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The US and UK Real Estate Appraisal Structure
April 11th, 2017 12:58 AM

Executive Summary

This report analyses the basic characteristics of American real estate appraisal and compares the US Appraisal system with the appraisal systems in the UK. For most of the clients from China with great interest in investment in American Real Estate, the business of appraisal still seems to be unfamiliar as the appraisal business in China are still at a beginning stage. What’s more, the appraisal business in China just started compared with the developed appraisal business in US and UK. The report gives briefly introduction to the appraisal business in America and aims to help the clients get to know the residual appraisal which is closely related to their own profit and also help the Chinese appraiser to learn some experience from these two countries.

 

Findings

  1. The current situation of American residential appraisal

    In the United States, there are a large number of real estate appraisers who are in a position of independent operation and have not joined in any other company. And a lot of appraisals are in partnership, with only two to five appraisers in a small company. Therefore, it can be seen from the survey, the size of the U.S. real estate appraisal business unit is significantly smaller than the U.K. Therefore, the residual appraisals in US are more like to take a family workshop style management.

    In some extents, the independent decentralized mode of operation has its superiority. First of all, in the case of an independent business, the assessor can freely control the time, flexible work, therefore, in contrast, the United States appraisers are more satisfied with their work. At the same time, due to the independent operation, there would be less problem in the management sector of the company, so that the appraisers can concentrate on the assessment of business and improve efficiency of the whole group.

    Despite of these advantages, the disadvantage of this approach seems to be more obvious. The most important thing is to limit the ability of the real estate appraisal agencies. The individual's experience and ability of an independent appraiser is very limited, and even setting up a small company in partnership can not be the solution to completely overcome this disadvantages. As a result, the majority of independent real estate appraisers and most of the real estate appraisal companies, can only provide services to local customers. At the same time, they are more engaged in the assessment of residential property which is relatively simple, and the other relatively complex property types (such as commercial property) are rarely involved. In most cases, they can only provide services to private clients, but rarely provide services for investment funds, insurance companies and other institutional customers a large volume of business under more complex situation.

    In addition, most of the United States real estate appraisals provide relatively simple business segments because of the limitations of their size, generally in the traditional sense of the real estate appraisal services except providing services including real estate brokerage, market analysis and other related business. In addition to the capacity constraints, another serious drawback of the US appraisals development pattern is that they may not conducive to the long-term development of the industry well enough. An independent appraiser generally does not accept interns, and even in a small appraisal, the number of trainees could be acceptable is limited. According to the results of the survey, nearly half of the appraisals in US do not accept trainee or intern of appraisers. And this is an important reason that may lead to the lack of experienced appraisers and will does harm to the appraisal business in US in long term.

     

    2) The differences between the US appraisal business and the UK appraisal system

    Compared with the US appraisals, the appraisal business in the UK is in large-scale and group oriented pattern. The survey results show that more than half of the appraisals has more than six appraisers in the company, while more than 50 people in the large number of companies which are also significantly larger than the United states. The size of the UK's real estate appraisal is much larger than that of the US.

    Expanding the on this scale, there are inevitably restrict limitations on the degrees of freedom to the appraisers and they have to spend more time in the management of the company, but the advantage is very obvious. The expansion of the company not only increases the number of appraisers with the simple superposition, but also greatly enhances the business segments in market research, business information collection and study ability. Therefore, the UK appraisals can not only work for local and regional property evaluation, but also involves in the country and even the worldwide business.  For example, the company may settle in London and has branch offices in other regions in the country and around the world. And this group model has been used for many British appraisal companies.

     

  2. The reasons that result in the differences between the US appraisal business and the UK appraisal systems

The elements leading to the differences are as follows:

  1. The regional differences between US and UK.
  2. The barrier in the appraisal business.
  3. The government and industry associations.
  4. The expectation to the ability and rewards of the appraisers

 

Further more, there are also some other reasons that may effect the business structure of the real estate appraisal industry like the differences in value.

 

Conclusions and Recommendations

Based on different national conditions, there are different development patterns in the residual appraisal business. Both the American and the UK appraisal industry have afforded the lessons that merit attention to the newly developed Chinese appraisal business.

From the above discussion, we believe that the real estate appraisal industry in China should learn experience from the US and UK experience:

  1. Settle up the qualification requirements to appraisers
  2. Gradually realize the evaluation system of the qualification level of appraisers
  3. Promote the reorganization of the real estate appraisals
  4. Achieve expansion of real estate appraisal agencies
  5. Build multiple management model.
  6. Provide a variety of real estate related services in the area of the larger companies.

For the foreigner investors who have strong interest in investing the real estate in American the appraisal can help them to make evaluations on the property and make their investment more profitable.


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Posted by Michael Hobbs on April 11th, 2017 12:58 AMPost a Comment

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