Dustin is right on point about the increase in productivity in the residential business. The use of mobile technology has been a game changer. I’ve been in the biz over 36 years, doing commercial, eminent domain and now residential. There are two things you have to do today to maximize you financial return as Dustin has indicated. They are “employ the law of delegation” and use every piece appraisal related technology that you can get. If you think you are a $100/hr guy or gal, why are you doing things that can be done by a $10 to $15/hr person? Why are you still paying for paper and file storage when electronic file storage is virtually free? Enough of my rant on the expense side.
On the income side, lets talk about why fees are low in some markets. Having worked for Rels Valuation for about a year and half as staff appraiser during recent housing depression in Florida, I have a very good understanding of how the big guys operate at the appraiser level. Their fee structure is ALL about supply and demand with there staff guys and the contract folks. As long as there are people willing to provide appraisal services at $255 a pop, they will keep hiring those folks. When those guys get to busy and can’t meet the Rels deadlines, the $350 guys get the assignment. When they are too busy, guys like me get hired. Also, as long as they can find staff guys to work 60 hours a week, they will keep their pay structure right where it is. When I worked with them, they had about 80 appraisers in Florida.
As far as scope creep goes, it is your time and their money in completing the assignment. Those of us who have done eminent domain work in Florida understand what is going on now with this residential business. We’ve had the seemingly endless review process to deal with forever particularly at the State level. The result was that the fees just kept getting higher and higher because the time to complete the assignments just kept getting longer and longer. Of the AMC’s I deal with, the “creep” has been strongest with Rels. As a result, I have had to increase my fees in order to cover my time expense. Sure, i get fewer assignments from them. However, I still get assignments at a fee equal to the retail cost to the borrower and that is meeting the time expense requirement. Guys and gals we’re not their employees. We are business owners. Many of you need to snap out of the victim mentality. Take a look at how your are operation competes with others in your market. Perhaps some of you need to move on to greener pastures.
Here are the comments that I sent to Appraisal Qualification Board recently.
I like to provide some comments regarding changes in RE
appraiser qualifications for entry into the profession that are being
considered by the AQB. I’ve been in the
business almost 37 years. We have
continually heard of the pending doom with the coming of a shortage of
appraisers. It has never happened. And indeed it has been just the
opposite. The ease by which someone can
enter the business has provided many unqualified and unskilled individuals. This in part has helped to drive down fees
and make most of the residential appraisal business a cottage industry. Here in Florida, the market is just beginning
to recover from the oversupply of these “wanabee” appraisers which developed in
the middle 2000’s.
The AQB needs to keep the requirement for entry bar at a high
level so that only those who are truly qualified can gain entry to the business. The economics of the business can only improve
when the supply of appraisers is at a level that supports a profitable
operation when trainees are included in the mix. That is, when it is the profitable for the
trainee and the supervising appraiser do business. As it is today, the appraisal fees for many and
requirements of the clients do not support a trainee/supervisor operation. Now, I know that AMC’s enjoy being able to
take a portion of the appraisal fee paid by the borrower for their
operation. That has to change if the
appraisal business ever going to be viable in the future. And it is only going to change when the
number of appraisers is reduced to a level that forces full payment for the
cost of doing business in a professional manner and includes the profitable use
Well, it has been a while since I last posted on the Hohman Appraisal Blog. The Christmas and New Year holidays and a Caribbean cruise vacation have kept me busy. Yes, some of us appraisers have a life outside of the real estate biz. But today, I am back in the saddle again.
Recently, I had an interesting appraisal assignment in Winter Haven. The current owners purchased a up and down duplex in the spring of 2015. This is an older home that was a single family residence when constructed but had been converted to a duplex some years ago. Since their purchase, the owners have invested a substantial sum, according to the listing agent, to upgrade and renovated the structure - refinishing the hardwood floors, updating the kitchens and bathrooms and painting the interior and exterior. However, it was still a duplex, having only outside access to the second floor unit.
My appraisal assignment was to appraise the property as a single family residence which was not possible as the outside only access to the second floor unit made this property a duplex. I discussed the situation with the listing agent who was present for the inspection. Once I was in my office, I called the lender to let her know about the situation.
Several days later the lender called and asked that I appraise the property as a duplex. Once the appraisal fee question was resolved, I proceeded with a revised sale search which provided market data much below the sale price. Because the buyers were applying for a VA loan, I was required to notify the lender that the value was not going to meet the contract price and ask that she or parties with an interest in the transaction provide sales that they believe would support a value equal to or greater than the contract price. There were no duplex sales provided by the interested parties to support the sale price because none existed.
Once I returned from vacation, I learned that the assignment has been canceled because the duplex use of the property would not support the sale price. Another interesting point about this is that sales were available for the single family residential use which would have supported the sale price. In order to convert the property to a single family use, the owner needed to cut an opening in a first floor living room wall which would have allowed access to the interior staircase and the second floor. The cost would have been $1,000 or less. Why this did not happen, I can't explain.
So, to continue on with appraisal process. - When a new appraisal order is received, I start a new folder in Dropbox in order to store all relevant work file docs. Once the sales research is finished, all of the sales and subject documents and an appraisal report template are sent to ieIMPACT, Inc., a data entry company that specializes in real estate residential appraisals. I use their 24 hour service which allows me to take a mostly complete report to the inspection of the subject and the sales. Using ieIMPACT saves me one to two hours for a cost of $12.49 per report.
The partially complete report is uploaded to my mobile device and edited as needed as I inspect the subject and sales. Pictures are automatically inserted in the proper location of the report in the mobile device. One of the great time savers with mobile device use, is the built in mapping feature which provides GPS directions for the sales and subject if the addresses are in the appraisal report. Once the inspections are complete, the report is uploaded to the Alamode cloud, then downloaded to my desktop once I return to the office.
Usually, an additional one to two hours are needed to complete the report and submit it to the client.
In August of 2013, I attended an Alamode appraisal software two day seminar on Orlando, FL. The purpose of the presentation was show us how to go "paperless" and make use of mobile devices in the appraisal process. The information from these two days completely changed the work flow and dynamics of my small office. I accepted the instructor challenge to implement these new ideas and as one of then put it, 'to take was working and change to what would work better."
Appraisers are required by the Appraisal Foundation and the State licensing boards to save their work file and appraisal report for each real estate appraisal for at least five (5)years. A lot of paper can be accumulated. Being able to store documents electronically has eliminated the space needed and cost associated with paper storage.
What I started doing was saving all documents as .pdf files, placing them in an electronic folder within Dropbox, a free file sharing program. Dropbox can be installed on mobile devices and desktop computers. As a result, all of my document files are available in the office and in the field.
Next, I started using Alamode's Total software which is their current state of the art residential software. With Total, I am able to save the work file docs within the appraisal report and backup everything in Alamode's Vault, which is cloud storage.
More on this in a future post .........
Last week a lady contacted me wanting to know if I could tell what a "Junker" (ie. a house in disrepair) in Winter Haven was worth. I suggested to her that what she needed to do was to get an construction contractor's estimate of what it would cost to put the home in livable condition for her husband and her. She said the house has not had AC for a number years and mold and mildew was present on the interior along with many other needed repairs.
I told her that my role in this would be to estimate the value of the property after all the repairs were made. Also, I suggested that she should include some money in addition to the contractor estimate for time spent managing the repair project and for closing costs in getting a loan. The difference between my estimated value and the expenses would be the amount her husband and she should offer for the property in the current condition. A mathematical example is shown below.
$70,000 My estimated value as repaired
-$30,00 Construction contractor estimate for repairs
-$ 3,000 Buyer's fee for managing the repair project
-$ 7,000 Buyer closing costs
$30,000 Maximum that should be offered for property is current condition
A way to get this project financed is by getting an FHA 203K loan which is a program for property repair projects.
The lady was unsure if her husband and she were really up for project such as this. She was going to get back to me if they decided to proceed. I have not heard from her.
Today, yet another article in the Lakeland Ledger about the aganst the Federal Reserve is going through in deciding whether or not to raise interest rates. I believe a better course would be to state their policy as, "we are leaving interest rates where they are for the foreseeable future." And shout up about it. What they have been doing is breeding uncertainty and fear in the financial markets and in the general public among those who pay attention to what is happening in the world. Ever since 09/11/2001, we have been hearing that interest rates are going to increase one day. The opposite has actually happened and now they can not go any lower.
An interest rate increase at the present time would most assuredly slow the residential real estate market in the Winter Haven and Lakeland area. Income increases in this part of Florida have been low to non-existent. A rate increase would take some out of the market, especially first time home buyers.
I think there are some on the Fed who like hearing themselves talk and like seeing their names in the news. It is my opinion that they need to go back to their bank, take a seat and stop making statements that only cause economic problems and not solutions. What do you think? Let me know.