms. Murphy said that even though these algorithms are not always high or low, they are always wrong because they don’t consider the unique qualities of your home. That’s the human touch that D.S. Murphy and Associates is proud to provide.

Murphy said, “Particularly in the Atlanta area, Zillow is working off public record data, which is notoriously incorrect.”

What resources are available for current and up-and-coming appraisers?

Appraisal Institute offers worldwide services for appraisers and boasts high-quality courses taught by exceptional instructors. Anyone can sign up for classes, but appraisers should take note since many classes are required for continuing education.

A two-year college degree, preferably in finance or real estate, is required for residential appraiser roles. Then, you must complete 90 hours of qualifying education through the Appraisal Institute to obtain a registered trainee's license. After that, 110 hours of classwork and two years of mentorship qualify you for a residential appraiser license.

Tune in to the full interview above to learn more about residential appraisal. For more about D.S. Murphy and Associates, visit www.DSMurphy.com. More information about Appraisal Institute can be found at www.AppraisalInstitute.org.

About D.S. Murphy and Associates

D.S. Murphy and Associates is the largest appraisal and inspection firm in the Southeast, serving homeowners, agents and lenders with 30 years of experience. In addition to its regular services, the firm also offers courses for appraisers, Realtors and the public that provide key information about the appraisal process, both residential and commercial.

Podcast Thanks

Thank you to Denim Marketing for sponsoring Atlanta Real Estate Forum Radio. Known as a trendsetter,