Charging for "trip fee" only ethical?

[David S. Roberson]

Rick,

Are you sure you understand JW's post?

 

[Tony in Ohio]

I have always admired and respected Tom Hildebrandt’s posts so I am happy to read that my approach appears to fit well in his understanding of USPAP. Please tell me if I have misinterpreted it.

I tell my clients that if I come across information while developing the appraisal analysis that I know will cause difficulties I will call them and discuss the situation with them so that we can find the solution that best meets their needs. This is not being a *****, it is called customer service.

There are various situations, but they can all be handled ethically, and within USPAP. If I have done an inspection and found significant repairs, I give a description of said repairs, and ask the LO to decide if they want me to continue developing an As-Is appraisal, change order to Subject To appraisal, or reduce everybody’s wasted time and money by reducing order to a consulting job and paying my consulting fee (commonly called a trip charge). In all cases I save my file with the completed appraisal, be it As-Is, Subject To, or merely a verbal value range or condition comments with supporting research and notes.

If I receive an order where preliminary research shows the expected value is not even close to being realistic, I give a call and advise the client as above, which usually results in a cancellation, and I almost invariable waive my consulting fee (for about 5 minutes of time) as a business decision.

There are two very important points to keep in mind. In all of the above cases I developed an appraisal. The only differences between talking house values at a party, doing a “comp search”, a drive-by, a URAR, or a Relocation report, are the amount of research (due diligence) and the amount of reporting, hence the reliability of the result. You are an expert, so any opinion you have is considered an expert opinion.

The second point is business decision. This method works well with reputable clients you can establish a long term relationship with, and that takes some weeding out. Most brokers who are looking for pushes are not going to continue sending orders after you “comp” 1 or 2 realistically, If they do, then I call them and tell them I will start billing them, that always gets them to stop. Likewise, If someone is sending you such ugly properties that your getting a lot of reduced fee’s then its time to fire them or at least tighten up your criteria. The same goes for the idiots that don't understand your consulting fee/trip charge will be significantly more for a 2 family in the next county than for a 1000SF ranch a mile from your office. Remember it’s not unethical to find out what your client needs (it’s not always what they originally ordered), however it is unethical, and stupid, to let them pressure you into giving away the store or producing fraudulent work.

 

[Tom Hildebrandt]

Tony

Thanks for your kind comments.

Yes, your post basically follows my understanding of the issues. My only "twinge" came as I read the idea of "comp search." I understood your post to recognize that this is an appraisal, and this is what I believe as well.

However, many appraisers miss this issue, so I want to remphasize this fact.

By selecting comps, you are applying judgement in the criteria for selection of the comparables and even without making adjustments, you are implying a range in value. This is of course what your client wants, an appraisal, ie, an opinion of value, expressed in a range so that he knows whether to order a more complete analysis and a written report. So long as you recognize that this is an appraisal, and do the work, including placing the supporting documentation and certifications in a workfile, you are fine by USPAP. This is true even if you do the work for free. Whether it is a good business decision is for you and your client to decide. I personally do not think appraiser's should work for free, but.....

You can provide your client with comparable data without having to open a workfile. If the client selects all search parameters, and you only give the client all the resulting data from those searches, you are providing only data, not any expressions of your judgement of value. There is no specific performance standard in USPAP (that is to say it is not an apprasial, appraisal review or appraisal consulting assignment) for this type of work product although it would be considered to be part of "appraisal practice." Therefore there is no requirement for a workfile, a signed certification. However, the work must be done competently and ethically under USPAP as part of appraisal practice since you are doing the work as an appraiser. Again, you can work for free, but....?

With best regards,

Tom Hildebrandt GAA

 

[Tony in Ohio]

Tom,

The kind words are well deserved.

I am sorry for giving you the “Twinge”. I get one too, and I certainly don’t want to work for free, so I will emphasize again that I think “Comp Searches” can be a good business tool if used very judiciously.

Perhaps I am, in part, willing to do it due to my experience in the Restaurant business when I was in school. In that industry if someone’s seated late you comp their drinks, if they get soup spilled on them, you comp their dinner, etc. The reason this takes place is that the cost of losing a potential repeat customer and the cost to advertise and attract new customers far outweighs the relatively small cost of making the gesture.

The cost of developing clients in the appraisal business is even greater, especially since there is a smaller potential client base. If you work for good banks or brokers, they have reasonable estimates of the property values to begin with, and I will generally phrase my call to them as a request for more info- as in “Uh Bob, The Courthouse shows 123 Oak St. to be a 1000SF Ranch built in 1965. A preliminary search shows 12 sales of similar size ranches and they range from 80 to 100K. Do you know if the owner put on an addition, Remodeled the kitchen/bath, etc. that made him think the house is worth the 120K he estimates? I seldom get more detailed than that, but it gives them an out, and also if they continue, they can’t say they are shocked when it comes in at 90K. If I have to do this on more than 1 order out of 20+/- It’s either time to look for a new client or at least try to train them a little better.

With new clients, I look at it as a way of screening them. It is worth doing a couple of times just to find out about them. I would rather invest this small amount of time up front, than to do more and not get paid or have someone pissed at me. It’s a good way to find out early whether someone is going to be a problem client and allows you to decide if you want to work for them.

Now, for the people who are doing 5 comp searches a day because they are getting “shopped“ by low end brokers, that is both a poor use of time (time=$) and a high risk scenario.