Discounting Poll Question

[Colleague]

If an appraiser charges an AMC less than their base fee should they disclose in the appraisal report that the AMC received a discount for the procurement of the assignment?

 

[Darrel Clark]

Maybe I am way off the mark, but as I read the Ethics rule of USPAP under the management section, it seems to me that if an appraiser is giving a discount for perceived volume of work—the appraiser is giving a “thing of value”. Following is the section of USPAP that I am referring to:
Management (ETHICS RULE)
The payment of undisclosed fees, commissions, or things of value in connection with the procurement of an assignment is unethical.
Comment: Disclosure of fees, commissions, or things of value connected to the procurement of an assignment must appear in the certification and in any transmittal letter in which conclusions are stated. In groups or organizations engaged in appraisal practice, intra-company payments to employees for business development are not considered unethical. Competency, rather than financial incentives, should be the primary basis for awarding an assignment.

 

[Fred]

Why wouldn't all fees be discounted then? Wouldn't your prices be higher if you were five times as busy?

I am thinking the word "payment" means payment and that this refers to payment of referral fees. Otherwise, "competency, rather than financial incentives" would make it unethical to be the low bidder.

 

[Scott Lanz]

I don't have a base fee, it's always as much as I can possibly get. I try to stay away from any discussions about future work with clients.

This is tricky as it feels good to all of us appraisers when we have a client that is happy, and indicating that more work will be coming our way.

Scott J. Lanz

 

[Pamela Crowley (Florida)]

Don't the AMCs 'sell' you on the lower fee for a higher volume of orders?

I agree with Darrel Clark and believe this should be disclosed.

 

[Colleague]

Disclosure of fees, commissions, or things of value connected to the procurement of an assignment must appear in the certification and in any transmittal letter in which conclusions are stated. Competency, rather than financial incentives, should be the primary basis for awarding an assignment.

When an appraiser completes an application to become an approved appraiser for an AMC client or a non AMC client (such as a local bank or mortgage broker), usually (not always) both clients request a schedule of fees from the appraiser.

More often than not, the fees for the AMC client are less than the fees for the non AMC clients. The primary reason, or procurring cause, of receiving the appraisal assignments from the AMC is because the appraiser agrees to give a volume discount.

A discount is something of value is it not?

 

[Lawrence R.]

If an appraiser charges an AMC less than their base fee should they disclose in the appraisal report that the AMC received a discount for the procurement of the assignment?

I think it would be very hard for an appraiser to establish his "base fee". Fees are now basically dependent on the SOW, and as such, each assignment stands on its own so to speak.

Granted, your cookie cutter SOW may have a base fee that you try to charge, sort of like the "rack rate" at a hotel. But nobody pays the rack rate, as everyone is entitled to some kind of discount.

If I were sued for disclosing a base fee and then a discount given to an AMC, could I prove in court that the number I used as a base fee was actually charged to clients? Would the court view a numerical average as the base fee?

Too hard to stick with. I think a discount is not a "thing" therefore is not a thing of value. What is the base fee for an oil change?

Just too hard to prove. Nice try though.

I do beleive though, that WHATEVER your fee was for an assignment, it should be disclosed within the report. Public trust and all.

 

[Randolph Kinney]

It seems to me that when any appraiser works for an AMC, they agree to the AMC schedule of fees. These fees are typically lower than what most appraisers routinely charge for non-AMC work. In marketing speak, it is called market segmentation. You are competing for appraisal work in a different market environment that involves a middleman.

I don't see a problem with USPAP.

 

[Scott Lanz]

I am with Larry on this one.

Years ago when I worked for AMC's, I provided a range of costs for my services.

I don't think I would enter into discussions about volume work from any company. The idea stemming from the statement in the management section of the USPAP of "the occurrence of a subsequent event".

I might be misinterpeting that statement in this scenario.


Scott J. Lanz

 

[PropertyEconomics]

How about those instances where you pay to get assignments .. like Apprisal Port in some instances charges $6 per report and bills you at the end of the month?
Is this paying for procurement of an assignment? I have wondered about this for some time now. Or is it payment to use their delivery system .... Im not sure.