Charging by the Hour for Appraisal Services?
How much are you worth per hour?
I am fuming. Thanks in advance for letting me vent and virtually ‘throw-up’ my frustration all over you. My Personal Assistant accepted an order for a Forensic Investigative Field Review the other day. Originally, the AMC had offered a fee of $350. We countered back at $500 and crossed our fingers… that we would NOT get the order.
These types of orders are becoming more and more popular. As the market has dropped across the nation, lenders cannot sell the collateral they loaned on between 2005 and 2008 for a fraction of the appraised value. Naturally, it must be the appraiser’s fault. I have had an influx of investigative reviews, and 90% of them are from the boom years. 50% of those are currently listed for well under the appraised value just a few years ago. Accordingly, the banks are asking, “What gives?”
Those of you doing these types of assignments have noticed a marked increase in scope requirements over the past several months. Not only do the lenders want to know if the original appraiser used the right comps and made accurate adjustments, but they want you, the reviewer, to prove every aspect of everything said and unsaid (both in the original report and your review report). Much to my chagrin, the AMC accepted our fee and sent us the order. Ugh! I immediately went to work and many, many hours later finished the report. It totaled just over 100 pages by the time I was done putting everything in that the client required. No, I am not kidding. Oh, I am not done. As you probably already guessed, once the report was turned in… out came the revision requests. Six back-and-forths (and lots of cursing coming from my back office) later, I am done with the assignment… for now.
Now, don’t get me wrong; in today’s difficult appraising world, I am happy for any work I can get. What I am not happy with is the fact that I only charged $500 for this assignment. A regular, non-review appraisal on this type of property (multi-family) would run approximately $600 in this market. What if we charged a per hour fee like so many other professionals?I charged less than the going price to basically redo the original appraisal (including interior inspection) AND do a review. Oh, and I agreed with the original appraiser’s value!
Between cussing, screaming and throwing things, I vowed I would never accept another order like this again. After I had calmed down a bit (which took a significant amount of time), cooler heads prevailed, and I had an idea… what if we charged a per hour fee like so many other professionals?
Now, before you start to lecture me, hear me out. I have been in this business long enough to know that you are not going to be able to start telling your clients, “Yeah, send over the order. I will keep track of my time and bill you when I am done.” I am also not advocating that we run our business like a taxi cab and start the meter the minute the engagement letter comes in (that would be nice, but it ain’t in the cards). What I am saying is that we may want to consider running our business like an auto-repair shop. Just yesterday, I took my car into the mechanic. He looked at the problem, looked up the approximate time to repair in a handy-dandy guide and gave me a quote. How much are you worth per hour?Now, I do not know if the actual job took him more or less than he quoted me, but he charged me the same number he quoted up front when I picked it up.
How much are you worth per hour? Rather than having a set fee for every assignment, it may be very possible to look at each assignment’s scope of work, quickly calculate the estimated time to complete, and quote the fee based on this information. This is easier accomplished than it sounds as most assignments will still fall into your standard fee range. The process I describe will only take place for unusual assignments.
The fact is — though I thought some of this particular client’s requests were Re-Dik-U-LUS — they were what the client wanted. Like it or not, they are the employers, and we the employees. They want what they want, and whether or not we agree with their mental status, we are here to serve those who send us a paycheck. The question is whether or not we are being compensated appropriately for what we are doing. And that, my friends, is OUR decision.
Guest blogger: Dustin Harris is 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.
- Outrage Over Connect by ValueLink’s New Monthly “Junk Fee” - November 27, 2024
- ARCC Discussion Exposes GSEs Agenda to Reduce Appraisal “Friction” - November 22, 2024
- FHFA’s Appraisal Waivers Expansion - October 29, 2024
I had a similar experience with Interthinx, doing a forensic field review (exterior only) on behalf of FannieMae. They were looking to burn the original appraiser and I could feel it by the tone of the order instructions. Several back-and-forth with the reviewer that was reviewing my review. Never again. Just too much “regular” work out there to deal with these pricks looking to burn someone.
A quick trick, Hypothetical value, the subject’s prior sale was 10% above the market average value, and also was 8% above the median value. Based on a hypothetical value the subject present market value would be 10% above the market average value and 8% above the median value.
If there is a large difference maybe the prior sale value was not supported by the market data at that time.
Appraisers could learn a great deal from the drug campaign of the 1980s & 1990s. It all boils down to three little words:
“Just Say No”
In my opinion learning which assignments to avoid is more important than any other skill when it comes to valuation. The risk alone can be enough to ruin an appraiser.
Appraisers could also learn a thing or two from the employees of Hostess this week (yes the maker of Twinkies). IF ONLY appraisers could grow a set and stand their ground, AMCs could be driven into bankruptcy within a month.
Yeah Dude, you’re retired, so perhaps you can please help your fellow appraiser-brothers-and-sisters by taking-up a new habit to fill your time. You know the in’s and out’s more than any of us intermediately experienced or newbie appraisers. Please begin by gathering and organizing us into a team that can stand our ground. Then help by spreading the word to all the appraisers to clam-up for a month as per your suggestion, and we can all make this problem go away. Thank you so much for volunteering! The world needs many, many more (GOOD) helpful people like yourself!!!
I for one think “Retired Appraiser” gives some very good advice! Of course, many appraisers refuse to take good advice. There are some appraisers who will accept an assignment as described in this article and then sing boo hoo. Many of us just laugh at them and shake our heads in amazement! Some appraisers will put up with “anything” an AMC or other joke of a client comes up with. These are the ones who are constantly complaining about low fees, scope creep, etc. If you are one of these you should seriously consider a different occupation. The rest of us are charging top fees and turning down assignments every day!
we can end this nonsense if we stick together. think about it, there are only so many appraisers within a 30-60 mile range. all you have to do is call each other and set up some ground rules…like a $25.00 pay increase every year on a certain date. they will never give us a raise, they will and keep it for themselves. there can only be 500 appraisers at best covering the city of Philadelphia or any other city…the guys in Harrisburg are not going to Phila and the guys in Pittsburgh are not going to Harrisburg or Phila. Its up to us, not them, We wont get help at the national level, nor the state level, we have to do it at the local level. and that’s us. search the alamode website and the aci website for appraisers, if aci have a list, call eachother, get together, set the rules, and don’t be greedy, just fair.