Nancy Dierx has jumped over fences and been bitten by dogs at least three times in her 31 years working as a real-estate appraiser.
"I am more afraid of dogs now than of people," she said.
Dierx is the founder of Real Estate Appraisal Professionals in Redwood City, a firm that appraises the market values of residential homes, lofts, condominiums and two- to four-unit dwellings in San Mateo, Santa Clara and San Francisco counties.
Along with angry pets, she often has to deal with irate homeowners unsatisfied with her evaluation of their homes.
They sometimes misunderstand their home's worth, she said.
Dierx works on at least two appraisal reports every day, most of them for banks or lenders issuing mortgage loans.
Apart from mortgages, appraisers are also hired to assess property value for litigation or arbitration, market research, feasibility analysis, tax valuations and divorce cases, Stan Tish, real-estate appraiser with Berliner, Kidder & Tish, said.
In the past, real-estate appraisers were usually hired directly by banks or lenders, as part of their due diligence before issuing a mortgage loan.
After the real-estate bubble collapse and the passing of the Housing Valuation Code of Conduct in 2008, mortgage lenders were mandated to hire appraisers through a third party called Appraisal Management Companies (AMCs), enabling appraisers to evaluate homes free from the lenders' influence.
Even with the changes in the appraisal regulations introduced by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, lenders are still prohibited from "influencing an appraiser to get a more favorable appraisal value."
AMCs establish a list of qualified appraisers and act as a "buffer layer" between the lender and the appraiser.
However, when AMCs started hiring appraisers from out of the area to save costs, it resulted in many homes being appraised inaccurately, according to a 2011 Secondary Marketing Executive article. Most were unfamiliar with the local market.
"Banks lend 80 percent of either the appraised or actual price, whichever is lower," Alex Wang, second-generation Realtor and broker associate at Sereno Group in Palo Alto, explained. "If the property is under-valued, homeowners end up having to pay a larger down-payment."
"AMCs can create or damage the relationship between the appraiser and the bank," Dierx said.
Once hired by the AMCs, the first step that an appraiser takes is establishing the purpose and scope of the appraisal.
Appraisers inspect the property and the neighborhood, collect information on the quality and condition and identify the important characteristics that determine the value, which vary depending on property type, area and purpose of the appraisal.
"Appraisers identify what contributes to the value of the home. There are generally accepted notions of what's important for a property: for a warehouse, it might be freeway access; for a home, it may be the school district," Tish explained.
Some appraisers have their own checklists, while some follow the Fannie Mae guidelines for evaluation.
"Banks may also have their own criteria or checklists," Tish said.
Appraisers usually get their data from rental statistics, sales history, brokers' lists, multiple-listing services and public records.
"Appraisers may also approach us for local knowledge and to get access to places," Wang said.
Most appraisers use the sales-comparison approach, comparing similar properties in competitive markets and reconciling adjustments to the property value.
"Each lender has their own rules. In general, lenders want to see at least two comparable sales in 90 days; some require four closed sales within a mile," Dierx said.
Finding comparable sales is one of the challenges that appraisers face, especially in a volatile real-estate market.
"If the prices go up too fast, appraisers find it difficult to justify the value," Wang said. "In the past year, it has become difficult to find enough comparable properties. ... We're seeing many under-valued appraisals."
Different neighborhoods also call for different adjustments.
A "white elephant on the block" -- for instance, a 3000-square-foot home that a contractor built on a 12,000-square-foot lot -- may also cause problems when trying to find a comparable sale within the guidelines, Dierx said.
Other appraisal approaches include the income capitalization approach (used to estimate the value of income-producing real estate) and the cost approach (based on estimated value of land and cost and depreciation of improvements).
"We apply all three approaches and find out which one gives the value of greatest confidence," Tish said, highlighting the case of a property purchased with substance contamination his firm is currently working on. Using all three approaches, they will compare the property value in its uncontaminated state with its present value, apart from estimating the cost of remediation and long-term effects of the contamination, he said.
Depending on the purpose and complexity, an appraisal for a mortgage loan may cost between $300 and $500. Legal disputes or charitable tax evaluations may cost significantly more, according to Tish.
"We usually do phased assignments: (complete) an initial appraisal and give our clients a ballpark figure. If they are satisfied, they continue working with us," he said.
Appraisal reports are reviewed by the lenders or AMCs by independent or in-house reviewers, or other appraisers.
Homeowners may also appeal or ask for a rebuttal of the appraisal report, if they have enough data to back up their claim, Dierx said.
Appraisers are certified either by the state or by private institutions such as the Appraisal Institute, a professional organization that awards two professional designations: SRA, to residential appraisers, and MAI, to commercial appraisers.
Appraisers are also expected to follow the Uniform Standards of Professional Appraisal Practice (USPAP), enforced by the Appraisal Foundation, a congressionally authorized nonprofit organization.
"Establishing an identity in the marketplace takes a lot of networking, follow-up and hard work," Dierx said.