Adding An Appraiser

[Marie Louise]

I have been solo for 10 years. A few years ago, I hired my brother so he could get certified. He has finally received his certification. How do you run a business while having other appraisers on staff? So far my clients have been open to adding him to the rotation because he is an extension of my company. How do you split your fees? How do you delegate work?

 

[Terrel L. Shields]

If I have the company, subs who generate income get 90%. Work I give them, I take 33%

 

[hastalavista]

If I have the company, subs who generate income get 90%. Work I give them, I take 33%

Terrel is a generous boss; however, the question is, what are you paying for vs. what is your brother paying for?

If you are providing the data, the facility, computer, software, etc., those are costs that should be deducted from your split-calculation. Likewise, if you are required to co-sign the appraisal, that is another cost (time + liability). Whatever split you decide, those costs should be factored in.
If the business is generated by you the split should be higher than if the business is generated by your brother.

At the end of the day, it would be reasonable for you to pocket anywhere from 10-20% after expenses. That would be the same no matter if it were your brother or you hired my brother. You might be inclined to lower that because it is your brother. That's fine. Just make sure that you at least recoup your costs.

Good luck!

 

[Joe Flacco]

10%-20% almost sounds like not worth the hassle of adding a appraiser. That is equivalent to you needing 5-10 staff appraisers in the firm to make the same amount as working by yourself.

 

[hastalavista]

10%-20% almost sounds like not worth the hassle of adding a appraiser. That is equivalent to you needing 5-10 staff appraisers in the firm to make the same amount as working by yourself.

It might. But....

If I have no costs associated with a sub and the sub is generating all the work, 10-20% seems pretty good, doesn't it?
I haven't seen that "dream sub" yet (and likely never will).

Let's assume that there are costs that I'm paying:
Shared data sources.
Appraisal processing (if they orders are coming through my office and going out from my office, there is going to be some time/cost involved in that).



Let's say my data sources/software are $1,500/year. My brother is doing about 44% of the work; I'll charge him on a pro rata share for the data sources.
Let's say I'm processing the orders (they are coming to me, but I'm assigning them out). Let's say I charge $10 for that.
On average, I might have to co-sign 33% of the assignments he is involved with. I charge $50 for that.
I want to make 20% profit.

Let's assume he does 3 orders a week, 48-weeks a year; average fee is $400. I'm doing 5 orders per week.

You can run the math, but under that scenario I'm pocketing $11,520/year in profit (this excludes the co-signing fee). I'm reducing my expenses by $4,400 (separate from the profit and includes the co-signing fee). The fee split to my brother is 72%. He grosses $41,680/year.

If I am co-signing 2/3rds of the work, the equation changes to $11,520 in profit and my brother is getting a 68% fee split. I'm reducing my expenses $6,827/year and my brother is making $39,254/year. (The increase in the expense reimbursement is due to my co-signing more appraisals; another might consider that "profit" but I'm counting my time and liability as an expense).
If he gets up to 4 assignments per week under this scenario, my profit increases to $15,360/year and I've reduced my expenses by $9,019/year. He is getting a fee split of 68% and earning $52,421.

In the best case scenario (best for me) I've reduced my expenses by $9k per year and earned a profit of $15,360. The "total" fee split to my brother is 68% (so I am taking 32% of the fee).
I don't think that is unreasonable, but I can appreciate another might think it so.

The above doesn't consider shared office costs. In my case, because of my office configuration, if my brother wanted to have a desk at the office (computer, phone, access to the office manger for assistance, copy machine, etc.) I'd likely charge a "desk charge" for that.

 

[Joe Flacco]

It makes more sense when your time and liability is counted as a expense.

 

[Howard Klahr]

10%-20% almost sounds like not worth the hassle

What dividend rates do you see in the market for other businesses? As Denis already noted that amount is after all expenses.

Think of the revenue for the business like a pie. Labor/production is one slice, marketing another, administrative costs another, etc. The goal is to still have a slice left over for profit/distribution

 

[Terrel L. Shields]

My subs had their own computer, bought their own software, E & O, and joined the MLS as my staff with their own MLS login. It cost the same for me. I didn't try to cheat the MLS out of their dues. They are no expense to me except the MLS office fee. So when they generated their own work, and since they were only using my company name, 10% and no liability was a easy choice. Taking a third where my review and signature was required meant my E & O was liable, etc. But once certified, their work tended to be quality work and not trainee level.

 

[Deleted member 130081]

I have been solo for 10 years. A few years ago, I hired my brother so he could get certified. He has finally received his certification. How do you run a business while having other appraisers on staff? So far my clients have been open to adding him to the rotation because he is an extension of my company. How do you split your fees? How do you delegate work?

What have you done so far? Does he work for free? How about just give him a raise? YOU built the business, not your brother. If he steps up with some entrepreneurial efforts to help you out, then maybe it would appropriate to form a partnership. Otherwise, you changed his life for the better just by being his mentor and he owes you, not the other way around.

 

[Michael P Jacobs MAI]

I have been solo for 10 years. A few years ago, I hired my brother so he could get certified. He has finally received his certification. How do you run a business while having other appraisers on staff? So far my clients have been open to adding him to the rotation because he is an extension of my company. How do you split your fees? How do you delegate work?

Just another observation - not really answering your question which has already been addressed - I grew up in an appraisal-business family and a decision was never made that didn't make business-sense. Nobody worked that didn't show an aptitude for decision making and potential to learn from every assignment how to do it faster and better next time. As you might imagine some did and some didn't.

That cut both ways - when the business hit a slow period and the decision was made to cut expenses on the backs of the appraisers, the blood-appraisers became competitors just like in real life. I eventually had to move to a different county to avoid embarrassing more "entitled" family. That kept peace in the family but just barely.

I guess I'm saying that hiring family might feel good but it has to make sense for everybody.