Buying a small appraisal business....

[tdw.375]

Hello fellow appraisers, has anyone ever bought a small appraisal business? I've been in the business for 5 years and the couple that I'm working for wants me to buy the business in a year or two. We are a small business, just the three of us appraising. Thanks for any help or feedback.

 

[Surf Cat]

Hello fellow appraisers, has anyone ever bought a small appraisal business? I've been in the business for 5 years and the couple that I'm working for wants me to buy the business in a year or two. We are a small business, just the three of us appraising. Thanks for any help or feedback.

I'm assuming the primary purchase is The Client List. Is there a guarantee that the clients will go with you as opposed to them?

What else is involved? Assuming the lease for commercial space? Equipment?

How much does the couple think this is worth in a vocation that is steadily racing to extinction of license appraisers inspecting, writing reports, Etc. AI is going to completely take this over.

 

[J Grant]

I do not believe that AI is going to take over appraising. That said, the res license side has seen inroads into it for various reasons wrt lender work. The commercial might follow suit to some degree.

It is hard to tell with this couple's client list, if it is more private work vs lender work, would they stay on for a year or two in some supervisory capacity, etc.

 

[Surf Cat]

I do not believe that AI is going to take over appraising.

How about after a couple years of the cheap data grab with the UAD 3.6? You don't think with the advancement of AI that in a couple of years of Nationwide data gathering, it will make the housing markets abundantly predictable without the use of the human?

Edit: Appraisers have already been cast aside with the inspection part. The lender's obviously feel that that is not important coming from a licensed appraiser as opposed to a junior realtor or an Uber driver. The new UAD 3.6 will be able to be done in seconds with the data imported. Increasing, declining markets don't matter.... they'll have the formulas.

 

[J Grant]

How about after a couple years of the cheap data grab with the UAD 3.6? You don't think with the advancement of AI that in a couple of years of Nationwide data gathering, it will make the housing markets abundantly predictable without the use of the human?

I believe AI will need the use of humans for analysis, review, prompts, and selection of comps, and that AI and humans will interact, rather than AI replacing humans, despite more data. JMO- the housing market and motivations are always changing, but AI modeling might be able to do more than it does now.

IMO, commercial is more at risk - their claim to fame was narrative, - AI excels at creating the type of narrative and doing a lot of the income-based formulas and analysis on commercial reports. Humans will still be needed there, too, but the AI advances might lend themselves well to that side of the business. Buy/sell/lease decisions on the commercial side are more $ driven than emotion-driven, as we see on the residential side.

 

[Gobears81]

By purchasing the business, the current clients will give you a chance, but no guarantee that they keep ordering appraisals, as we are in a particularly fickle industry. The flip side is that other clients might not like the current owners as much, and prefer how you operate or appraise, but that is, of course, not what you are purchasing.
You would have the benefit of possessing prior files, and won't have to measure in those cases, but the files still lose relevance over time.
Not sure if you are on the residential side or commercial side, but I recall an appraiser that passed away and his estate attempted to sell the business. Even though he was quite successful, no one purchased the business. Not suggesting that RE appraisal businesses are entirely worthless, but just know what you are buying.

 

[J Grant]

Instead of outright purchase, perhaps a small amount upfront and then offer to pay them a monthly $ % of the fees collected for 3 years (or some agreed on length of time)

 

[Vermonter]

An established business name with client connections may be beneficial in your market, or it may not be at all. Really depends on what you're getting in the purchase.

 

[glenn walker]

Not enough information about the business to give any opinion but your in the driver's seat because most likely there's nobody else that will purchase it.

 

[Alsie35]

I would encourage you to work something out with them where you would pay them a certain % of each deal, as-you-go, so if the business craters - at least you're not out any $$$. I cannot imagine paying "up front" for an appraisal business ... for what? A promise that "hopefully the clients we hand off will keep you on as their appraiser"?

(And let's not even get into the "Curveball" that the GSE's are going to throw you once the "UAD 3.6 Abomination" is adopted, in terms of your ability to actually "push out" work.

It was once possible to routinely do 2-3 appraisal orders a DAY during "refinance booms" in bedroom community towns - I'll wager that even with all of the supposed "helpful" technology that shills are trying to sell you from every point of the compass, those days are GONE - for good. PDC + Hybrids, AVMs, and the GSE's own RAVENOUS appetite for "data, more data, EVEN MORE DATA" has threatened to end the viability of independent appraising as a profitable small business model.

Those are HUGE unknowns at the moment for you to consider in the equation, if you intend to stay in this business for as long as it lasts.)