What does MAI stand for?
“MAI” refers to a professional designation offered by the Appraisal Institute. The Appraisal Institute is the oldest and most well respected appraisal organization in the United States.
MAI’s are generally considered to have experience and education roughly equivalent to a ‘doctorate level’ of commercial real estate appraisal.
MAI stands for “Member Appraisal Institute”. While the acronym does not have a substantial meaning to most people in and of itself, the experience and education required to achieve the MAI designation encompasses completion of the most rigorous coursework, report writing and examination process for any appraisal designation.
The process of achieving the designation requires completion of theory/coursework, appraisal report writing, specialized experience and multiple examinations.
Achieving the MAI designation has historically taken about 5-10 years from the onset of pursuing the designation, for most appraisers. Though this may change moving into the future as the Appraisal Institute appears to be lowering the requirements for designation.
Throughout the designation process, an appraiser’s knowledge, judgment and ability to evaluate both simple and complex valuation models is fine tuned.
As a result, MAI’s are considered to possess the highest level of knowledge and experience within the commercial real estate appraisal industry.
Many sophisticated real estate players such as REIT’s, large investment funds, developers, investors, lenders, pension funds, corporations and buyers/sellers, require the use of an MAI designated appraiser for their appraisal needs.
Additionally, seasoned commercial real estate attorneys drafting legal documents that are utilized to establish market values for commercial property (purchase options, rental rate renewal, etc.) typically state that the use of an MAI designated appraiser is required.
The MAI requirements have and will likely change through time. It is important to view current MAI requirements via the Appraisal Institute’s published materials, which override anything herein. Below are the generally representative designation requirements as of this post.
All candidates must have at least a four year Bachelor’s Degree from an accredited educational institution.
Courses or equivalent coursework required are as follows:
- General Report Writing & Case Studies (4-day course)
- Business Practices and Ethics (5-hour course)
- Advanced Income Capitalization (35-hour course)
- Advanced market Analysis and Highest and Best Use (35-hour course)
- Advanced Concepts & Case Studies (37-hour course)
- Quantitative Analysis (35-hour course)
An appraiser must have at least 4,500 hours of documented experience completing specialized appraisals, which are generally considered to be commercial or residential subdivision appraisals.
Upon submitting the experience log, three appraisals are randomly selected from the pool by the first reviewer. The reviewer examines the three appraisals for cohesiveness and adherence to appraisal standards.
Once approved to sit for the comprehensive exam (final exam), the candidate must pass four separate models. All modules include qualitative and quantitative questions. All questions within the comprehensive exam are designed to test knowledge with judgment.
The questions are not designed to merely evaluate whether the candidate can memorize a formula, theory, concept, or use a calculator. Rather, they are designed to test whether the candidate can integrate expert judgment into theory, concepts and values.
Put another way by the Appraisal Institute, “The object is to determine how an individual functions in the real estate world beyond the formulaic problems of the course laboratory.”
The four exam modules are as follows:
- Module 1: General Concepts, is a 3.5 hour exam that tests on areas such as general appraisal concepts, statistics, taxes, market conditions and value reconciliation.
- Module 2: Cost Approach, Highest and Best Use, Feasibility, is a 3.5 hour exam that tests on areas such as the cost approach, land value, depreciation, obsolescence, highest and best use, feasibility and real estate marketability analysis.
- Module 3: Income Capitalization Approach is a 4 hour exam that tests on areas such as the income capitalization approach, valuation of partial interests, investment and risk analysis and leverage.
- Module 4: Sales Comparison Approach, is a 4 hour exam that tests on areas such as the sales comparison approach, cash equivalence and reconciliation.
If passed, the final General Demonstration of Knowledge requirement must be met. Within this requirement, there are seven options available. Most appraisers have historically done the Traditional Demo Option which entails a very comprehensive “demonstration report” appraisal of a property, beyond what most appraisers do on a day to day basis. The subject must either suffer from some form of functional obsolescence, or a fundamental market analysis/feasibility analysis must be performed. Many appraisers will take time off their daily practices to complete the final report. It is said that 30 days is an appropriate time-frame to complete the demo report.
Lastly, the demo report is reviewed by another MAI and scored based on specific categories. The appraiser must pass all above requirements.
Receiving the MAI designation is the pinnacle of most commercial appraiser’s careers. Obtaining the designation requires dedication, skill and expertise.
Again, it is important to check for current MAI requirements via the Appraisal Institute as they can and will change. There are also multiple paths and individual can take to achieve the MAI status.
The above statements represent opinions only. There are plenty of other appraisal designations out there and someone could easily argue that others are ‘more prestigious’ or that an MAI is not at the ‘doctorate level’. Readers are encouraged to explore the myriad of professional designations and make their own determinations.