How To Charge Cancellation Fees

Dustin Harris

Dustin Harris

Certified Real Estate Appraiser at The Appraiser Coach
A multi-business owner and residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc. He owns and operates The Appraiser Coach where he personally advises and mentors other appraisers. His principles and methodologies are also taught in an online, Mastermind group. He and his wife reside in Idaho with their four children. Dustin Harris on e-AppraisersDirectory.com
Dustin Harris

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How To Charge Cancellation Fees - 'We Cancelled, Didn’t the Bank Tell You?'

A-Clients who have no qualms paying cancellation fees…

You’ve been driving for more than an hour and a half to your appraisal appointment. So, you decide to call the client and let them know you’re almost there – only for you to get told, ‘We cancelled, didn’t the bank tell you?’

For those involved in real estate appraisal, this is an all too common experience. The flip side is that they get just as angry when the bank cancels and we don’t call them to inform them. So let me share some tips with you on how to effectively deal with these situations.

Previously, I used to charge a “drive fee” to cover the cost of coming down for the appraisal observation, but that was until I had a change of perspective; think of yourself as a professional and place great premium on your time. It’s not just your fee that counts anymore, but your hourly rate. So, when a client cancels an appraisal while you’re already on the road, it’s not just the time spent on the highway that was wasted, but also all the time spent on working on the project while at the office, scheduling, etc. At my office, we pull most of the comps before getting into the onsite inspection. Usually, we’ve checked out the county records and prior deeds and zoning. We’ve made some comparisons and probably even started some adjustments. All of this (not just the drive time) represents man-hours spent on the prep work for this client, who just cancelled!

It makes little sense to only charge for the drive-out – like that was where the job started and ended. An average appraisal in my area goes for around $500-$600. It makes it worthwhile to also consider the cost already incurred by the appraiser and staff before the drive even began.

Of course, you are probably thinking, “but the guys I work with only pay me around $50 -$75 per drive fee.” If that is the case, you should consider looking for new clients.

In my office, I can easily see the number of manhours my office had invested into a project and come up with an appropriate cancellation fee. Whether they pay or not is another ball game altogether – depending on the client they are – but if they establish a pattern of abrupt cancellations without considering the cost incurred on my side, I can easily make the business decision to cut them off.

To sum it all up, we need to stop looking at ourselves as technicians, but rather, as professionals. If you hire a lawyer, he would charge you per hour. If you told him to draft an employment contract and halfway into it, you weren’t interested, you’d still have to pay according to the number of hours they had put into it.

So as appraisers, let’s look at ourselves, as business owners and place a great premium on A-Clients who have no qualms paying cancellation fees that are worth every minute of your time.

For more information on this subject, please download and listen to the podcast below: The Appraiser Coach Podcast Episode 306 Charging Cancellation Fees for Appraisals

Image credit flickr - Joe Wolf
Dustin Harris

Dustin Harris

A multi-business owner and residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc. He owns and operates The Appraiser Coach where he personally advises and mentors other appraisers. His principles and methodologies are also taught in an online, Mastermind group. He and his wife reside in Idaho with their four children. Dustin Harris on e-AppraisersDirectory.com

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8 Responses

  1. Philip Gray on Facebook Philip Gray on Facebook says:

    I was told by a lawyer to have a “Cancellation Policy” published on your website and stick to it. Here is mine as a sample -> https://www.porchlightappraisal.com/cancellation-policy

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  2. Lori Alexandra on Facebook Lori Alexandra on Facebook says:

    Lenders have no problem cancelling the day before a due date or the day of the due date. Mind boggling.

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  3. Al says:

    I have no had problems getting paid for my time when a assignment is cancelled. Based on the level or work. I provide documents of what this entailed; MLS or Sale/Listing sheets, subject property profile, and if any field work photos of the comps, and the subject, they called me just as I was getting out the car door. I add a little for creating this file. I have gotten 40-60% of my fee base on the level of work. What I have is this need to be done within the 24 hours of the notice and a call to the process immediately after I get the notice. This has worked for me even for the ones that state their low cancellation fee.

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  4. Koma says:

    No problems here. You work for reputable companies then there will be no problems. Happened to me once in ten years and learned what to look out for. Money well spent so to speak.

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  5. Bill Johnson says:

    I work from a 10 to 20% rule of thumb, meaning all of my clients get updates as each +/- 10 to 20% of the estimated time to complete the assignment gets done. In some cases, (local property, purchase (recent interior photos), agent interview, already drove by to look at exterior, past model match sketch in hand, etc.), I can bill for 75% of my total fee prior to the physical inspection. It’s much easier to collect ones value (work completed), while documenting as you go, then to receive a cancellation notice and after the fact try to prove your work completed. As most of my work comes from the VA, I also include their verbiage relating to cancellations.

    “Cancellations – Lenders must notify the fee appraiser and VA if a case is to be cancelled. A reasonable fee for partial work already performed may be charged at the discretion of the appraiser. Appraisers who have completed the appraisal report may charge the full fee.”

    Seek the truth.

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  6. David says:

    I always tell them that the appraisal is complete, too late. That does mean you have 24 hours to complete it – NO PROBLEM! Have not been stiffed yet!

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  7. Charging trip fees is standard operating procedure. Sometimes  we are able to charge for preparation work on cancelled appraisals. One should be compensated for work completed preparing for appraisals. In addition it is my opinion that AMCs should be charged for requested bids. They take up you time checking and use your bid to achieve lower fees from others. If you do not check in advance, you will receive problem assignments that may be more work than they are worth.

    It is suggested that a bid fee that is credited against the total appraisal fee become an industry standard. This would limit soliciting many appraisers on the same property and selecting the cheapest not necessarily the most competent.

    It has also become a policy to charge for revisions that are due to the client’s errors, or unnecessary revision requests, particularly when there are secondary and tertiary reviews or revisions for items not addressed in the first revision request.

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  8. Baggins Baggins says:

    Sure in a perfect world. I’ve heard this response multiple times by aggressive panel managers;

    If the engagement terms do not work for you, we can move down the line to a different appraiser.

    The new thing is that the waiver for appraisal services is sought after they order the appraisal.

    The hits keep on coming from every direction and I simply do not believe that when dealing with mortgage lenders, appraisers have as a rule of thumb, the power to charge these fees or set reasonable terms.

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How To Charge Cancellation Fees

by Dustin Harris time to read: 2 min
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