Appraisers Ask: What Now?

By Daniel A. Bradley, SRA, CDEI

The hype and excitement for April 1, 2011 is now a memory. For appraisers who thought this date would bring about higher appraisal fees from AMCs and other clients, bitter disappointment has undoubtedly begun to set in. Appraisal-related blogs, message boards, and websites are trumpeting the news – it is just business as usual. The promise of higher appraisal fees turned out to be an April Fools’ joke on an entire profession.

So for residential appraisers, what now?

There are several options; not one of them is perfect. There is not one course of action that is right for every single appraiser’s situation.

Option 1: Leave the profession. This will undoubtedly be the choice for some; in fact, the exodus has been going on for some time. According to the ASC, there are approximately 10% fewer active appraiser credentials today than there were in 2008. It saddens me to think that others would give up on a profession when times get tough, but that is a decision that every appraiser has to make for himself or herself.

Option 2: Knuckle under and accept whatever fees are being paid. This is a very unattractive option. It helps perpetuate a “race to the bottom” in which the least qualified and experienced appraisers are doing the lion’s share of the work for clients who do not care about quality. It simply results in an appraiser working harder for less money. As a temporary measure, it may keep an appraiser from having to exercise Option 1 (or Chapter 11), but it is likely not a long-term solution.

Option 3: Complain. This will undoubtedly be the option chosen by many appraisers. The effectiveness of such a strategy depends on the party to whom the appraiser is complaining. Lodging complaints with federal agencies like the FRB, FDIC, and FTC is certainly more effective than complaining to one’s peers, family members, or online communities. In states that have AMC regulations already in place, appraisers have a ready-made repository for their factual complaints. The long-term effectiveness of this option remains to be seen.

Option 4: Specialize and/or improve one’s skills. This one takes the most planning, effort, and work, and may necessitate an appraiser getting outside his or her “comfort zone”. An appraiser may choose to upgrade his or her certification level; commercial appraisal clients typically do not use AMCs, and are typically more interested in quality than fee. Even without upgrading, an appraiser who wants to expand his or her horizons will find that there are many other types of appraisal assignments out there. Some are relatively simple, such as estates, assessment appeals, and divorce work. Others require additional knowledge and specialized skills, such as eminent domain or conservation easement appraisals. Specialization may require an appraiser to come up with an entire new marketing plan, which may involve marketing services to attorneys, government agencies, and/or individual property owners. By replacing, say, 30% of his or her mortgage lending appraisal business with other types of appraisals, an appraiser can retain his or her top-paying mortgage clients, and at the same time selectively dismiss their lowest-paying clients.

If you are thinking of replying to this article by telling me to wake up and smell reality, don’t bother. For me, this is personal. Appraising has been the only real job I have had during my entire adult life, and my wife is also an appraiser. I understand – better than most – the daily, weekly, monthly, and yearly trials and tribulations of an appraiser. Even though I spend most of my time these days writing and teaching appraisal courses, I still depend solely on the appraisal profession for my family’s livelihood.

The decision for every appraiser is individual and highly personal. What works for one may not work for another. I get that. I’m hoping, though, that most appraisers will select Option 4 above. The future of the profession is better served with more highly-skilled valuation professionals who are capable of providing a variety of different appraisal services, and fewer appraisers whose skill sets consist merely of inspecting houses, selecting comparables based on client-specified parameters, and filling out forms.

The best advice I can think of at a time like this is to spend your time thinking about what you can do, not about what you cannot do.

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32 Responses to “Appraisers Ask: What Now?”

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32
Scott Says:
May 25th, 2011 at 12:59 am
I’m not sure that a one time boycott would have any significant impact. It may grab headlines, unfortunately the banks have deeper pockets and can wait us out. They know that we are fragmented and eventually appraiser’s will accept what is being offered in order to survive.

Appraiser’s need to take the stance that I’ve taken since the first AMCs began inserting themselves into the process. Calculate your bottom line based on your labor and overhead. In addition to the direct cost i.e. software maintenance fees, association dues, etc. overhead should include health insurance and retirement. We are professionals and need to behave as such. Then “boycott” each and every order that is below your threshold. Working for less only prolongs the sinking process, it doesn’t stop the ship from sinking.

If AMCs actually provide a value added service to the process, there are some who do, then the end user (lender’s) should be willing to pay a premium above fair compensation for professionally completed appraisals.

Like or Dislike: 3 0
31
Patty Says:
May 11th, 2011 at 4:59 am
Hey Jeff, not sure what to tell you. Things have changed alot in the past 2 or 3 years and most banks won’t accept licensed verses certified licensed. The past few years has been very unfair to many of us.

I would suggest getting the Certified level license, however if you have many hours to go, this may not be worth it.

If I maybe honest, I think you only getting a 3 month E & O set a red flag for the AMC”s and banks. They want to think you are in long term and a 3 month policy does not suggest that. I am not being funny when I say this, they want to know they can blame it on you five or ten years from now if the loan defaults. If you don’t stay in business or more important to them, keep insurance, harder to sue.

I feel bad for your situation. Hope things could be better for all of us.

Like or Dislike: 1 1
30
Brad Heavey Says:
May 10th, 2011 at 10:40 pm
It was not long ago, just 35-years when I first started in the real estate industry. It was difficult, the MLS was in weekly books that you paged through to try to find a house to sell. I remember when MLS came on dial-up telephone, yes I can still hear that tone in my brain. Yes, I remember when I first started appraising some 25- years ago when the industry decided they were going to change the 1040 form, it was so long ago I don’t even remember if it was a 1040 form. Because I had just started appraising and it was acceptable to use the new form that’s what I started using and I remember other appraisers in the office, we had 40 they all complained about having to change to the new form.

It only took them about one week to plagiarize the new form that I had already been using. Yep, it is difficult to accept change but you got a leave the old way of life behind you, move forward and accept the changes that are in the future. Mr. and Mrs. appraiser think about the skills that you have and supplement your income with those skills in another industry.

Brad Heavey
http://www.bradheaveyrealestateappraiser.com

Like or Dislike: 1 1
29
Retired Appraiser Says:
May 9th, 2011 at 5:12 pm
Use Google and search for: Criminal Justice Petition: National Appraiser’s Boycott
This is the only way that appraiser’s can truly make a difference. Relying on the NAR & AFL CIO is a useless waste of time for the most part. They don’t have the money to fight the mega banks and you don’t have the time for them to raise the money.

Join the boycott and you can save the profession. Ignore it and you may as well be go shopping for a casket & burial plot. Banks are out to kill the profession people and you my friend are nothing more than a walking corpse without the boycott.

Like or Dislike: 6 1
28
Ruth Says:
May 1st, 2011 at 7:46 pm
Debbie, AMEN!!

I have always thought it a waste of time and money for the Appraisal Institute and Appraisal Foundation to employ lobbyists and attempt to influence the government in our favor. They have made a few minor points, but even if we join with NAR (heaven forbid) we don’t have enough money, influence or quantity of people to make a dent. We are the low end of the totem pole.

Like or Dislike: 5 0
27
DEBBIE Says:
May 1st, 2011 at 6:26 pm
Are you appraisers all clueless? I have been doing residential work for independent mortgage brokers, local mortgage companies and local banks for more than 14 years. I entered the profession when everyone was seeing dollar signs and could not wait to leave their mentor and go out on their own, mainly for the money, not how well they could do the job. I established a great group of clients and worked very hard to gain their business and did not compromise my ethics or inflate values. I declined that work. So….even though I established myself and had loyal, ethical clients, the HVCC destroyed everything that I had worked for. While I watched my clients being told that they had to order from AMC’s (because none of the managers wanted to be responsible for the “firewall”), the Appraisal Institute was doing nothing (or maybe couldn’t do anything) to help the residential appraisers have a say in what was going on or even postpone the inevitable. Do you really think you have any influence over the 3-5 largest lenders in the country who wanted to put these rules in place? These few lenders have been successful in putting most of the independently owned mortgage brokers out of business by screwing up the playing field. Do you really think any of this will reverse itself – you are dreaming !!

Like or Dislike: 10 0
26
Ben Says:
April 21st, 2011 at 7:55 pm
Wow. Great Stuff all around. I am vested as an appraiser. Leaving the profession is not an option for me. So, when I was a CR appraiser I thought the only way to do better was move to a CG, so I did. It was hard work but I made it happen and have benefited from it. That has been a great transition. From there I figure I would take the next step and started towards my MAI. I should have it by years end. That was another great step. Once I get that, what’s the next step? I don’t know but I am sure I will add one. We can wine and moan all we want, but until YOU personally decide to do something, its just another sound. I am not saying you have to be Braveheart and lead the rebellion. I am saying quietly improve on what you already have. If you are a CR then you know how hard it was to get, how hard to pay our dues. What is stoping you from moving on to a CG. If you are a CG what is stoping you from starting your MAI designation? Expert Witness work was another great thing to add that keeps me busy. Understand, I cut my teeth as a residential guy for many years. I still do some residential work but once the AMC came on the seen I started gradually weaning off of them but not as often as I once did. So, I know where you guys are coming from. I am not saying all this is easy. Its work. But it can be done and you can benefit. I am just trying to throw a positive spin to our industry. I got in the business when it took 3 classes and a signature and you were an appraiser. I am thankful for the industry changes that make it harder to get in and let’s the fly by nights stay out. I am a natural optimist though. I always see the glass half full!! Keep your head up. You can turn it around!

Like or Dislike: 5 9
25
Terrance L Wood Says:
April 21st, 2011 at 2:44 pm
Why be organized ?

Fees
E & O Premium negotions
Medical Insurance benefits
Lobbying benefits
Federal and State appraiser rules input.
Fee collection power
Security is in the Power of being organized..
Appraisal program buying power

And many other less obvious benefits.

Terrance L Wood
President
Mercer & Associates Inc.

Like or Dislike: 13 1
24
Retired Appraiser Says:
April 21st, 2011 at 2:24 pm
You failed to mention organizing and boycotting AMC orders. For some reason appraisers cannot wrap their brains around the concept that they have always had the ability to shut down the mortgage market completely. Organizing is easier than ever in the internet age.

Personally I opted for #1 two years ago. There are so many opportunities out there for people who are willing to think. If you’re willing to take the leap you’ll see that appraising was really a low life profession that forces you to jump through flaming hoops day after day after day.

Wake up appraisers…either leave the business or grow a set and boycott to take your careers back.

Well-liked! Like or Dislike: 23 2
23
Andrew Close Says:
April 20th, 2011 at 9:48 pm
Dave,

Things wrong with my post? I only read the first two words of your post and found a mistake.

“There is so many things wrong with your post I don’t even know where to start. Can’t say that we lost a good one when you left.”

I’m sure it was a Freudian slip but just in case, “There are” would be the plural, “There is” the singular.

I hope you were not offended by my post. It was meant to be an attack on the principal and theory of the whole appraisal industry in general, not you in particular. I apologise.

Still, let me ask you this; how are the values of the homes you appraised four years ago and do you think you helped to prevent the meltdown by declining work at that time?

Like or Dislike: 1 8