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Appraiser added value

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The Dog

Thread Starter
Senior Member
Joined
Apr 18, 2005
Professional Status
Certified General Appraiser
State
Oregon
I have been thinking about this for a long time. Reading the forum, it appears that a couple of different 'camps' for lack of a better term exist.

Part of our problem as appraisers is in my opinion directly related to the way we work, accept work, decline work and behave in public. A lot of writing on this and other forums includes discussions about fees and how only a "skippy" will work for some of the fees offered. In the same breath, the same people that often argue for higher fees are sometimes the same ones that state "run" when an appraisal assignment appears that is slightly out of the ordinary.

To me it seems that we have to realize that the only way our profession will survive is once we prove that an appraisal adds VALUE to a transaction. Those transactions that are cookie cutters do not need, want or require an appraisal. That type of transaction can be handled with BPO, AVM or simple statistical analysis. That is not the type of transactions that a good appraiser should strive for, because that type of work will produce low fees because we are competing with cheaper electronic media.

However, the true value of an appraisal becomes apparent when we add value ie the transactions that could be troublesome and will involve thorough research and analysis. We are a service industry and as such have to justify our existence.

We as a profession have to remember that the only reason we are needed is because we provide a tangible asset to a transaction. Too often, we look upon the need for our services as being only to provide $ into our accounts.

I believe that the present downturn in the market will eliminate a large number of what I call "form jockeys" that saw this profession as an easy way to get rich. There were recent posts on the forum about accepting jobs in this industry or another, about the future of the appraisal world, about accepting or declining difficult assignment. I may in the minority here, but I do believe that the future for appraiser is good. But it is only good for those appraisers that are educated and willing to accept assignments that cannot be completed by machines.
 

Narkissos

Junior Member
Joined
Jan 9, 2006
Professional Status
Certified Residential Appraiser
State
Michigan
I agree with you for the most part. However, the problem is that many do not want to pay the appropriate fee for difficult assignments. I have never turned down an assignment due to complexity, evening knowing in advance it was going to be a major PITA.

I do not know you about you but I have not had what is referred to as a “cookie cutter” in a LONG time. The lack of sales, presence of institutional owned properties, declining market, oversupply…. have made almost every report I have developed for the past 6 months difficult. Not to mention the phone calls, complaints and explaining to clients as if they were three year olds the principal of substitution, the impact the presence of institutional owned properties are having,….

It takes me twice as long just to analyze the market, up, down, sides. Many areas are becoming increasingly difficult to peg.

As a service industry trying to survive in a time when ALL of our costs are going up, our job is becoming increasingly difficult and NO one what to pay more, they want to pay much less. Many “run” because they know what they will make will by no means be worth the hassle.

I have done several appraisals lately that I have said, repeatedly while typing a 5 page addendum at 11pm, this just not worth it. I took the job knowing it was going to be bad, so I did my job. I believe what you believe but I also understand the reason many run, many times I wish I had. However, I am sick like that. I actually enjoy the difficult ones, it helps me remember why I love my job.
 
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George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
I think the prevailing sentiment among some of these lenders is that they have been compelled to use appraisers on even the no-brainer deals. Since they already think they've been overpaying in general they're not that sympathetic when it comes to paying extra for the more difficult assignments.

The other thing is that right now they are in the driver's seat. The supply/demand dynamic in our business has changed, and instead of us creeping our fees up, they now have the leverage to creep the fees down.
 

jakeboeger

Member
Joined
May 12, 2005
Professional Status
Licensed Appraiser
State
California
Other than now, I cant think of any other time that an accurate & honest opinion of value has been needed more.

Are fees increasing yet??
 

Marcia Langley

Senior Member
Joined
Aug 26, 2005
Professional Status
Certified Residential Appraiser
State
Missouri
I agree.

Any function associated with the financial industry will be controlled by themselves and the rest of us participate at their pleasure. In exactly the same way that mortgage brokers do. The residential mortgage segment of the appraisal industry has always been controlled by banks to one degree or another.

When the demand-volume for appraisals mushroomed in the last century, and before they had sufficiently sophisticated machines, they influenced the laws and regulations needed to speed up and cheapen the new appraiser training curve. As the internet became pervasive they found lucrative pipelines from mortgage brokers and were able to tap into nationwide markets. The volume mushroomed even more.

Then they tweaked their risk/profit model to allow for more increase in volume. Once they created investor demand for mortgage backed securities the increase in volume was exponential.

The old time consuming and exclusive appraiser apprentice training model simply was not fast enough to supply this enormous and sudden demand for appraisers. People can complain about licensing all they want but the sudden and drastic increase in the number of appraisers in a very short time would have happened one way or another because the banks needed it.

But now, finally, PCs are available to almost every American. Banks don't need the MBs so much any more. And machines can handle the bulk of the appraisals so they don't need so many appraisers. Losses have forced them to re-tweak their risk/profit model causing more reduction in volume.

They simply do not need so many of us anymore.


To me it seems that we have to realize that the only way our profession will survive is once we prove that an appraisal adds VALUE to a transaction.

I may in the minority here, but I do believe that the future for appraiser is good. But it is only good for those appraisers that are educated and willing to accept assignments that cannot be completed by machines.

Dog,

I agree that the future is good for the sort of appraiser/appraisals you describe but I also think the number such appraisers that will be required to supply the demand will be miniscule compared to the numbers that have been needed in the recent past.

One thing appraisers will not be able to control is the overall volume of "real" assignments (not doable by a machine). Even appraisers who are diligent in seeking out such assignments will be lucky to find enough of them to make a living without the supplemental income of doing cookie cutters.

-------------

As I see the future unfolding, I see AVMs and AMCs melding into one unit that no longer even offer appraisals but rather offer ever more accurate and sophisticated automated values.

The hordes of appraisers trained to identify and keypunch property attributes could change careers and instead become on-site data collectors.

When someone applies for a mortgage, instead of the lender requiring the borrower to open their doors to an appraiser, they could require them to open their doors to a data collector.

For the biggest part of their mortgage volume, lenders do not need appraisers any more. They only need data collectors. In reality, that's what the fast and cheap appraisals that go into the AMC's databases are. The appraisers' certifications and E&O are just a risk-layoff bonus for the AMC over and above the value of the data.

Appraisers who sign those crazy contracts with AMCs are really getting paid for data collection that the clients think they own and for accepting liability for being the patsy if something goes wrong.

The poor appraiser is working their butt off trying to produce a "passable" appraisal fast and cheap and is suffering all sorts of aggravation and angst because their license and work volume is on the line.

I wonder how much the financial industry would value the data collection activity without the conclusions, certification, and E&O. I'll bet it would be almost as much as some AMCs have on their broadcast assignments today but it would cost the appraiser a lot less to produce.
 

David Wimpelberg

Moderator
Staff member
Moderator
Joined
Mar 30, 2005
Professional Status
Certified General Appraiser
State
New York
I concur with the first posts. Two things I recommend to any appraiser are:
  1. Get your general certification; and
  2. Specialize.
The one thing the people that have #1 and do #2 all have in common is that they have plenty of work (at least in my neck of the woods), regardless of what happens in the lending segment.
 
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