Finance 371: Blog Assignment #3

Blog Assignment #3

In the video above, the job description of a real estate is both described and acted out. The day to day responsibilities for an appraiser, as described by the U.S. Department of Labor, are to "estimate the value of the value of real property-land and the buildings on that land-before it is sold, mortgaged, taxed, insured, or developed."

According to the United States Department of Labor the necessary requirements to become an appraiser include an associates degree, an appraisal license, as well as time spent as an apprentice to an appraiser. The job market for real estate appraisers is pretty competitive, as the growth rate of the job is less than the national average. Finally, the average median pay according to the U.S. Department of Labor for a real estate appraiser is $48,500.

This article explains the job of an appraisal as, "to help establish a property's market value." It goes on to say that it is customary to have an appraisal made on real estate when making a purchase for loan purposes. This is due to banks and lending institutions wanting to make sure there is substantial collateral for the money they are lending out.

The video gives the reasons to have an appraisal on a house before making a purchase, but also gives warning to how an appraisal can be misleading. One reason for bad appraisals is due to the relationship an appraiser might have with the real estate broker. The potential for incorrect appraisals increases when there is an existing relation because the appraiser will get paid regardless, and can help his broker friend out by overvaluing the real estate.

Some of the major employers in the real estate finance field include GE Capital, NorthStar Realty, and Walker & Dunlop. On the Walker & Dunlop website a list of potential careers in real estate finance are given, as well as a description of each career. A few of the careers that are mentioned are an insurance analyst, asset manager, and production analyst. An insurance analyst will mainly be tasked with the job of making sure the insurance coverage is appropriate for the investor guidelines and the borrower. The job of an asset manager is to manage assets, oversee performance, and to recommend new assets. Finally, a production analyst is charged primarily with sizing and underwriting loans.

There are many real estate trade organizations, including the American Land Title Association, American Society of Appraisers, and the Institute of Real Estate Management. Each are very important to professionals in real estate finance, as they all are needed to complete a real estate transaction. An example is the Institute of Real Estate Management which connects real estate professionals to help spark business opportunities.

In the article there are many different types of loans that can be used to finance real estate. Balloon loans, adjustable rate loans, and fixed rate loans are just a few of the many loans that are available from lending institutions. The terms for loans such as these can vary for 10 to 30 years usually.

The author says that when presenting to potential investors there are 3 steps to convincing them to invest. The first step is to show them the market value of the real estate currently, and show how it is lower than the asking price. Secondly, use pictures to give the investor a clear idea of what the real estate looks like. This can go a long way in convincing the investor that it is a good investment. Finally, the last and most obvious step is to show the investor the features and benefits of the real estate. This should sell the investor as to why the real estate is worthy of their investment.

This article lists ideas for financing real estate in ways out of the ordinary. I found most interesting that a way could be to use collateral from another property to finance a new one. Also, a person could use 401K borrowing where they use some of their pension they have earned. After reading about the ways that one can finance real estate, I was very surprised there were so many avenues available to finance real estate.