Increasing Fees

[tom mack]

I am in the process of constructing a letter to my clients announcing a fee increase as of July 1st. I want to avoid discussing actual fees. Any help, thoughts or input is appreciated. If you have already increased your fees, I would also appreciate sharing any feedback from your client's. Have a good weekend.

 

[Randolph Kinney]

I would just announce a gasoline adder to all orders. You don't have to get specific on base fees but make it appealing to a sense of fairness.

 

[Alison Swain]

Tell them about increase in gas, that your E & O has gone up due to increased liability, additional CE required to keeep up with market conditions and the anticipated costs of the coming bonding requirement.


Good luck. Lending clients have never been known for dealing well with reality. :new_all_coholic:

 

[Dale Smalley]

I would only announce someting that adds value to your service that includes a fee increase. Otherwise I don't see it as much of a sucessful marketing plan. It makes you look desperate.

 

[xmmcsmielr]

No more AMC fees

Back in 1993, when I started my one-man residential appraisal shop, I would not have survived without Lender's Service work. Back then, I never .... not once .... had a problem with LSI dictating values at the demand of any lender.

However, the fees were horrible. At one point, I completed several months' work at $190 per FNMA1004. That was then, and now:

I do not work for AMCs, unless they have a unique property that no one on their list wants to touch. For example, one of LSI's one-of-a-kind properties paid $2,500, and I should have charged double that. It was an extremely difficult assignment.

Now, most of the work I do is for non mortgage lending purposes with higher fees than AMCs are willing to pay. During the past year, several AMCs contacted me to register, but in every case, when I told them that I would not accept orders with predetermined values, and that I charged $375 for cookie cutter house appraisals on the FNMA1004, they did not continue to ask for my information.

During this month (June, 2008) my average fee is $553 per assignment. That's only for the 8 jobs that I accepted. I turned down another half dozen mortgage lender inquiries, because every one of them initiated the conversation with the usual value check drivel that churns my stomach.

You know how they start: "I have a client in Tucson, and I don't know that market. But, my company is expanding into that market, and I'm looking for an appraiser I can work with. The borrower tells me that the place is worth $500,000. Can you pull some comps to check that for me?" I usually hang up on them at that point.

I feel lucky to have other clients who want honest values. If I had to rely on appraisal work for mortgage lending, I would have to change careers.

Partly due to my higher fees, but mainly due to the market slow down, I am producing reports at the end of June, 2008 that are at a volume which is ~40% of the number as of the end of June, 2005, when my fees were a bit lower and when the market was cookin'.

So, if I had to do it over again, I would not hesitate. I would raise fees and focus on non lender work.

 

[tom mack]

Thanks Ricardo,
You are extremely correct in your assessment of mortgage lending assignments. I diversified my practice 3+ years ago and went to work with a CG MAI. Our clients are lender and non lender, private valuation, litigation, assessments and - no brokers. Dale, I appreciate your post and your advice about adding to our services. No, I am not desperate, but it sure hurts to experience a total butt kicking at the gasoline pump. I am interested in feedback as if the majority of appraisers has, or is considering a fee adjustment. I personally feel that now is the time to adjust. Our company has base fees for the SFRs' and for commercial or complex assignments; we make a call to the client and communicate the need for a higher fee. Rarely, if ever, do the clients turn down our fees. Most of the time, they do not realize what they ordered. Communication is a key factor in retaining good clients and I would like to communicate to my clients the need for an increase in fees.

 

[Walter Kirk]

I have just raised my basic fee from $350. to $375. effective July 1. Each of the clients that I have told about the increase have agreed that a fee increase is justified given increased costs.

 

[PropertyEconomics]

I am in the process of constructing a letter to my clients announcing a fee increase as of July 1st. I want to avoid discussing actual fees. Any help, thoughts or input is appreciated. If you have already increased your fees, I would also appreciate sharing any feedback from your client's. Have a good weekend.

How in the world can you announce a fee increase and avoid discussing actual fees? By not discussing fees you are hiding something, or that would be my interpretation.
I personally think its bad business to state you are increasing fees due to the increased cost of gasoline, ie a gas surcharge, for several reasons, First, once gas goes down you will have to recind the fee, and second, frankly, it offends many when they not only have to pay for their own gas but they have to buy yours as well. I have heard from many they have lost business over this simple use of words.
Why not merely state that as a result of the increase in costs of doing business and the increased time necessary to complete appraisals including listings and pending sales, our fees will be increased $XX as of July 1, 2008 (and I think Id make it August 1 instead). Giving your clients one day notice is not much notice.

 

[Bedrock]

I have never announced that my fees were being raise. How many companies do you know of that inform their customers that they are raising prices. I don't expect my pest control company, gas company, bank or supermarket to notify my of their prices increased. If you are only doing a small increase of $25.00, just do it and don't worry about it. I have been in the business since 1994 and have raised my fees from $250 to $350 in small increments over the years. I have never had a company come back to me and argue my fees. Make the move.

 

[c w d]

It makes you look desperate.

So I guess the power companies, the oil companies, the cable companies, the municipal and state taxing authorities, the airlines, the grocery chains and their distributors, the convenience chains and their distributors, the railways, the trucking companies, the farmers and their distributors, the loggers, the mills, the paper mills, the steel industry, the gold industry, the furniture industry, the construction industry, the lawyers, the doctors, the hospitals, the courts, the pharmaceutical industry, academia, the merchant marine industry, etc, etc, etc,etc are desperate. But we don't want to look desperate and soil our reputations with the likes of them and theirs? Yeah....ok. Could it be you're desperate if you don't raise your prices in these market conditions, Dale?