Commercial Real Estate Review - Worth It?

[Michael P Jacobs MAI]

Two local banks have asked me to do their commercial (narrative) reviews, and another that's been asking just sent a review to me directly (no-bidding). That's three unsolicited review assignments in a few months, and no telling how many I'd see if I did these regularly. I've resisted doing reviews for several years.

I'm seriously re-thinking my office's no-review policy, but I'm completely inexperienced except for the Continuing Ed courses which will keep me out of extraordinary legal trouble.

However, is it worth it financially? I'm considering a fee in the range of 50% of what I'd charge for the appraisal if the client asks for my opinion of value should I disagree with the appraiser's conclusions, 35% if not.

Any suggestions or insights?

 

[Joe Flacco]

I think most charge more for reviews than appraisal because if you disagree then you need to do a appraisal.

 

[JTip]

Let's be honest.

9 times out of 10 a review is ordered because something is wrong. Be it the value or sloppy reporting. I can't offer any advice on CG fees, it's not my gig. But residential stuff, I agree with the Ravens guy, review work is at least double the standard reporting fee.

I took the General Review Theory week class last year, well worth the time and price. I pondered on taking the case study class to pad the resume, but other career opportunities have presented themselves.....

 

[PL1957]

Reviews are a nice sideline for a lot appraisers. It's become a cottage industry for retired MAIs who are looking for a little spending money. Banks have various review thresholds and most smaller banks don't have a review staff beyond a chief appraiser. Sending a report out for review doesn't mean there's a problem, it means they're checking off a regulatory box. Fees are all over the place, depending on scope and complexity.

 

[gregb]

One local bank I am familiar with paid $1,000 for an appraisal review of a new construction mixed use appraisal report. Seems low to me, the original appraisal cost the bank $11,000.

 

[JTip]

Are they offering an 'in-house' check list review or a full blown Std. 3 & 4 ('18)?

I work with a CG who was previously a local bank in-house reviewer. I believe he has some sort of checklist for compliance.

 

[PL1957]

Are they offering an 'in-house' check list review or a full blown Std. 3 & 4 ('18)?

I work with a CG who was previously a local bank in-house reviewer. I believe he has some sort of checklist for compliance.

Most guys I know work with the bank's checklist, but complete a full Standard 3. Once you're set up, it becomes a routine and it can go pretty quickly. The original reports don't need to be perfect, they just have to be good enough for regulatory compliance.

You do 1-2 of these a week and it gives you enough money to play golf without the wife complaining

 

[Michigan CG]

I think most charge more for reviews than appraisal because if you disagree then you need to do a appraisal.

That is for residential and most of the time when those reviews are ordered the client already sees a problem with the report.

 

[Michigan CG]

Mr. Jacobs,

I have a commercial license but work in a mostly rural area and restrict my coverage area for multiple reasons too long to list. Therefore I do a mixture of commercial, residential and farm work. I can tell you that the quality of reviewers is vast from completely ignorant to absolutely inspirational.

Let me bore you with some residential stuff first. This year I have only taken residential assignments from one AMC because they pay decent and the chief appraiser is an SRA who is knowledgeable. I have had to explain the definition of Arm's-Length Transaction to more than one "chief appraiser" in the residential world. Once I asked one to pull out his Dictionary of Real Estate Appraisal (AI) and the guy said he didn't have one. I have had discussions with CAs or review appraisers about units of comparison and I should have just talked to my dog, she would have understood better.

I do agricultural work and work with a lender who has a reviewer and CA who are designated ASFMRA appraisers and the few discussions are always professional. I also do work for a high-end residential client. Talking to a reviewer who actually understands the concepts and appraisal practice is enjoyable. I have been on the "winning" and "losing" sides of discussions but they are always professional discussions.

I do some work for two lenders that deal with high-dollar residential properties that are most of the time somewhat complex (house on 40 acres with a 15,000 SF riding arena and paddocks). One of the lenders has a reviewer who is CG who understands both commercial and residential very well. He is articulate, understanding and can talk in real world verbiage. He makes good suggestions and in every discussion he makes sure to ask about my adopted kids and lets me know I am too old to have a five year-old. He is never insulting and never talks down to me as he has respect although I know he has little tolerance for the clueless.

I bring up all of these topics because I think that my best clients are the ones that have the best reviewers. The best reviewers are the ones who do not treat others as beneath them and I find that the residential AMC reviewers are the worst. They hold that title as a license to act like they are God-like even though I have found many to be clueless. I don't expect all reviewers to be designated but to at least have a clue.

From what I understand of quality review appraisers doing work for a specific lender is that they have a say in who is on the approved list and who gets removed and therefore the reviews are pretty easy. I am guessing that the complex residential guy gets about $200-$300 per report and that the commercial guy gets about 20%-30% of the fee of the original appraiser. If the appraisers on the panel are good then there is little to review as you know the work product of the appraiser.

I have found that the best reviewers are designated although the best reviewer I work with is a CG who is not designated.

 

[Vernon Martin]

When I did commercial fee reviews for Wells Fargo the standard payment was 20% of the original appraisal fee. This is no longer enticing.
Reviewing is no way to get rich.