Appraisal Fees Do Not Tell The Whole Story
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Is it possible that the company with the lowest bid will also do the worst job?
If you are on social media platforms where appraisers hang out for any length of time, you are bound to see a version of the following, on a regular basis:
“I was just offered $275 to do a full appraisal in my hometown. Before I had time to email the AMC and tell them how ridiculous a fee like that is here, some other appraiser accepted it! Can you believe that? What kind of low-life appraiser does a full 1004 for $275?”
This kind of post is typically followed up by other appraisers piling on with their own stories of a similar nature or of hopes and dreams of leaving the profession soon and slamming the door behind them. To be clear, I do not do full appraisals for $275 either, but I am also not as critical of those who do. Why? I do not know the whole story.
Let me set this up with a scenario that recently happened to me. I have a rental property that was in need of some plumbing repairs. Accordingly, I called three, separate, companies for bids. Unsurprisingly, they all came back with different numbers. Two were fairly close in their estimates and one was substantially lower. Why is that? How is it that three companies can all look at the same job and not come up with an identical number as a cost to fix? The answer is complicated. Is it possible that the company with the lowest bid will also do the worst job? Is it possible that the technician will be less experienced, unprofessional, and will simply have a lower quality of work? Of course, but that is not the only possibility. It is also quite possible that the company with the lower bid has better tools, a well-trained support staff, and a streamlined business model; all helping them to complete the job more efficiently, with a higher quality, and still do it for less money than their competitors. These are the hallmarks of a company who will still be around tomorrow.
What does that have to do with an appraisal office, you might ask? Surely I am not comparing fixing pipes with valuing properties. You are right; they are different professions, but they are still both professions. Business is business whether you are cleaning out a drain or measuring a house. Better tools will indeed allow you to save time without cutting quality. Hiring, training, and managing a great support staff will allow the appraiser to focus on the things they should be doing rather than getting distracted by tedious work that could be delegated to others. Continually refining your procedures and streamlining the way you do business will not only allow you to do more work in the same day, but may open the windows to a better quality of work because you are more careful about how the product is moved, from inception to delivery.
When an appraiser’s peer accepts a full appraisal for $275, it seems like a travesty. To an outsider, it might seem as if they are scraping the bottom of the barrel, cutting corners, and giving the rest of us a bad name. Most likely, your judgments are correct. There are those appraisers out there and I have even reviewed a few. I have even met a few of those appraisers over the years. How they continue to keep their licenses, I do not know. However, their fees do not always tell the whole story.
Ever since HVCC and Dodd-Frank, appraisers have had a harder time making a living. There are real reasons for that. We should fight hard to overturn bad legislation and over-regulation. However, there is still a way to make a very good living as a real estate appraiser in today’s reality, and it does not mean we have to cut our prices so we can get more work than the next guy. Taking off our technician’s hat and donning our CEO cap once in a while will allow us to look at things from a whole different perspective.
The most successful business models I have observed do a good job of balancing three, main ingredients: investing technology, surrounding yourself with a well-qualified team, and streamlining your processes. This will allow you to do excellent quality work, but more efficiently than your competition. As for fees, I would not suggest you cut them and become, “that guy.” However, being open to getting outside the box once in a while and look at things from a business owner’s perspective, may allow you to remain competitive, accurate, efficient, and successful, all at the same time.