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Fees Based On Value Range

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Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
The company I first worked for had based their fee schedule for residential work on value ranges. 350 pelts for properties under 500,000 pelts, 500 pelts for properties over 500,000 pelts, and a quote for properties over 1,000,000 pelts. The reasoning behind this was that the liability in pelts was higher for high value properties, meaning "a 10% mistake on a 100,000 pelt value is 10,000 pelts and a 10% mistake on a 1,000,000 pelt value is 100,000" thus justifying the higher fee and no USPAP violation. What say you??? Can fees be based on liability exposure that is determined from value ranges???
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I say yes! For years, we have charged a higher fee for residential properties over $500,000. The reason is two fold. First the appraisal is generally more complex in nature and secondly, we have a higher risk or exposure.

If you make a 10% error on a $100,000 property your potential liability could be, say $10,000. On a $500,000 property that risk for the same 10% error rises to $50,000.

My logic is...."it isn't based on value...but rather risk". Also, for that reason, I prefer to pass on residential properties over $1,000,000. I lay it off citing my E & O coverage.
 

wyecoyote

Senior Member
Joined
Jan 15, 2002
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Washington
Just a question how do you know what to quote until you are complete with the appraisal report? Charge what you want or don't charge for your services but could that not be inferred as a USPAP violation in knowing what to quote until your completed with the appraisal. IE you quote a house over the $500K mark and charge for that but the value actually comes in at $475K. Could the client not state that they paid for the $500K value?

Just a thought.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
And if pigs had wings they could fly.........

When was the last time you received a request that didn't have "estimated value" or a contract amount?

If I have one that says that, I charge accordingly. It isn't cast in bronze and the up charge isn't that much.
 

Patrick Egger

Sophomore Member
Joined
May 29, 2003
Professional Status
Certified General Appraiser
State
Nevada
Frederick ...

Can't speak for anyone else, but I got notified from the state of Nevada that Fee Schedules with value ranges were a USPAP violation. We had sent some packages out to lenders several years ago with a fee schedule that tied fees to value ranges and got a letter from the state. We subsequently altered the schedule to refer to minimum or base prices for typical assignments and indicate that complex will increase the fee.

They had something similar to what Ryan said ... how can you tie the costs to a value range when you don't know what the value is ... also tying the cost to a value range goes to predetermined values and direction of assignment ...

Fee schedules with value ranges tied to the fee have been common place for years, still see them on appraiser websites, packages. Its been raised at several USPAP classes and the instructors have had the same opinion ... its a violation.
 

TC

Elite Member
Gold Supporting Member
Joined
Jan 31, 2002
Professional Status
Certified Residential Appraiser
State
Pennsylvania
I remember one of the first things I learned in this business was that fees could not be determined by the value of the house. If your thresold is 500K, wouldn't you be tempted to bump up the value of a $490,000 house? I can see charging more if a good client is sending you on a road trip where more time is involved, but not based on the value of the property. I'm not a USPAP guru, but I'm sure that topic is covered somewhere.

TC
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
I have a statement at the top of my fee schedule that I fax clients, the fee schedule does have my fees for a typical assignment in each category--so sometimes I make money and sometimes I lose.

"Fees are based upon estimated, time, cost to complete the appraisal assignment and are not based upon the the opinion of value of the subject property. Fees will be quoted for appraisal assignments for Non-Conforming properties, Property Disposition Appraisals, Acreage/Rural properties, etc."

I decide whether a property is non-conforming or not and I decide the fee after I determine how out of the ordinary that assignment will be.
 

DianaOKC

Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Oklahoma
I guess it's a little easier here, I quote by square footage. Certain amount for under 3,000sf and a little higher over 3,000sf. Most homes under 3,000sf will be for less than $200,000 and those over $200,000 are either over 3,000sf or have other amenities. I always follow with the line that this amount could change due to any problems or concerns encountered.
 
Joined
Jan 16, 2002
I agree with Mike.

It's not a USPAP violation if it's based on the difficulty of the assignment. Value ranges are not pre-determined anyway.

We need to start thinking outside the proverbial box.

In addition, the so-called "standard" fees are for run of the mill properties. The more unique they are the higher the fees. In addition, if you are an experienced appraiser you should know the area well enough or at least have a few clues after the preliminary research phase is done (before appointment is made). The concept that fees are standard based upon number of living units or ownership rights is BS feed us by lenders (and I don't buy the arguement that it's easier for the lender).

Name another profession where all work is based upon one standard fee fits all. Even haircutters charge various amounts based upon what you want done.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Absolutely we charge more the higher the estimated value (not restricted to the estimate of the borrower, but also including tax data, etc.). The reason being is the property is more complex, no matter how you cut it. A $1M home is much more complex than a $100K tract house. (However, I've had a lot more trouble on some $40K box than some high dollar homes - just happens sometimes). If the state gripes, you can block it by size/market.
 
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