Appraisal Fees Do Not Tell The Whole Story

Appraisal Fees Do Not Tell The Whole Story - lowest bid job

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.

Dustin Harris
Latest posts by Dustin Harris (see all)
Image credit flickr - DaveBleasdale
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

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19 Responses

  1. Avatar KenQ says:

    How can the $275 appraiser pay a well-trained support staff? At $275 I can’t afford the cost of living in a one-man shop!

  2. Avatar Loadie says:

    I am tired of your articles. I wish you could get a grip man! There is a big difference in who somebody is selling to when they are cleaning a drain vs appraising a house. Go fly a kite why don’t you?

  3. Avatar bill johnson says:

    This article was originally posted on Dustin’s site as a blog (Feb 20th), and in part due to my comments there, was addressed as a follow up podcast on March 23 (episode #106).

    My point in responding to him then as it is now relates to the cost of living (COL) on a local level as the primary decision to accept a fee (Say $450), or for that matter, the decision to become or continue as an appraiser.

    With the VA setting primarily set state fees, AMC’s attempting to set national fees, and in general, lenders wanting to establish set fees (TRID), what is the impact of such policies when applied a local level.

    To address the issue I compared my area (San Diego/Carlsbad), to what I believe is Dustin’s primary area of practice (Idaho Falls Idaho) by way of a COL calculator (Bankrate). Based on 50 categories the end result showed that my area was 80.63% more expensive to live in as compared to his. If your income in Idaho Falls is $50,000 per year, the equivalent income to maintain the same standard of living would need to be $90,314.77 in my area. Home prices were $180,380 versus $802,495. Mortgages were $659 versus $2,937.

    To address the impact of set VA fees ($450 in both states), then the Idaho Falls appraiser would need to be paid $90 per assignment to feel the true impact of paying the SD appraiser $450 (80% less). It is only after applying such concepts can each appraiser be on equal footing and in turn evaluate this profession from the same prospective. If instead of being paid $450 the Idaho appraiser was paid $90 per assignment, would they have the same thought (support/no support) requiring a 4 year degree and a couple years of apprenticeship training? Would they encourage and train their own family members based on those known financial rewards? Could they afford to pay staff members current minimum wage? What would the impact be if the state of Idaho increases minimum wage to $15 like the state of CA? Would they continue in the profession or retire? Dustin, I understand you have a footprint in the profession larger than your immediate area of Idaho Falls, but based on your unique position/location, I think you are out of touch with 90% of your audience. If a few years back you were unhappy making $100,000 a year in an area where the typical mortgage is $659, again most appraisers can’t relate. If in the recent past you have truly made $500,000 a year, than again 99.99% of your peers have never walked in your shoes. I would challenge you Dustin to live off $90 per appraisal (Equivalent to a SD fee of $450) for 6 months and after this, see if your articles have a different tone.

    Your correct Dustin, an appraisal fee does not tell the whole story as to better understand the impact of the fee, one must calculate the cost of living to bring clarity.

  4. Baggins - Cost Plus is the only solution Baggins - Cost Plus is the only solution says:

    You other posters need to chill out. Dustin often has great inspirational points. However, the glaring omission is how fees tie into the management rule. If the cost savings from reduced service costs are not returned to the borrowing consumer, and are instead held as variable profit by the distributor, the action of providing reduced fees is quite clearly the action of providing a thing of value to be the preferred selectee. The omission resides in the fact that borrowers are quoted fees prior to the appraiser quoting fees, and that is the primary problem in which the ethical question is rooted. We appraisers did not create this ethical dilemma but it is important to answer it and deal with it. Dustin most certainly gets a report done in less time than me, because he has supportive staff. Obviously he’s competent or he would not still be rocking such volume. However, in the absence of an agreement to assure the distributor has a fixed rake amount, and cost savings are returned to the borrowing consumer, any reduction in service costs compared to the norm are technical and obvious violations of the management rule. The only solution I’ve found is to charge more than the next guy, and I’ve absolutely never seen a distributor client return cost savings to the borrowing customer, in over 10 years of independent operation. Just a personal observation, but one I’m sure is true nationally as a rule of thumb in mortgage lending. Simple rules like separation of the appraisal fee from the distributors fee would solve this problem. My wifes co worker was called away from the job last week, because she got a call from her neighbor about the local roofing project her HOA had set up. Apparently those low bidders left holes in roofs, re used tiles, and were not operating under proper permit. But you can be sure they were selected because of their lower fee. There is no constant rule regarding fees but unlike other professions, in the realm of appraisal a reduced service fee with mortgage lending rarely if ever results in cost savings to the borrowing consumer. There is acceptable reduced service charges, and then there is undercutting. Facing the differences and tackling the ethical dilemma pertaining to the management rule is something we all need to face, sooner than later. I’ve never met a distributor who is willing to send me more work because I have a lower fee, while simultaneously agreeing to return the cost savings to the borrowing consumer. You see, it’s all smoke and mirrors.  The distributors hook is to claim they need to keep fees down for trid and borrowers savings.  Meanwhile they profit from the variable rake. If a licensed MB did that, it would otherwise be known as a junk fee or unearned fee. Plumbers do not deal with C&R or ethical aspects of fee quoting because the consumer fee is exactly matching the plumbers fee, and there is no middle man violating fair lending rules which creates ethical conflict.

    • Avatar Loadie says:

      You can say that again.  Maybe you should have posted an article that says “Appraisal Fees Do Not Tell The Whole Story”.

      Thanks for telling a little more of the story!

    • Avatar Bill Johnson says:

      Baggins, I would agree that Dustin has some inspirational points and offers good business advice, but if based on cost of living calculations (COL) he keeps a dollar and I keep 20 cents (80% more expensive), he lives like a king while others qualify for Obamacare. In the article he makes it clear that he does not do work for $275, but when calculated out in my area (+80%), that would be equal to a fee of $495. Is his system of success simply a reality of the higher fees his area can command, or does he fill out the forms better than everyone else? If my state pays $450 for a VA assignment, would he decline those offers if he lived in my area because they are below his equivalent rate of $275?  In truth, his website indicates his standard fee is $400 or if the cost of living is applied/compared to my area, than an equal fee would be $720 per assignment. Again, grab any positives you can from him, but in areas where the median fee is $300 a pop and the COL is 80% higher, his system and advice will have limitations.

    • Bill, the disparities that you pointed out were fundamental in my proposal for both state or national minimum fees.

      It was based on the Federal Civil Service pay scale with it’s built in area COLA factors.

      It may be worth revisiting now that the original heat over anyone daring to suggest minimum fees has moderated slightly. C&R fees or C&R fees tab…jump to the very end and then if it piques interest, go back and read the boring details. It would have to be adjusted upward about 5%+- today.

  5. Avatar bill johnson says:

    If you want to look at this from a different angle (appraisal fees do not tell the whole story), say entry into the industry (Certified Appraiser) on a state by state basis (Idaho versus California), then the story as it relates to appraisal fees, becomes even more muddy. Per my state of CA requires a bachelor’s degree along and no less than 30 months of time spent obtaining education hours. The state of Idaho only requires 21 semester hours of approved credit and no less than 24 months to obtain the education hours. The CA appraiser will thus spend 3 additional years in college, 6 additional months obtaining education hours and have significantly less income over the combined 3.5 years of required time. What is the lifetime financial impact on that individual in CA who may spend an additional $60,000 on college, and lose $50,000 a year due to the delay in starting a career? Combined, the direct financial impact to the CA appraiser along with the loss of income (not fully employed) is in my example, $235,000. Over a 30 year career, that CA appraiser will need to make $7,833 more per year just to be even with the Idaho appraiser. Assuming 250 assignments are completed each year, the CA appraiser would need to be paid $31.33 more per assignment just to recoup the upfront costs and loss of income. This $31 would need to be collected for each assignment over the next 30 years! Lenders, AMC’s, the VA, etc., do not take into account enough real world items to fully understand what on a local level should be a reasonable appraisal fee.

    • Baggins - LA's Infinite Repeat. Baggins - LA's Infinite Repeat. says:

      Somehow as a group, the CO appraisers must have mustered up.  Fees are finally tracking upward after absurdly long delays.  I’m firm in my position that the industry needs a primary process correction and separation of distributor and appraiser fees.  The top businesses in the USA have no overhead, produce nothing, and mostly just relay information, data, and requests.  Amc’s just ran with current models, but these models are well known to crush the industries they spring up from.  You don’t need a crystal ball to understand that the appraisers fee is a much more intricate and complex consideration point than the old tag line of being just a personal business decision.  The appraisers fee stopped being just a personal business decision the exact same moment that a middle man distributor caused cost savings of reduced cost appraisal services to be held as variable operational profit, rather than be returned to the borrowing consumer.  There is no question of which came first, the chicken or the egg.  Fair lending rules came first, and that is the final word.  But whom besides me dares to speak it?  It is up to the locals to regain the margin based on their own location and specific operational costs.  Rethink the strategy.  The new upcoming game is bonus for non amc distributors whom can maintain that low tat.  Yet another unintended consequence of improperly co mingled fees is just around the corner.  Trickle down theory is absent in appraisal distribution.  The broken record keeps skipping, but at what price? “KLON, Los Angeles infinite repeat, Klon radio.  We play the songs that sound more like everyone else, than anyone else – Klon”

  6. Avatar Wayne says:

    I was going to post but changed my mind.

  7. Avatar Wayne says:

    Changed my mind again and here is my silly post! Take a look at the entire appraisal profession. The mortgage lending aspect is only a part. I could write a page or two listing the other appraisal types that are ordered on a daily basis. If you are working for an AMC you are most likely being used as a chump! If you are working for a national appraisal company….you are a chump! I am not trying to make you angry…just telling you the truth!

    My question to you is very simple. You can only do so many appraisals each week. When you are offered two assignments each day at a price of $450.00 that is $900.00 per day @ 365 days each year equals $328,500 a year. Gee….that is just mortgage lending…what about all of the other appraisal assignments? Of course I could be wrong and you only have 30% of those orders. That is still $98,550. Again….that is 30%…what about the final inspections at $150.00 each? Even 10% would not be bad as a retirement income? Can you tell that I am doing the “retirement” thing and each appraisal or two pays for another cruise? You dudes should keep bowing down to AMC’s!
    Do you fellows really enjoy providing the income for AMCs and national appraisal companies? Really?Come join me on about four cruises each year to the Carribbean. We “B” just fine in Jamaica! Why pay dues, subscriptions, pay a silly coach? Really? Take a closer look at this profession!

    Why do you want to pay dues to a group that spends your money to promote designations that you do not have? Why spend money to attend a Conference sponsored by AMCs that want to suck a living from your appraisal fees? Why pay for a coach? Why pay for a news letter? As a group…are we really that stupid?

  8. Baggins - No Shortcuts Baggins - No Shortcuts says:

    2 a day!?  See addenda.  What a rip off.  Takes me on average 2 full days per, to do it right, and with unique informative content.

    • Avatar Wayne says:

      I love it! There we go again! The comment was that we are offered two assignments a day. There are many days that no assignments are offered and other days where five or six are offered. The point was not how many assignments an appraiser can do in a day. The point was that the appraisers that I know are so busy that they are unable to keep up.

      There are a couple hundred appraisers within 40 miles of me. Just received my new phone book and there are three companies with a listing. I know most of these appraisers and they do have a phone! This is one very interesting business. It seems that we have some appraisers begging AMCs for work at pitiful fees and other appraisers that will not even return a phone call requesting an appraisal. What is up with this?

      I like most of the comments by “Baggins”. It seems that he grabs one topic of a post and runs with it without understanding the total concept of the post. In my previous post he only caught the comment about 2 assignments a day. That was not what I meant and I have never completed two assignments in a day. As a General Certified appraiser I am on the approved panel with TxDot ( just a few hundred appraisers with hundreds of thousands of miles of roadway)
      I am approved with the SBA, VA, FHA, IRS…but our office does not accept any commercial assignments at this time. We do no work with any AMC, mortgage broker. No Chase, Bank of America, Wells Fargo, etc. Believe it or not….we stay completely flooded with work from the regional banks, small credit unions and individuals. Really….there are just so many of these appraisals one person can do! I recommend that my fellow appraisers market themselves over and over until they reach the point of saying “WOW”

      • Wayne, the point about there  being work available was made.

        it was the analogy of 2 appraisals a day extended out to over $300K a year working 7 days a week, 52 weeks a year that was like waving a red flag in front of the bull for most of us.

        Almost all of us receive work one day and do the field work on another-splitting up the work over two days (or more). But for the sake of discussion; assume the order comes in at 8AM ( its a hypothetical- 8AM is an hour that doesn’t even appear on my clock).

        There is from 15 to 45 minutes to do preliminary property research and comparable sales. Lets assume the appointment and owner interview was done in that time frame. By 9AM I am in my car and on my way. Thirty minute drive (I’m pretending I don’t live in the L.A. area where its close to 1-1.5 hrs drive) and I’m at the property. Either before or after the inspection I am going to drive around the block; alleys and maybe a few cross streets I didn’t take getting there. 15 minutes more) including time for note taking (When I did work in the Porter Ranch Gas Blow Out area drive around was closer to an hour and a half–aside from the gas , were the landslide issues and extensive road cracking (soil movement)..

        Anyway, its 9:45. The property is a 3,800 sf mediterranean style, with solar panels on the roof, a pool and a cantilevered deck overhanging a canyon to the rear. This particular inspection (in and out), measuring, walking down the canyon under the cantilevered deck and observing the caissons and supports : and making notes about more apparent soil sloughing off downslope; inspecting and recording data on the solar system & and it’s FIFTY polycrystalline panels .Verifying it is an owned system as claimed (its not-contract showed its a lease-small but significant owner fib) took about 1 1/2 hours.

        Anyway its 11:15. I have five potential comparables sales all under  3/4 of a mile, except that 2 are on the opposite side of the canyon and it is a five mile drive to get to them via winding roads. Anyway, its another thirty minutes later.

        11:45 all comps shot and notated. Combination of rent and that 8AM coffee says I need a “lunch break”. I hate interruptions in the field. Fifteen minutes later. Heading back to office

        12:30 back in office. Fifteen minutes to fire up computer; check email; return calls.

        Its 12:45. I spend a few (15) more minutes going over my data to decide what appears to be most relevant

        It’s 1PM Start typing up report. I prefer not to use overseas/foreign typing services; or even datamaster since I personally verify everything that goes IN my report, so I minimize what has to come OUT of my report or be corrected needlessly. I also verified the legal description; reconciled it to the plat map and what I actually saw at the site. I take a look a good old Thomas Bros Map to make sure I missed nothing significant in field. I look up local zoning map and general plan along with development standards and apparent land use ratios. Subject is an sfr in predominantly sfr area with no (apparent) alternate uses that make more sense. H&BU is ASSUMED with & for reasons cited. (yeah, you could build a church, day care center, or a convalescent center but no one has proposed that and there is simply no data available within scope of assignment to suggest any other use is likely.) In this case no actual math calculations were necessary. Could have been another 1/2 hour +

        Im flying through this report. Its now 2PM Already at top of page two! Quick check; 7 potential sales and 1 competing listing. Telephoned the five agents. Spoke with one and left messages for three. One is a disconnected number.

        2:15 AMAZING! Three agents called back right away and in order-five minutes apart!!!

        2:30 PM Comparable sales analysis. Looks like site; GBA, condition and pool adjustment probable. paired sales give me my site adjustment-subjected to sensitivity analysis. Condition is estimated at cost to achieve similar condition between each comparable and subject-it varies though all are Q3. Agents I spoke with concurred re condition differences on two sales vs “average” for the area. Translated that to UAD-speak and explained it.

        3:00 PM Skipping to cost approach. Using all five original potential comps to extract my land values (we really don’t have vacant land sales here. Range $65 sf to $103 sf. I wrestle with numbers, hit ’em with a hammer and conclude (nominally) below the mean of all five ($89) which rounded came out to $90 sf. Performed extensions and derived site value. I refuse to use M&S anymore for a variety of reasons; liked but they changed format. Going back to my old Craftsman National Building Costs Manual (old school). Calculate replacement of all items. depreciation is two tier in this case. Half house MUCH older than the rest. Blended depreciation rate. Arrived at conclusions.

        4PM Initially (absent any better data) used depreciated replacement costs for GBA variances (adjusted up and down til all came closest together. Assumes I calculated depreciation from all causes accurately. Pool is another matter. Cost was over $100k but market recognition seems about half that…similar to my estimates of its depreciation in C/A. Another call to agent. Concurs $25k to $50k for pool in that area. No functional inadequacy-contributes about same as its depreciated cost.

        4:30 PM TIME TO GO HOME (since Im actually home already-I can just take a break and say hi to family , etc.) already an 8 1/4 hour workday with no breaks other than lunch. I’ll reconcile values in Sales Comparison tomorrow along with overall reconciliation of approaches. I got lucky. Not rented and not primarily sold for rental income purposes in this area. Still need to write all my explanations and explain why 1004MC was garbage that did not match MY data based neighborhood conclusions and trends. Double check and deliver.

        Fee on this one was $1,200. Its for the lawsuit related to the gas leak. Two more hours of writing still (roughly). My net rate on this one is only around $120 and hour. No complaints, but I DO have one question:

        So who out there is doing two of these a day again? Even if it wasn’t a complex appraisal it still would have been 7 to 8 hours with fantasy scenario light traffic.

        • Baggins Baggins says:

          Mike you need to ‘hire a driver’, LOL.  Double the time expectations for everything I do, and for simpler tasks no less.  The other day I tried to drive East side Denver to West side Denver, about 30 something miles.  2 hours.  Off at 4:30!?!?  And I’d bet you take weekends off.  I’m in the wrong business, what’s new?

          • True, but I cant type in moving car; and cant read the screen most of the time due to glare.

            Truth of matter is  I try very hard to work bankers hours in the field. After 10 AM and before 2PM. Avoid rush hour on both ends and avoid HS kids in afternoon from some of the more charming areas I work. Its been a long time since i worked hours like that single-day scenario..In my area that 30 minute drive scenario is usually 1 1/2 hours each way.

            Like most, I still work til midnight…or two and three AM when I have reports due.


  9. Baggins - Triggering event Baggins - Triggering event says:

  10. Baggins Baggins says:

    Wayne, I just try to focus on something. So in that regard, the stereotypical expectations vs realities topics keep my attention. To answer your question regarding client sourcing and appraisers business positioning, what’s up with that?; It may seem second nature to compete by quality to you personally, having an apparent great accreditation and solid track record, it’s not like that for many other appraisers out there. Amc’s have set the stage for ready substitutability and many direct lenders errantly run with a similar model. The ability to be an effective salesperson is something I take for granted, but it’s obvious that’s not a readily replaceable skill, the ability to say no to inadequate terms. Behind the ability to make that firm business decision comes with it a lot of personal responsibility factors. Again, probably something many take for granted. But for appraisers leasing not owning, renting instead of paying to principal, check to check and all of that, they have cast out their own negotiation positions in favor of something quick, something now. They can’t say no or they go out of business. They don’t make effective personal financial decisions but are somehow still ‘preferred vendors’. Once you’re down the rabbit hole of check to check living, it can be hard to scrape back out. And as many start there in the first place they never do escape. I would still like to see orders prioritized based on appraisers personal credit. You either understand risk or you don’t. You understand effective money management or you don’t. You’re a good appraiser who understands price vs value, or you’re a check to checker, not much room in between is left. I’d speculate considerations like that are the root cause why many appraisers find themselves held to ineffective negotiation positions.


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Appraisal Fees Do Not Tell The Whole Story

by Dustin Harris time to read: 3 min