Appraisal Fees & Value: Lessons from Picasso & Steinmetz
The Appraisal Institute has been a source of frustration and criticism within the appraisal profession for quite some time. I must admit that I have also expressed my dissatisfaction with them. Nevertheless, I must acknowledge that the new CEO, Cindy Chance, appears to be a positive change and is making some valuable points about our profession from her new position. In particular, she recently discussed appraisal fees in a piece she wrote.
In this excerpt, she shares two stories that provide valuable insights. These stories, one involving art and the other science, highlight the fact that appraising is a combination of both.
Last week I wrote about the scarcity of professional appraisers relative to other highly skilled professionals, and it made me want to share with you two stories with something to teach us about fee levels and confidence in the value appraisers offer. Appropriately, one involves art, and the other science. (Appraising, it is often said, is part art, and part science…)
First is the story about a young woman who encountered Pablo Picasso one spring day, in a park, sketching. She begged him to sketch her. He graciously agreed, and following a few moments of study and drawing, handed her a sketch of herself. When she asked what she owed him, Picasso answered “$5,000 madam.” “But it only took you five minutes.” “No, madam, it took me my whole life.”
The other is a story about a brilliant engineer and mathematician, Charles Proteus Steinmetz, who was called to Ford Motor Company to solve an intractable problem with a massive generator. After inspecting the machinery, he marked a chalk X on the housing of the generator, and told the Ford engineers to replace a specific component located inside the generator just behind his chalk mark. The generator was quickly returned to service and he then produced a bill for $10,000. When questioned by Henry Ford about his seemingly huge fee compared to the short time it took Steinmetz to diagnose the problem, he broke it down into the following components: “Making a chalk mark on the generator, $1. Knowing where to put the chalk mark, $9,999.” Henry Ford paid the bill.
And what is the moral of these stories?
Know your value. And charge what you are worth. Quality has a higher price because it is more valuable. Experience cannot be bought, but it can earn you more if you highlight its value.
The skills mastered by professionals at the top of their games may make what they do appear effortless to others, but it’s the mastery that makes the difficult look effortless. What the best professionals bring to every challenge reflects a lifetime of study and practice, and this is what others are paying for when they buy professional services.
These two stories, as highlighted by Cindy Chance, provide a powerful counterpoint to the all-too-common tendency to undervalue the expertise of appraisers. Just as Picasso’s sketch and Steinmetz’s chalk mark represented the culmination of lifetimes of mastery, the work of professional appraisers is rooted in years of specialized training, experience, and refined judgment. By invoking these illustrative examples, Chance appears to be challenging the appraisal profession to assert the true worth of their services and to resist the pressures that often drive down appraisal fees to unsustainable levels. Her leadership and this thoughtful commentary suggest a promising new direction for the Appraisal Institute, one that may help restore confidence in the vital role that appraisers play in our economy.
This is very good news for Appraisers, and I say that with caution as someone who recently retired from the profession. I was a research scientist turned appraiser, and spent the previous 20 years in the profession. I prided myself on detailed analysis of complex properties and was always up for a challenge. It became exhausting as I realized that the majority of clients could care less about your detailed analysis and rarely read the comments provided in the report addendum. It always took me a little longer to produce a report that I was proud to put my name on. Last August, I decided I’d had enough of the lowest bidder gets the job. In spite of the fact that about 50% of my business was private, I just couldn’t justify sustaining the business model of taking on only four to five reports a week.
***This comment was edited by AppraisersBlogs Team. Profanity is edited out because it’s inappropriate within the context of this blog.***
Agreed, now what we should all quit because some f** appraisers, cannot get work without kissing the worthless amcs a**s?
The issue extends beyond just the fees; it lies in the fact that AMCs are obstructing opportunities for anyone outside their selected pool of appraisers. These appraisers, in collusion with the AMC, agree to reduced fees and faster turnaround times to secure the majority of the workload, effectively shutting out other professionals.
EJ, the legal language for your argument is Anti Trust and Restriction of Trade.
https://en.wikipedia.org/wiki/Sherman_Antitrust_Act
https://en.wikipedia.org/wiki/Racketeering
The amc industry has it all. Harm to consumers, harm to provider competition, price fixing, collusion, monopolization, a function to conceal dealings from regulatory authorities, restriction of trade, racketeering, etc. The amc industry fails certain tests because; They do not return cost savings to consumers. They do not benefit the market place with their service. Their service actually causes harm. And the type of service provided is not generally necessary.
The appraisal trade groups fail to recognize appraisers important contributions to consumer protection, to acknowledge that almost all mortgage lending appraisals which consumers rely on, the literal majority of all appraisal work out there, is run through amc syndicates whom continue to engage in anti competitive practices.
Mortgage lending appraisers can not over ride the fact that amc companies have a financial motivation to drive appraisers fees down, drive consumer fees up, pocket the difference, conceal the billing distribution, then send the vast majority of all work assignments to the lowest priced appraiser(s). Denying the most talented and skilled appraisers in the business the ability to work, driving them out of business instead. It’s called amc junk fee billing fraud, and is the industry standard, not the exception. Appraisers do not need basic lessons on the value of service.
Bravo! Especially love that last line.
Bill Black talks about this a lot.
In a perfect world that would be gospel. Unfortunately it’s not a perfect world.
not sure how to get this out – but The CFPB encourages comments and data from the public and all interested stakeholders. Comments must be received within 60 days of the request for information being published in the Federal Register.
on this from 5/30/2024
press@cfpb.gov
CFPB Launches Inquiry into Junk Fees in Mortgage Closing Costs
it says they want comments – so everyone should comment – with all the hidden fees – or anything – let it all out
https://financialregnews.com/cfpb-launches-inquiry-into-junk-fees-in-mortgage-closing-costs/
https://www.consumerfinance.gov/about-us/newsroom/cfpb-launches-inquiry-into-junk-fees-in-mortgage-closing-costs/
____________________________
How does the CFPB share complaint data?
We’ll share your complaint with the company so it can review and respond to the issues you’ve described.
____________________________
Good luck. Mortgage lending is only a side focus, not likely to get much attention. The CFPB will apparently tattle on any and every appraiser to the same companies the appraiser complains against, publishing official complaints with the appraisers name stated, sent directly to the same company the appraiser complains against, or the CFPB will likely disregard the comment. File that complaint and volunteer to be blacklisted.
Pressuring appraisers works. And works very well.
“Chance appears to be challenging the appraisal profession to assert the true worth of their services and to resist the pressures that often drive down appraisal fees to unsustainable levels”
Are you sh*tting me?
The cheerleading comments of Cindy Chance are condescending and insulting. Appraisers know our worth. Why are appraisers leaving the industry? There are many reasons, but the system is broken when appraisers must bid for work at fees similar to when they first became licensed 25 years ago.
She needs to spearhead the effort in any way possible to address the problem – AMC’s. Do your job Cindy Chance. Fight for the appraisers and fight the real enemy.
Cindy obviously is not a working appraiser. If she is, I’m shocked at the nativity. The take is unicorns and rainbows. She can’t possibly be following this blog. In theory, it sounds great but to a realist, that ship has sailed.
At one time, I could pay my rent with one appraisal. Now it takes six.
Knowing your value is slightly irrelevant when you have 300 starving appraisers willing to undercut your quote.
It becomes massively irrelevant when the keys to the ordering system are handed to criminals (AMCs) who use reverse auctions to disperse jobs to the lowest bidder while simultaneously elevating the cost of the appraisal for maximum profit.
In my opinion, the appraiser who truly understands their value left this business years ago.
LMAO! What we think and or believe about ourselves is not even a remote consideration to the whatever’s who hire us. Their entire job is to beat us down as low as possible so that their bottom lines can look good. I’m sure it won’t be long until they’re “outsourcing” appraisals to India or some such anyway. They already outsource reviews. Are those people licensed, certified, designated? Appraising is not even appraising any longer anyway. According to the GSE’s and the Bitin’ regime, we’re to be little other than “agents of social change and equity” and or “social justice warriors”, crusaders with DEI in big bold letters on our shields.
I’m not gonna throw my eggs into this basket until I see results. Anyone can say what they want. Prove it. Show it. Engage it.
I’m not AI but I know from the past that words mean nothing. Actions mean something.
I agree. It’s all talk until we see positive changes.
AMC work is a joke and always goes to lowest bidder. I have been an appraiser for 32 years and do mostly private work now
https://appraisalfoundation.sharefile.com/share/view/sf13f260546f149ab82622a87a8c94d23
Read this. Another industry review paper. Data interpreted by people whom do not actually work as active appraisers. My total licensed numbers have been off, sorry about that. Get ready to retest with increasingly difficult testing peramiters in order to retain and renew the appraisers license or face a licensing downgrade. These people live in a time capsule, really don’t understand the real world situations for many appraisers today.
Once again, I’d prefer that the ‘Powers That Be’ just say the quiet parts out loud. They don’t want appraisers.
Appraisers are getting squeezed from both ends – the regulatory side of Fannie and Freddie, HUD DEI nonsense, and state boards, AI and appraisal waivers; and then from the broken client/AMC model.
If it becomes mandatory that appraisers must retest every 2 years to hold their certification, in addition to 21+ hours of CE and USPAP, I’m out like a scout.
Book sale revenue must be down. If one suffers a licensing downgrade, would likely to be subjected to updated college degree requirements to regain the license. Even if you pass the tests, the proposal is a never ending series of additional fees and specifically required collegiate level class work based specifically on your wrong answers.
The long form link is in the post I provided above. This is the abbreviated with lists of questions for appraisers to answer at the end.
https://appraisalfoundation.sharefile.com/share/view/sa70550f1c41743fcb240e2deeceabe30
This is the survey link they just asked appraisers to fill out about the educational proposals.
https://www.surveymonkey.com/r/AQBComments
The appraisal industry by way of managements bat **** crazy approach to fluid rule making, presents as an ongoing contradiction which is never resolved. For just about every single policy and advisement related to appraisers primary responsibilities, they have recommended the opposite thing in the past. Nobody is in charge, policy and advisement changes daily. The appraisal industry has no clear long term vision, planning, or goals.
It seems to me this is selective discrimination against one profession, appraisal. If one profession can be made to retake their “licensing” exam every two years then ALL professions should be made subject to the same standard including, but not limited to; lawyers, accountants, realtors, brokers, doctors and the list continues. Why should any profession be excluded? This has gotten out of hand when they can “willy nilly” say that the appraisal profession is different. There is a case here.
I was a certified appraiser for 20-years with the ability to support my family, save for retirement, take a vacation here and there. Typical middle class life. As the stranglehold of the AMC set in that was no longer the case. I started to trim all the expenses to survive, including giving up my SRA designation. I couldn’t justify the cos of dues. AI made no retention effort. Even my cable company offers me incentives to stay. I could no longer support myself much less a family when handcuffed to the lowest bidder in my market. For the life of me I have no idea how appraisers are able to derive credible adjustments and turn out a credible product and make a profit. It can routinely take an hour or more just to derive a single adjustment in my area. No cookie cutters here as I assume they are gobbled up by AMC staff. Sure – I enjoy the complex work, but the reality is there is not enough of that to sustain oneself financially. AMC s have uberized the appraisal profession to nothing more than a gig with lower barriers to entry and a race to the bottom of the fee barrel. Same progression happens in all functions are relegated to apps. Rideshare, food delivery, package delivery, etc. With everyone on the same rung of the ladder regardless of experience or quality, what’s the point. An individual with a mortgage, car payment children has to work for the same fee as the new appraiser still living at home with parents who thinks $200 for a 1004 is a windfall because you can get a 30-pack and a tank of gas.
Most appraisers are form fillers. The appraiser came back with a range from $625,000 to $850,00 (after adjustments), and the appraiser chose $750,000. Give me a break. Why not just take a guess and save the appraisal fee?
Unfortunately the process has become so complex the form fillers are doing well if they manage to walk away with minimum wage. I applaud those form fillers for providing minimum research for MINIMUM PAY!
If you are billing less than $800 per easy appraisal you should aspire to become a form filling appraiser. Most accredited tax people without degrees (form fillers) bill $300 to $400 PER HOUR and have a fraction of the training time required by appraisers. If an appraiser billed at the same rate they be billing $2,500+ for a simple assignment.
You better believe I would be a cut corner form filler if I were crazy enough to accept beggar wages.