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Commercial Evaluations As A Service - Worthwhile?

As a commercial appraiser are you/would you offer EVALUATION services?

  • It's not relevant because my state doesn't allow me to do them.

    Votes: 1 6.3%
  • I don't know - I haven't studied the requirements or potential fees yet.

    Votes: 3 18.8%
  • YES - I know all about the requirements and they work for me.

    Votes: 6 37.5%
  • NO - evals are just work for people who can't pass State certification or licensing.

    Votes: 6 37.5%

  • Total voters
    16
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Joined
Jun 2, 2007
Professional Status
Certified General Appraiser
State
Florida
Florida State Certified appraisers are now permitted to provide evaluations for banks where "There has been no obvious and material change in market conditions or physical aspects of the property that threaten the adequacy of the institution’s real estate collateral protection after the transaction, even with the advancement of new monies; or There is no advancement of new monies other than funds necessary to cover reasonable closing costs." (Interagency appraisal guidelines 12/2/10). There's also a business loan exemption from appraisals and $250,000 value threshold.

I don't personally see where there's any difference between appraisals and evaluations about accuracy, development or reporting. An Evaluation is not just a "restricted appraisal report" and in fact has more reporting requirements.

So, is anybody making these work at a profit anywhere in the US?
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
I've seen AI issue guidance on evaluations but if a client requests an evaluation, I tell them that I can do a restricted report and so far they have been fine with that.

Due to the above, maybe I'm disqualified from participating in this thread, but my answer to the poll question would be, it depends. I find that accuracy/ comfort with the value comes with spending at least a little more time working on the property than what the fee expected by them translates to on an hourly basis. Restricted appraisals certainly do save time, but seemingly not the reduction in time that they are expecting. As a result, they seem to be using me for these scenarios less and less, and I'm perfectly fine with that.
 

Michael S

Senior Member
Joined
Mar 18, 2009
Professional Status
Certified General Appraiser
State
New Mexico
I have done several evaluations, we have one large bank client that orders these for small owner occupied properties where the value is typically between $100,000 and $300,000.

Frankly the fees are not worth it. Using a restricted report with a pretty skinny format and single approach to value (virtually always sales comparison) it takes perhaps half the time as a "summary" report with a third of the fee (rough numbers). I would rather complete one summary report than two - three evaluations. The only upside is that it can be a way to squeeze in some extra work between larger assignments. Even on one I did where I had a lot of data from appraising a similar property recently it still didn't work out to be as profitable on an hourly basis as a normal report.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
I think you'll have to get your answer from those who provide an Evaluation without being required to follow the USPAP, since Florida exempts USPAP compliance.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Let's price an "Eval" out.
By definition, these are relatively lower-risk transactions. Many times, the institution already holds the loan. Let's assume the institution holds the loan on an industrial building; it is owner-occupied and it fits the owner-occupied profile for that property type.
What is needed to complete the evaluation?
A. A physical inspection (not necessarily a walk-through, but why not?).
What's the base charge for that? $250? Presumably, the institution has a prior appraisal with the GBA, etc. If no material changes have taken place, this prior information can be relied upon.
B. A market valuation
Owner-user property in an owner-user market. Sales comparison approach would be appropriate. No other approaches might be necessary.
OK, so I find a set of comparables. How detailed do I have to do the analysis? It depends. Might be pretty straight forward. I could use a qualitative analysis and conclude to $/sf. I don't have to shoot the comparables; I can rely on other means (maybe Google Earth, etc.).
I suppose I could do an imputed cap rate based on market rent as a test of reasonableness, but if the premise this is an owner-occupied property the expectation is that the income approach is going to indicate a lower value anyway.
I can write this up on a couple of pages. It may take me a couple of hours to do so. I can use some pretty generic market data for trends/conditions (again,the presumption is that there isn't any significant changes in the market; otherwise, an appraisal will probably be needed).
How much to do the research/write-up? Another $250 to $500 (remember, it takes me about 2 hours or so after the inspection).

It seems to me that an Eval might be profitable in the $500 to $750 range. This assumes a simple property without any complications (which is what the eval is designed for).
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
It seems to me that an Eval might be profitable in the $500 to $750 range. This assumes a simple property without any complications (which is what the eval is designed for).
I'm not one that likes to brag about my minimum fee being $5,000 (because it isn't), but that's exactly the range where the banks I was discussing in my prior post are expecting a fee in. I do qualitative adjustments on occasion, but have never looked at them as a more expedient method. There are two reservations that I have with evaluations at that price. First, at $500-$750, even if it is in my hometown and all of the comps are already researched, etc., I'm not spending enough time with the appraisal to be comfortable with the value at that price (unless I take an hourly cut, which I don't have any incentive in doing). One could point to the watered-down scope of work for the reason of decreased potential accuracy, but from a business standpoint, if I issue 20 to 30-page reports that have minimal detail AND aren't entirely accurate, word will get around that the quality of my work is declining. Appraisers understand some of these issues, but the public may not. Also, I have been approached by other banks regarding evaluations or restricted appraisals and I have discussed some of the issues associated with them that have resulted in them sticking with normal formats for me. Some of those banks are great clients and if they found out that I am appraising a like-kind property for a considerably lower fee for another bank, that won't go over well, even if one could simply point to SOW differences.

I am not suggesting that one can't do evaluations in an accurate manner or in a manner that results in sustainable business, just not at that fee :)
 

Michael S

Senior Member
Joined
Mar 18, 2009
Professional Status
Certified General Appraiser
State
New Mexico
The evaluations I've done are typically about 20 pages not including addenda and I've yet to finish one in less than about 15 hours. I would not feel comfortable putting my name and license on something that I only spent a few hours on. However, much of that time is spent on research as non-disclosure makes it time consuming to find and confirm comp data. A lot of the properties I've done evaluations for are much smaller than what we normally appraise so we don't have a lot of comps in our database. Those types of properties are also less likely to involve a broker, further making it harder to find and confirm good data.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
GoBears & Michael S:

I think you guys are writing appraisals, yes?
And, certainly a non-disclosure state would complicate the data research, etc., necessary.

I'm talking about an evaluation. Different scope, different standard, different expectations. Only works for an appraiser when the appraiser can do the evaluation as an evaluator and not an appraiser (not be required to complete the service compliant with SR-1/SR-2. No record keeping requirement either, although I'd probably keep a work file). An appraiser can never mislead or produce non-credible results; so that is always in play.
 
Last edited:

Michael S

Senior Member
Joined
Mar 18, 2009
Professional Status
Certified General Appraiser
State
New Mexico
GoBears & Michael S:

I think you guys are writing appraisals, yes?
And, certainly a non-disclosure state would complicate the data research, etc., necessary.

I'm talking about an evaluation. Different scope, different standard, different expectations. Only works for an appraiser when the appraiser can do the evaluation as an evaluator and not an appraiser (SR-1/SR-2. An appraiser can never mislead or produce non-credible results).

Yes, the evaluations I've done are restricted appraisal reports.

If I were not held to any appraisal standards then I could probably provide a reasonably supported value within a couple of hours plus time to confirm a few sales.

Plenty of times I've determined the value within the first day and then spent multiple days actually writing the report and providing the analysis and backup to support that value opinion.
 
Joined
Jun 2, 2007
Professional Status
Certified General Appraiser
State
Florida
Just an FYI, a Restricted Appraisal Report would be inadequate for an evaluation assignment without supplementing it with a market and physical analysis. I think what you are implying is that your evaluations resemble Restricted Appraisal Reports in brevity, and you present some thought to issues the intended user would need to understand that are unnecessary in a Restricted Appraisal Report.
 
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