About to jump in...looking for sanity check

[Mike Jones]

After working as a Software Engineer for the past 10 years I am burned out. I'm tired of sitting behind my desk all day, I'm tired of the politics, and I can't keep up (technically) with kids coming right out of school who know all the latest and greatest technologies. I'm ready for a change.

I have always been interested in real estate and have a few relatives in the industry. After some research, I determined that appraising is the way to go (like working outdoors, enjoy economic theory, prefer to work alone, very self motivated, etc.)

My brother hooked me up with an appraiser that is expanding his business and would like to have me aboard. He is swamped and has work to give me. After I get my trainee license he will pay me 50% and after I get my residential license he will pay me 80%. It sounds like a great deal. I am about ready to go for it, but I'm nervous. It even keeps me up at night.

I'd be leaving a $70k job that I know I can do. I've done this job for 10 years and it's reliable income that I can depend on to support my family. Appraising is something I've never done before. I have gone on ride alongs and I will be doing a couple inspections on my own to "try it out". My spouse doesn't work so if I make a bad decision, it will hurt.

Here is my financial plan: am I missing anything?

• 
  250 work days per year (this counts 10 sick/vacation days)
  2 appraisals per day (seems conservative at present)
  500 appraisals per year (250 * 5)
  $150 per appraisal
  $75k gross income per year
  $5k health insurance (currently paid by employer)
  $4k operating costs
  $66k new gross income per year (same as my current job)
  • 
    
    Please comment. Am I making a good decision. Am I missing anything in my financial plan? What else is there to consider :?:
    
    Thanks for the advice!
    Mike

 

[Farm Gal]

Mike:

I suggest you spend a little time reading the past posts in this forum, and breese through some on the general and improving the profession areas as well.

I think you ARE being overly optimistic for the income levels in many areas of the country, and I would encourage you to develop a healthy stage of skepticism about the very near changes occurring in this industry. (your market may vary)

An honest opinion? The odds of you becoming a healthy wealthy and wise appraiser are about the same as if you went down to the corner and opened up a new restaurant.

not real good, sir.

If you are not comfortable with the 'New Turks' coming in and running a different show than 'the way they used ta do it back in the good ol days' I fear you are also headed for grave disappointment.

There will be significant changes in the near future in the way we do business, and I am not sure your financial expectations are likely to be met: particularly in the area of expecting to 'turn 2+ appraisals a day'.

The 'easy ones' are going to be done by automated processes, the medium hard ones by the lowest bidder on the block (from amongst underemployed folks who already have already acquired -at no little expense and effort-their license to practice), and the really hard ones will require experience, optimism, wisdom, knowlege, and cojones.

Which is not to say that you might not do very well, but self-employment is not for those unwilling to fly in the face of reason, the bills don't go down, expenses go up and there is often someone willing to do what you do for lots less money. And they may or may not file the required incometax papers.

If it's keeping you up nights now, you may want to spend some amount of time and effort exploring other avenues (try your local JC for aptitude testing as a first step) before achieveing your goal keeps you up nights hitting your head on the bedstand...

That said, if you chose to go this route: welcome and well met!

 

[Ken-NC]

Mike,

I am currently averaging two appraisals a day (1 today, 3 tomorrow as an example) but I also realize that come winter, the orders will slow down - or at least they usually do.

The fee split you described sounds very good indeed. Here in Western NC, most appraisers I know pay their trainees 40% and licensed/certified appraisers get 50%.

And as Lee Ann mentioned, this industry changes often - with the biggest to come, I fear.

I have found appraising to be quite rewarding and sometimes it's downright fun. Learning how to deal with the uncooperative real estate agents and clients is the toughest part for me. :evil:

 

[wyecoyote]

Mike,

As Lee Ann states read some of the past posts. Two a day maybe after some experince around the 1.5 to 2 year mark, but to start not likely. The winters things slow down you might be lucky to get 1 a week some months. When I first started I was lucky to do one a week. I also had nightmares about red ink. The split sounds higher than typical 50% to start and 80% after license/certification. The one thing to keep in mind is that if things slow down your mentor will continue to get work and you won't.

I would not discorage you however, you said you wife does not work. Starting this new job out there will be several expenses/investments that you will need like for instance classess. Also from my personal experince is that a) the first two years I maxed out every credit card I had to stay alive. Several times in the first year I had a choice fill my gas tank or eat, no joke. I was by myself with no support. b) after three years the credit card bills finally got under hand and I did not have to really worry anymore. c) after 5+ years in this I am finally making the type of money you descirbed in your original post.

I do not mean to discorage you on this but, most people do not jump in and make lots of money to start it takes time, investment and hard work. Take my post for what it is my own experince.

Ryan

 

[George W Dodd]

Mike,

Poor Mike.

If you want an easier job, become a RE Agent. The work is easier and the commission higher.

This is a dying industry right now. After 20 years doing this, I probably average the money your hoping to start out making. Let me say, no two years are ever alike. The ups and downs are enough to keep anyone awake nights.

Not if, but when the work flow decreases you will become expendable. And, unless you've had time enough to get all your education and experince you won't be able to 'go it alone'.

Hope for the best, but plan for the worst.

 

[Mike Jones]

Interesting replies.

First let me state that I am not doing this because I think it's quick easy money. I expect to have to work long and hard to find a retain clients. I am making the change because I enjoy a challenge and the work.

It seems that most of you are questioning my assumption that I can do 2 appraisals per day. I feel that this is conservative since most appraisers I talk to in my area are doing 4 per day 7 days a week. I understand some if this is due to current market conditions, but most in my area also tell me that even in slower times they are fairly busy. I also understand that it takes roughly 3 hours per appraisal. Those of you who do less than 2 per day...do you consider this a part time job? Or does the market fluctuate so much that you can't take on another job to suppliment your income? If business is so slow that you are only getting 2 orders per week, it seems that the market is saturated and that appraisers will be leaving the profession. Perhaps that is the reason for the disgruntled tone in some of the responses.

I am fortunate enough to live in an area that is one of the fastest growing in the country (Riverside, San Bernardino, Orange County CA). Maybe local market conditions cause me to feel like I am being conservative while those of you in other markets think I am being overly optimistic.

I'm not discounting any of your responses, I just want to understand where the disconnect is between what I'm being told by appraisers in my market and appraisers on this forum.

Regards,
Mike

 

[Farm Gal]

Mike:

I am NOT trying to ba sarcastic here: Check the map, there is more to this country than the LA Basin and Sand Diego.

My comments with regard to the changes in the industry are particualrly germaine to the area in which you are proposing to work: if it is so incredibly easy to determine a valid value in your area, it is going to be done by machine, rather than humans!

Many of us are real practicing professionals but work in areas where the round trip DRIVE time between home and an assignment takes the better part of a full day, comparable searches do not rely on any automated system: a MLS search can involve driving to several different realty offices and asking to see their 3 ring binder, researching County records may involve pulling out a single file drawer which contains 3 years of comparables, and the county clerk knows every dog's name and geneology: and the clerk is related to half the county residents. We need to know some of that history, and what the living rooms look like in order to do our job. Exchanging a smile and a joke is part of the job. We aren't part-timers. Some areas have whiz bang technology, so we have to stay up to speed there also!

The purchase of an 'average residence' in my area (assuming median income for the area) takes 1.5 years of 'median income' wages, as opposed to your area where the median are income requires 6-8 years (map was unclear) of full time employment (assuming no bills).
Our lives are neither better nor worse, just different.

However, I feel my future a little more secure in my future as an appraiser: automated systems are not going to result in reasonable values in my area. I am slightly insulated from the automation changes that I and others are attempting to warn you of. Come to your own conclusions, expend time and effort on obtaining your license or not, but do NOT say you were not warned to be cautious.

Whatever your decision, I wanted to warn you that LARGE changes are being implemented, and the results in areas like yours will likely result in underemployment of folks already possessing what you are proposing to earn.

If you chose to scorn that advice fine, but please do not imply that myself and others are either ignorant or stupid. I left the Golden State for a reason: spiraling cost of living and at the time inability to maintain what I considered a reasonable lifestyle. Divorce left me with a great many bills. They are now paid, and I am progressing. Leaving a secure job for an unknown in what others are warning is an uncertain field may leave you with a worse taste than I got from my divorce.

Again, I wish you well in your endevours, but you may want to take a very close look at your future, or pursue another area of enterprise, life is too short not to have fun: find something you will enjoy and go for it!

Regards,

Lee Ann

 

[Pamela Crowley (Florida)]

Those that do 2 or more per day are either:

#1) doing VERY EASY ones where they already have an extensive data base to pull their general neighborhood and comp information from, ie: many, many years of experience in the neighborhoods where they are appraising

- OR -

#2) they are not completing the appraisal process correctly, ie: cutting corners, not verifying comp information, not doing the proper due diligence.

Not all (some do fall into category #1), but the vast majority doing this many are in category #2. The vast majority in category #2 don't really know how to appraise and have low ethical standards.

If the 'appraisers' you know that are doing that many have been appraising less than 5+/- years, they are very likely in category #2.

Just my opinion - there are a few exceptions.

 

[Mike Jones]

Lee Ann,

I understand the changes you are referring to and am taking them into consideration. I have been reading every post on this forum and am grateful to have gained the knowledge from folks like you.

I did not mean to imply that anyone on this forum was ignorant or worse off than me. I was simply trying to understand where people are coming from. The thing I hate most about forums is that it is difficult to convey tone or clarify intention. I should have been more clear with my comments.

Regards,
Mike

 

[Jo Ann Meyer Stratton]

I am finally going to have to jump in although currently I am in an unusual market. But for years I completed appraisals in the seventh largest metropolitan area of the country with miles and miles of cookie cutter subdivisions as an employee of a very large appraisal office. And I will also have to do some sermonizing. Appraisers that claim 3-4 appraisal assignments a day usually have some errors in typing, math or I'll even be outspoken, ethics. To do the job properly, the subject, the market area, comparables and any factor that might have an effect on value needs to be reseached and verified. That takes time and prevents 3-4 appraisals per day from being done properly. Even when in a cookie cutter subdivision with ten sales, actives, pendings of the subject model with similar features and upgrades. Appraisers that do the minimum without proper verification and reasearch are the reason that Fannie Mae, etc are now saying appraisals are necessary because an appraisal only reports the sale price--so why bother with an appraisal. Okay off my soap box. Appraising is a very feast or famine business. Orders can be rolling in so fast there might be a six week turn around time before the assignment can be completed. At another time if one order in week arrives it is a reason for a celebration. And those cycles do occur. I have been in this field for 35 years, 20 as a fee appraiser and there have been times I worked other part time jobs just to put food on the table. When a feast would occur I had to get caught up with all the debts from the famine period, maybe save a little and then it was famine time again. But appraising is a field I have enjoyed throughly and very glad I have stuck it out through the bad times and good times. But there has to be continuing education, training, experience, exposure to new ideas the entire time you are apprasing. All those items are required and do take time away from actually do an appraisal that will pay the bills.

It all boils down to the old saying about a successfull farmer or rancher. A farmer/rancher that is successfull is one who's spouse works at the courthouse and takes home a steady paycheck to pay the bills. Since your wife doesn't, will she be willing to work at an outside job during the famine times? Are you willing and able to cut back living expenses during the famine times? And yes they will occur!