How To Charge Cancellation Fees
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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