Customary but NOT Reasonable Fees

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Customary but NOT Reasonable Fees

REASONABLE needs to become the appraiser’s operative word

Appraisers,

It’s time to grow a pair as some people say, or to stiffen the backbone, and quit caving in to the low ball fees being offered by some in this crazy “industry.”

Another true statement is “you are what you are worth”.

If you, as an business person, only know how to say yes to low fees, you won’t be worth anything higher to the majority of clients. Further, your self image and actual net worth are negatively impacted. You cannot expect to earn a certain income, then wonder why you gave yourself a bloodbath by working for peanuts. You cannot sell at a loss, expecting to make up the difference in volume.

The subject of C & R fees, as mentioned in the Dodd-Frank law, was intended to protect the local appraiser. That concept was diminished and watered down by the Federal Reserve Board when they issued their Interim Final Rule to implement D-F into the main stream. As a result, appraisers have been taken advantage of by less than honorable clients, and unfortunately, far too many appraisers have succumbed to this nonsense.

It may be ‘customary’ to accept low fees, but it certainly is NOT reasonable.

REASONABLE needs to become the appraiser’s operative word, the operative attitude, and the operative action whenever you are asked to quote a fee for a particular assignment. To quote the same ‘customary’ fee for all types of assignments, regardless of difficulty, is suicide.

Case in point: I was recently asked to be the second appraiser for a non-commercial ‘horse property.’ This property is 20 acres, with house, stable, riding arena, paddocks, barn, etc., all necessary to support the equestrian use. The first appraiser quoted a fee similar to what might be offered for a simple house in a subdivision. My quoted fee was $150 higher. And even that might not be high enough! But this certainly is not a ‘customary’ assignment worthy of a low ball ‘customary’ fee.

To consider what might be REASONABLE in your area, click this link for the WorkingRE fee survey.  This gives you a good foundation for what your lowest fee should be for the basic type of assignments.

You are a professional. Reasonable should be the way you charge for your service.

‘Customary’ is just a disguise for low-balling. To heck with that!

By Dave Towne, AGA, MNAA, Certified Residential RE Appraiser, Accredited Green Appraiser
Towne Appraisals, Mount Vernon, WA
Dave Towne on e-AppraisersDirectory.com

Image credit flickr - Sebastien Wiertz
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28 Responses

  1. Retired Appraiser Retired Appraiser says:

    You are preaching to a band of idiots. Today’s appraiser finds that it’s easier to break even and stay on their little hamster wheel than to grow a set, make a statement and find a replacement job to boycott AMCs.

    I stand up and applaud those who grew a set and left the business as a matter of principle. I have no respect whatsoever for the “profession” today. Today’s appraisers don’t even realize that they are as much of a problem as the AMC that puts in the bid for the lowest paying order. They simply gloss over the fact that they participate in extortion every time that accept an appraisal order. It’s that simple folks.

    You either have morals or you don’t.
    You either have a set or you don’t.

    All the petitions in the world will do no good at this point in time because AMCs have more than enough staff appraisers to do the work. If that failed they would turn to AVMs which is fully stocked with data now compliments of the free data you provided to them via the UAD.

    A full 20% of appraisers have left the business over the last few years. Why? Not because they wanted to, I assure you. They left because they were professionals were fully capable of assessing the value of their own time. They left because they had a set. They left because it was the right thing to do to stand up for their profession.

    As a professional appraiser you should look into the mirror each morning and ask yourself one question. Am I an appraiser or am I an AMC prostitute? If the answer is prostitute the solution is simple. Grow a set, switch jobs (yes it is a JOB…not a career), and walk away.

    If you can walk away from it; you have the right stuff and you deserve respect from the most intelligent appraisers in the U.S. today; those who walked away.

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    • Mike Ford Mike Ford says:

      Dear Retired,
      Many of us were not raised to be quitters. I once spent four years of my life to help change the composition of an entire city council (successfully).

      Why would I do less for my profession? I have morals and a strong sense of ethics. I only work for ONE AMC now, and it is owned by an appraiser I mentored for over seven years (after telling him NOT to get in this business). He ALSO has morals and ethics. A condition of my working for him is that I get to yell at him about low fees, idiotic requirements, and unnecessary addendum or rebuttal needs.

      The focus of my business is toward C&I and litigation work, BUT residential is still needed to fill the void between orders. I am NOT cheap, and my volume DOES suffer from it.

      An associate and I just opened a new office on Wilshire Blvd. in best area of Beverly Hills. We choose to seek out new opportunities…rather than burying our heads in the sand and leaving ourselves vulnerable ‘elsewhere’.

      By the way, I neither need nor want the “respect” of self proclaimed most intelligent appraisers that walked away. I’d rather have the respect of my true peers. Those that stay and better our profession.

      But that’s just me.

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      • Retired Appraiser Retired Appraiser says:

        Mike

        In my opinion $600 is too low of a fee considering the fact that work load per appraisal has doubled and the liability has increased five fold. Someone has to accept those $200 to $300 orders; I am overjoyed that it is you and not me.

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      • Retired, Big difference between $200~$300; and $600. Frankly I think the “magic number” for “reasonable” on a conforming loan limit, FNMA UAD compliant appraisal is $650. I’d even concur with VA limits of $500 for the same thing. I’ll work to that end. Personally I think anything that REQUIRES a certified level appraiser should start at $750 and go up from there. In the meantime I try to focus my business model toward more commercial work, but even there national AMCs are lowering fees (PCV Murcor comes to mind).

        RE Buggy Whips in email to me, *G* You sound like my IRS appraisal buddy down in Alabama. He says the same thing.

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  2. John Moonitz says:

    I agree with Retired Appraiser . . . This article completely misses the mark, because it is encouraging professionals to stay in this industry and simply “demand” higher fees . . . What happens when an appraiser does this? They get NO WORK! PERIOD!! So unless they are independently wealthy, live off a trust fund, or etc., the only answer I see is exactly what Retired Appraiser put forward . . . QUIT!! Find other work, another professional field, even if you mean to return to the appraisal industry if things genuinely improve to where it is a respectable industry again . . . IT ISN’T RESPECTABLE NOW!! I took far too long to finally cut the strings with this industry, but I did . . . and I am ecstatic over this (and a bit freaked out)! The reality is that this industry is not likely to improve within the next 10 to 15 years, if ever . . . do you REALLY want to work for McDonnald’s wages for the next 10 to 15 years . . . or for the rest of your professional life?? Well . . . there are many who will . . . I suggest you NOT be one of them!

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    • Retired Appraiser Retired Appraiser says:

      Thanks for the support John. Glad to see that I’m not the only nut who continues to advocate for what I consider to be the only intelligent choice.

      Still trying to figure out the photo above beside the caption. If I’m reading it correcting she is communicating to her father that she would rather put a double barrel shotgun to her head than follow him into what she considers to be a suicidal career choice.

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    • Mike Ford Mike Ford says:

      John, each of us must do (legally) what we have to do to survive. Why not work in the profession part time? Why not try to correct the problems we face?

      Personally, I LIKE hearing more appraisers quit in my state. It helps ME raise my fees and get more work in the long run. Maybe we will return to the conditions of 1986 when turn times for a simple house were 6 to 8 weeks BEFORE inspection was scheduled!

      Thank you and thanks to ‘Retired’ for thinning out the herd.

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      • Retired Appraiser Retired Appraiser says:

        Mike

        You are very welcome. I hope you get your wish of being the last appraiser standing. I think there is also one buggy whip manufacturer in business in the U.S. They exist because they still market a novelty.

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      • Retired

        Even with UAD and MISMO, the commercial side will continue to require appraisers. TAF and the GSEs can pretend that AVMs fill the void, or are ‘acceptable risk’ alternatives for sfrs, even though the recent collapse would disprove that, but the commercial investors still want to KNOW what security for a loan is worth.

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  3. Jeremy Hall Appraisals - Colorado Jeremy Hall Appraisals - Colorado says:

    This is a hard cost, soft cost argument at heart. / Various analysis points to the standard appraisal fee needing to be $700 or better, if appraisers were to enjoy the same comparative earnings latitude to brokers, as we did 20 years ago. Our fees are held down by both middle men who profit by doing so, as well as by the fact our fees cannot be financed into loans, which causes stagnation in our fees since out of pocket costs are a major consideration point for front end customer sales, with lenders. Demand of the lenders, that they at least force the amc to have their own set fee per order, so the amc’s are not driving down appraisers fees for variable opportunistic profit. / Or the idea I like better, is to move all representative costs into a separate loan package, or cash cost basis. In a perfect world, residential markets would not experience the same level of consistent inflation, as they do with integrated representative service costs reflected in the sold price. When they call you, they need you, price accordingly.

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  4. Jeremy I agree completely re amount of fee, though it is a separate topic from the mechanics of how it should be paid. Your proposal still makes it a contingent fee.
    I want my money up front.

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  5. Jeremy Hall Appraisals - Colorado Jeremy Hall Appraisals - Colorado says:

    No, it does not have to be a contingent fee. A simple cc backup form would do. Never should the appraisal fee be contingent. That does not mean we have to be held in a hard costs category indefinitely. I’m more concerned about the ability to access orders. The financialized incentive to drive down appraisers fees for variable opportunistic profit is a major problem. Let cost savings be returned to consumers. The current appraisal fee range is artificially depressed by third party market participators. And that’s why appraisers continue to quit. The choice of cod or billing payment, is really more aligned with the client choice. The core argument is that amc’s would not play this ruthless to save the consumer a dollar. They only do so, in a constrained system, to force additional earnings without any additional contribution to the process. aka; unearned fee or junk fee. I like the other blogs article about a trust account. Force the separation of fees today.

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  6. Appraiser morons says:

    It all ended when they prohibited appraisers from collecting at the door. That was the final piece to the puzzle for control.

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  7. bubba jay bubba jay says:

    i will say it again

    the ONLY way we will ever get reasonable and customary fees is if WE, are able to submit an invoice for the work have done! THATS IT. a quoted or billed fee should never come from anyone else. we should be able to bill for the work we have been asked to do. the fee that we will be paid, for our appraisal, should never come from an AMC or anyone else for that matter. secondly, if an AMC wants paid for their work, then so be it. BUT, their fee should NEVER come out of someone elses pocket, including ours. the AMC fee should be a line item cost similar to title work, termite inspection, whatever. they are another service, let them bill the consumer for their service. reasonable and customary fees for us are a total farse and will never happen, as long as an AMC or a bank is in control of our fees, and their profit is tied into what we are paid. keep adding work to my report, i dont care, but i expect to be paid for it. our fees have not gone up in 10 years, but the workload certainly has. a step in the right direction to save this profession and keep good appraisers, is to pay them appropriately based on the work that is asked of them, and their exposure to liability, both of which are very high right now. until at least this happens, you will continue to lose more and more people.

    let me also say this as a warning to whoever is listening. if our fees dont go up, (soon), and our costs continue to rise, more and more people will continue to leave because nobody will want to deal with this much headache and workload, and then discover they are working for free or only $15-20/hour. if gas prices continue to rise, if MLS fees go up again, if my insurance continues to go up, etc., we should have the freedom to raise our fees accordingly to cover those costs and still make a decent living. good luck getting any college graduate to do appraisal work unless this problem changes very soon.

    mark my words – we are getting very close to this scenario, and all appraisers know it.

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  8. The only way we will ever get “reasonable” fees is to stop playing the ‘customary & reasonable’ fee game. Legislators knew EXACTLY what they were doing when they used deliberately ambiguous language.

    In 1986 average appraisal costs were $250 to $275 in Southern California. Gasoline was about $0.84 a gallon according to State Attorney General Report done in ’04. That’s about 30% of what gas is today (at $2.60+- a gallon).

    IF appraisal fees had increased at same rate as gas (excluding the recent two year spike) to the above $2.60+- rate (03/04/15), then our current non complex SFR SHOULD be $917.00! OK, not all costs of living adjust the same as gas (though THAT is a biggy) .

    Whether you think “Reasonable” is $650 to $917 somewhere in between, I think we ALL agree that it should not still be $275!

    Use local multipliers just like the feds do. If you are in a low cost of living area, deduct 27% from the range (100% – 27% = 73%). $600 x .73 = $438. 0.73 x $917 = $669.41 SAY $670.00.

    We need to STOP playing the ‘customary game’ and focus on the reasonable side.

    My Guild is working toward educating people to that end (among other things).

    Join me at The American Guild of Appraisers (AGA) of the OPEIU / AFL-CIO. Its NOT your grandfathers old union. We stress education of our opponents – not the old style job actions that rarely work among professionals.

    Contact Jan Bellas at 1-800-660-1835, or me at mike@mfford.com

    Lets reclaim our profession!

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  9. A few hours ago I received a call from my old business partner and friend. He in turn was talking to me about a mutual acquaintance that he used to manage; and I used to supervise.

    The man in question is now a Residential Certified Appraiser. I won’t say where he is because I don’t ever want to be the cause of embarrassment to him. He is one of the hardest working, unflinchingly honest, conscientious appraisers it has ever been my privilege to know. He ALWAYS went the extra mile to do things right. He drove himself (and sometimes me) crazy if reported data did not make sense. He’d keep digging away until he figured it out. I’m proud if I helped him learn enough to become certified.

    We all used to do a lot of work for LSI back when they paid semi decent fees that were only about 10% below the competitive norm back around 1992. I think the norm was around $300 and they were paying $275+-. In late 1992+- they cut back to $235.  We lost a few people but most stayed.  Bear in mind the appraisers were being paid on a fee split. I think they got 50% of the firms fee. I was on salary for QC review and teaching work plus a split fee for field reviews. Back then it was much simpler to write up a report.

    Our guys invariably worked from 12 to 16 hours a day and most did two appraisals a day. Their comps were pulled for them and given to them with their assignments back then; and the appointments were set up for them. Even so, these guys broke their backs. Reports all had boilerplate templates where all the appraiser had to do was delete a word here, or add one there to “localize” it with some degree of relevance. Highest and best use was almost always assumed to be existing; unless I caught it as something potentially different in the review process; or they brought up unusual conditions before the write up.

    Once, the in house Chief Appraiser at LSI even came out to see us from Pennsylvania to thank us for saving their butts on a direct probable loss of $250,000 when a high powered dishonest seller tried to buffalo them into thinking his $500K house was in fact one of the nearby $750k models. Well, they said they came out to see us, but I think it was because they either wanted to see Disneyland, or because our owner always sent the cute receptionist with free tickets for everybody to go to Universal City. Back then we were very high volume appraisal mill for them. I usually had to Quick review 25 to 30 reports before 11:30 AM and then another 10 to 20+- before 2:30 every day. Do the math. We billed them about a quarter of a million dollars every month. Our guys mostly worked seven days a week until they completely burned out and needed a few days.

    Then LSI lowered the gross appraisal fee to $189. My salary disappeared and I was offered a fee position (No, but thank you!). I had options. My former trainees and lower license level appraisers did not have the same options. Many had higher degrees, but English was not their native language and without help, it showed in their work. Bear in mind these guys were only getting $94.50 plus mileage per assignment. One went back to driving a taxi. One went back to his native country where he was a nuclear engineer.

    When I next checked on them somewhere in the 2000 to 2010 era I think I was told they were only earning gross appraisal fees of $175 and had 48 hour from inspection to turn reports in!

    Today I asked a friend of mine to contact one of the older associates and was told he was still working for LSI “Well its not LSI and more but its the country that they turned into“, I was told. My friend couldn’t remember the name “How much are they paying these days, gross?” I asked. “You won’t believe it” was the reply. “Still $175?” I was only half heartedly joking.

    “Less.”

    “NO! That’s CRIMINAL!” “Maybe, but they are only getting $165 per appraisal now”. But then he also has to pay some kind of processing or uploading fee too.

    IF ANYONE that reads this in ANY state has first hand knowledge and confirmation of the appraisal fee being this low I would sincerely appreciate you emailing me the particulars. I think I may have just found the Guild’s newest “project”.

    I’ve already FOUND their new name. As soon as I can provide proof that the fees are as low as I’ve related here, I’ll publish it for all to see, and to avoid. Anything I can do that starts a class action suit against them; including trying to get the Guild behind it, will be done. These may be THEIR ‘customary’ fees, but they are by no means ‘reasonable’.

    They are one of those huge firms that offers all in one settlement and closing services. In fact you have to look fairly hard to even FIND appraisal services listed on their site…but they ARE listed.

    Any first hand info (meaning you were offered these fees; and approximately when), please email to me at mike@mfford.com  .

    Absolutely CRIMINAL, but only in the dishonest politician kind of criminal. Not the honest kind that goes up and just robs people without all the pretense.

    I wonder if the name change was to reflect their more inclusive services; OR because they turned the reputation of the old one into a pile of steaming pony loaf?

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  10. Oops

    Correction:

    “Well its not LSI and more but its the country that they turned into“,  Should be its the COMPANY that they turned into.

    Also, I was so angry over hearing this I even forgot to say if YOU have s similar situation, it is WAY past time to join the Appraisers Guild! Please contact AGA Jan Bellas at (301) 220-4100 or email to JanBellas@appraisersguild.org

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  11. Wish I could find my dictionary. Not the real estate one, the regular Webster one for English.

    M   o   n   o   p   o   l   y

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  12. As much as I respect WorkingRE for their unselfish integrity (and giving us another forum). no state C&R survey is unaffected by AMC fees anymore, even if those fees are excluded from the study. Websites are now telling consumers that “typical fees run from $300 to $750” depending on complexity. No independent university study is going to adequately isolate the AMC influence for current fees.

    $300 has not been a ‘Customary’ fee since 1990 through about 1995. Reasonable today?

    Is YOUR gas price the same as it was 25 years ago? Do you pay your mayor or police chief the same today as you did 25 years ago? How about Congress Members pay? Senators-are they still earning (er, excuse me being paid) what they were 25 years ago? How about doctors, accountants, attorneys, engineers? I contend that NO OTHER profession is still being paid what they were 25 years ago EXCEPT appraisers.

    From now I want to see either the VA minimum  as the minimum REASONABLE  AMC fee OR the federal GS pay scale equivalent for comparable license level skills as the AMCs dictate.

    By the way folks, quit bragging that you complete RE appraisals start to finish in six hours! It only HURTS are cause, and is not true for MOST. Unless you truly investigate the specific ownership interest being appraised (read CC&Rs lately? or the deed restrictions?); looked at zoning maps AND development standards under site analysis; developed PROPER land value via cost approach and properly developed costs data and estimated depreciation properly; AND used something other than boilerplate to explain exclusion of income approach, AND spoke with either listing or selling agents on ALL your comps, then  PLEASE do not make it harder for those of us that DO ALL (or try to do all) these things in the 8 to 12 hours it takes for each assignment, to get compensated for doing so!

    Attorney I spoke with today firmly said most appraisers he spoke with (Rels, Landsafe types) all told him its 5 or 6 hours start to finish. Folks, if you quote turn times that are the same as those on the bottom of the barrel, how do you ever expect to be paid what you are worth?

    Shoot for the stars and you never know how high you will or can go. Shoot for the bottom, and you WILL hit it every time.

     

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  13. Roy says:

    2 years ago I received a AMC email request to do a URAR on a home that was listed for $11 million. It was on 20 acres, 9,000+ sf with ocean views, a very complex assignment. The amc fee $300 and 3 day turntime. I replied with a quote of $3,500 and 4 weeks. I received a call from the AMC asking if I had a typo on my bid…did I intend to quote $350. hahahaha. My reply absolutely NO typo…..the fee is $3,500. I figured not only the complexity of the assignment but the anticipated time to be spent on U/W reviews and responding to questions.

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  14. Roy, this is a perfect example of what I am talking about. Even if they understood the significance of the order details they would not have had the ability o authorize a higher fee because I bet you the AMC agreed to a flat rate vendor fee of $495 with the lender. I doubt you keep your declined or unaccepted countered offers this long, but this is EXACTLY what I’d like to be able to take to the attorneys  and say: “See what happens? A REASONABLE fee gets quoted and the order immediately gets cancelled.”

    Unless we start documenting these things (name, email, state, order #/address , AMC & lender ) amount offered; amount countered and nature of complexity as you pointed out, we will never get anywhere. Simply print it to pdf or do a screen capture (SnagIt or whatever you use) how will we EVER be able to either change a Congress members mind; OR to engage in Class Actions?

    I think $3,500 in Hawaii would be a bargain. In California, its “reasonable” if the property is in BH, Bel Aire, Hollywood Hills or Pelican Bay / Newport Beach with lots of easy comps,  but even $5,000 to $7,500 would not seem out of line to me. Frankly if the market would bear it and if comps are all up an down the coast, then I think even $10k -$15k could be reasonable. Point is the appraiser quoted a very reasonable fee and they are shocked.

    Maybe no AMC should not be taking an order that they do not have someone  on staff that is not capable of doing that order (hypothetically assuming it were local to them)

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    • ray says:

      This happen some time ago.l didn’t keep the email docs. The property was located in Malibu hillside. It was a recent listing,so I had a lot of info. A very difficult assignment that require market searching and a lot more underwriting requests and headache which I consider when I quoted the fee. Yes, this c/r is a huge issue. Personally it has driven me away from most lender work. AMCs are bottom fishermen when it comes to fees. Overall, their lender clients are more important to them versus the lending appraisers.
      Thus appraiser are typically on the short end of the stick.

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  15. Ray, (& all others) I think instead of routinely deleting orders we decline from AMCs we should print them out as pdfs and maintain a low fee file of rejected orders. THEN send the whole thing to me.

    I do not consider myself bound by confidentiality if someone sends me an unsolicited order as part of a bulk mailing. Clearly they do not consider THAT info as confidential. Maybe redact YOUR last name and vendor number?

    Maybe notate copy with counter offer you made? Id be interested in hearing others views.

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