Integra’s Chairman On Current Appeal Of National Appraisal Firms As Acquisition Targets

[Terrel L. Shields]

Eventually much will morph into big data companies and remote appraisal no better than an AVM. Think how many times these outfits have been sued...or sue another firm or AMC.

He mentions Cushman and Wakefield who has been sued for gender discrimination, disability discrimination, sued by an appraiser who fell off a ladder,etc. And he mentions CBRE, who just got thru an appeal with a win after being sued by Banker's life.

Great companies and your future. Few independents will survive.

 

[PL1957]

Eventually much will morph into big data companies and remote appraisal no better than an AVM. Think how many times these outfits have been sued...or sue another firm or AMC.

He mentions Cushman and Wakefield who has been sued for gender discrimination, disability discrimination, sued by an appraiser who fell off a ladder,etc. And he mentions CBRE, who just got thru an appeal with a win after being sued by Banker's life.

Great companies and your future. Few independents will survive.

What does the article have to do with any lawsuits? What do lawsuits have to do with anything? You trying to give Eli a run for his money?

 

[Terrel L. Shields]

hat do lawsuits have to do with anything?

Do you want to work for crooks? And there were real issues raised in one subdivision appraisal suit over USPAP issues. If the independent appraiser disappears and has to work with folks who are large companies, how do you keep your job and refuse to bend rules when boss says to? Whistleblowers rarely keep their jobs but these companies won't have a license to lose, you will. They throw you under the bus and go hire someone else.

 

[PL1957]

If the independent appraiser disappears and has to work with folks who are large companies, how do you keep your job and refuse to bend rules when boss says to? Whistleblowers rarely keep their jobs but these companies won't have a license to lose, you will. They throw you under the bus and go hire someone else.

Too funny ... how do independent appraisers refuse to bend the rules when a client who represents most of their revenues asks them to bend the rules? Personal ethics are still personal ethics. The size of company is irrelevant.

The amount of leverage/influence a major client can exert on an independent appraiser is far greater than the leverage they have over a large firm. A single client is important to a big firm, but won't make the go out of business if they go away. How many independent appraisers can say that?

As to retaliation for whistleblowers, see the threads related to George Mann. I think $8M is pretty good ...

 

[jay trotta]

All of this began with a call out for Predatory Lending some years back and a famous NY AG Sold out the profession.

IMO - the little guy or individual appraiser will remain the scapegoat, unless when you join one of these "Firms", you can wrangle a "Hold harmless" agreement. As for the Independent Fee appraiser, I will see it thru until I can no longer walk or write (not that far off); additionally, I work in a complex market place and wish anyone behind me, the best of luck with their future business adventures in my area.

The position being played, is reflective of the Banking Industry, the CEO will take a small fine and move on to another company, no harm/no foul. It's amazing how the Fed can walk on both the Top & Bottom of it's own feet.

 

[Gobears81]

Too funny ... how do independent appraisers refuse to bend the rules when a client who represents most of their revenues asks them to bend the rules? Personal ethics are still personal ethics. The size of company is irrelevant.

The amount of leverage/influence a major client can exert on an independent appraiser is far greater than the leverage they have over a large firm. A single client is important to a big firm, but won't make the go out of business if they go away. How many independent appraisers can say that?

I remember talking to someone with a national firm and they said that they don't allow any client to comprise more than 20% of their business. I cannot say that my best client comprises quite 20% of my business, but believe that the client base is diversified enough that if they stopped using me entirely, I wouldn't go out of business. The beauty of commercial appraising is adaptability-kind of a window opens when a door closes type of thing. Maybe bank work grinds to a halt but suddenly a big eminent domain project starts. Pressure on values isn't what it was when I first started-we don't get calls about "nudging up the value" like we did in 2006. Plus, if a client actually respects your work, they will come back if an appraisal is done that doesn't suit them. It is the shiftier clients that want fast turn times, low fees, AND expect you to meet their value expectations each time that are a revolving door. Most of us could survive without those types.

 

[leasedfee]

4. Where will the appraisers go? Try to start their own companies?

My sister-in-law is with a medium size regional advertising agency and their model is to constantly hire and layoff as big contracts come and go. They balloon to 70 people and shrinking to 40 -- but seem to be stuck in that segment as the bigger accounts will only allow NY or LA firms, who have connections with major media. Remember what happened to Saatchi & Saatchi, the advertising firm. After the brothers were ousted by the investors, the senior executives took the giant customers, and the remaining staff fled during the next year, leaving the firm's assets as chairs and computers.

Fortunately appraisers don't rely on major contracts. Nonetheless, given our low overhead an appraiser can quit or be laid-off on Friday, and on Monday create a "new" company. I appreciate that IRR, et al., has a global brand and standardized product but my impression is that they're more of a confederation of medium size shops throughout the country. They have the constant need to train and C&W suffers from MAIs rubber stamping green appraisers.

 

[Deleted member 126639]

Too funny ... how do independent appraisers refuse to bend the rules when a client who represents most of their revenues asks them to bend the rules? Personal ethics are still personal ethics. The size of company is irrelevant.

The amount of leverage/influence a major client can exert on an independent appraiser is far greater than the leverage they have over a large firm. A single client is important to a big firm, but won't make the go out of business if they go away. How many independent appraisers can say that?

As to retaliation for whistleblowers, see the threads related to George Mann. I think $8M is pretty good ...

In theory, an independent appraiser does not have to listen to anyone. He can choose to listen to his client or not. An employee of an appraisal firm however, can be fired for doing something about which they disapprove.

Whistleblower benefits sound nice, but it takes years to get a settlement. Most people can't or won't risk it.

What really needs to be done in the industry is something similar to accounting firms. There is no question that economies of scale and technology and driving consolidation in the industry. Holding individual appraisers liable and not the entirety of the firm will always lead to abuse.

This was the lesson of Arthur Andersen. When you revoke the right of the firm in its entirety to practice, the threat is suddenly much more real.

Appraisal should be (and once was) at least as lucrative and respected as accountancy, but that is no longer the case. And that is unfortunate.

 

[Vernon Martin]

I find it ironic that Jones Lang wants to rebuild its appraisal presence through acquisitions, because that is where I started my career in 1984, when it was English-owned.

While working there, I was permitted to be independent almost all the time, although my boss would sometimes change the numbers to suit a client or client's advisor. After 3 years I was given the responsibility of appraising a portfolio of properties of a British pharmaceutical company that is now part of GlaxoSmithKline. I made a courtesy visit to the office of the Western Hemisphere manager just to introduce myself and tell him what I would be doing, whereupon he, being an engineer, gruffly insisted that I base all the appraisals on the cost approach. Most of their pharmaceutical plants were built in the 1920s, so I politely said that the cost approach was not particularly suited towards this property type, and I had the task of estimating market value. Wrong answer, I guess. He also repeatedly asked why an English appraiser was being sent to appraise U.S. real estate, and I had to repeatedly remind him that I am American and am American-trained. I may look English because my ancestors are from England.

Several days later came a message to my bosses from the client's British headquarters that "words cannot describe how unprofessional Mr. Martin was." My confused bosses asked what had happened and I was equally confused. I just told my bosses to ask for words that could describe my unprofessional conduct. The only response we got was that they insisted I be fired. So I was fired. So much for independence.

Cushman & Wakefield is still feeling the heat from caving into a client's dictation of appraisal methods (Credit Suisse and their "Total Net Value" method which amounts to a DCF model discounted at a zero percent IRR). C&W prevailed in the largest lawsuit, Gibson v. Credit Suisse, but that case was a loser to begin with based on grounds of privity. There is still a $2 billion lawsuit from the investors in the loans that Credit Suisse syndicated, and privity would apply because the investors relied on the C&W appraisals.

So that is the reason I have been reluctant to work for a national firm since then. I sometimes get "Dear appraiser" letters from Colliers International or Valbridge Property Advisors and get the feeling that they are just dragging the net for any living, breathing certified general appraiser in the state registry. A lot of the new national firms seem inferior to the old national firms.

 

[PL1957]

I find it ironic that Jones Lang wants to rebuild its appraisal presence through acquisitions, because that is where I started my career in 1984, when it was English-owned.

While working there, I was permitted to be independent almost all the time, although my boss would sometimes change the numbers to suit a client or client's advisor. After 3 years I was given the responsibility of appraising a portfolio of properties of a British pharmaceutical company that is now part of GlaxoSmithKline. I made a courtesy visit to the office of the Western Hemisphere manager just to introduce myself and tell him what I would be doing, whereupon he, being an engineer, gruffly insisted that I base all the appraisals on the cost approach. Most of their pharmaceutical plants were built in the 1920s, so I politely said that the cost approach was not particularly suited towards this property type, and I had the task of estimating market value. Wrong answer, I guess. He also repeatedly asked why an English appraiser was being sent to appraise U.S. real estate, and I had to repeatedly remind him that I am American and am American-trained. I may look English because my ancestors are from England.

Several days later came a message to my bosses from the client's British headquarters that "words cannot describe how unprofessional Mr. Martin was." My confused bosses asked what had happened and I was equally confused. I just told my bosses to ask for words that could describe my unprofessional conduct. The only response we got was that they insisted I be fired. So I was fired. So much for independence.

Cushman & Wakefield is still feeling the heat from caving into a client's dictation of appraisal methods (Credit Suisse and their "Total Net Value" method which amounts to a DCF model discounted at a zero percent IRR). C&W prevailed in the largest lawsuit, Gibson v. Credit Suisse, but that case was a loser to begin with based on grounds of privity. There is still a $2 billion lawsuit from the investors in the loans that Credit Suisse syndicated, and privity would apply because the investors relied on the C&W appraisals.

So that is the reason I have been reluctant to work for a national firm since then. I sometimes get "Dear appraiser" letters from Colliers International or Valbridge Property Advisors and get the feeling that they are just dragging the net for any living, breathing certified general appraiser in the state registry. A lot of the new national firms seem inferior to the old national firms.

And the moral of the story is ... "Never get into an argument with a property contact regarding methodology."

IMO, some of these "new" national firms will discover that doing appraisals profitability is much more difficult than they anticipate.