There are a lot of appraisers who can do the minimum standards at a price and fee that is lower and faster than I can, and be profitable. Why shouldn't they be allowed to compete against me using those advantages to get the work? As long as they meet the minimum standards, they have the competitive advantage no matter what system they are bidding their services where there is not a fee-control in place.
If appraisals had no mandate to protect the public trust, I'd agree with the above. But since appraisals do have that mandate per USPAP , having appraisers who supposedly meet minimum standards who compete on fee and turn time drive many good, competent appraisers out of the business, which is overall not good for public trust. And no matter how efficient an appraiser is, there has to come a point where competing on speed/low fee interferes with the ability to do better work. There is no reason, for res lending, why appraisers should be competing this way, as long as what the appraiser charges is covered by what borrower pays. This competition on fee means lenders or AMC's are benefiting by keeping a larger share of those appraiser's fees, otherwise why would they select by fee? And who is to say these entities are selecting the better appraiser, if one offers a lower fee? Isn't the public interest better served by having better appraisers doing the work, and indeed going beyond the minimum standards if need be to best fulfill assignment?
Turn time is an issue as well and imo has gotten way too fast for expectation.
JGrant, IMO, you are making an emotional argument based on the real-life squeeze that many appraisers find themselves in. I get that.
But without accepting the fact that,
by definition, the minimum standards (which are different for every assignment since no two assignments are exactly the same; but they have the same requirement: credibility and not misleading) is the basic benchmark that defines everything else that goes into the appraisal process, you are missing the most critical factor in the equation of fee, turn-time, credible results, and business-sustainability.
There is no reason, for res lending, why appraisers should be competing this way, as long as what the appraiser charges is covered by what borrower pays.
Again, this thread was about borrowers picking the appraiser from a lender-approved list. You already said that you think many borrowers would use fee (and maybe turn time) as a significant factor in their selection process.
Why should you not get the job at $450 and 10-days if I'm bidding $600 and 3-weeks? Unless I can impress upon the borrower that my reports are so significantly superior to yours
and that difference matters, why would they pay me and not hire you? And, that difference doesn't matter; you will complete the assignment to at least the minimum standards as well as I will. You may even exceed what I do.
But, UCBruin walks-in and can do the report for $400 and 5-days, and his work meets the same minimum as ours does. Why shouldn't the borrower hire UCBruin?
The obvious counter-argument is, "Well, if we were negotiating fees in the $400 to $600 range for a standard house, we wouldn't be having this argument!!!"
But here is the problem with that argument: There are some appraisers out their who have refined their process such that they can meet the minimum standards and do the work for $275. If you, UCBruin, and I are competing against that appraiser, she is going to beat us out most of the time. Why shouldn't the borrower benefit (since they are selecting the appraiser in this hypothetical) from that lower fee? Isn't a less costly service that meets the minimum standards in the public interest?
I personally believe that fee, by itself, does not drive quality (I've seen enough appraisals to make this claim with confidence). I've seen reports where I think they did it at a fee I wouldn't consider that were acceptable, and I've seen reports priced at a fee higher than I would have charged that are unacceptable. And the fee for these residential reports start closer in the +$400 range, not the $250-$300 range. Note what I said:
"fee, by itself, does not drive quality".
The fee is almost always the argument on this forum. It is a losing argument because fee is not what is important or significant
in the appraisal process. Minimum standards/requirements and meeting them is what is important
in the appraisal process. Focus on that, and everything else will fall in-line. And we should be prepared (as I am because I personally see it all the time) to accept that if the minimum standards are really the benchmark, someone may be able to complete an appraisal at a price and within a time frame that beats us. When that happens, we have a choice: We can see how we can become more competitive, we can try to find a client-base whose requirements exceed the minimum (which, again by definition, becomes that assignment's "minimum"), or we can determine that our service is no longer competitive and make a decision if our service is sustainable or not.
I don't go out of business or lose jobs because clients won't pay me what I want. I go out of business or lose jobs because another appraiser can meet the minimum standards at a price I cannot (or, am not willing to accept).
This is true for nearly all types of professions and services. Ours is no different.
The focus on fees is a focus on the outcome.
The focus on standards is the focus on what determines the outcome.
All I need to do is figure out how I can deliver what is required and how to price it so that I'm competitive and my business is sustainable.
I get to choose which competitive arena (high volume residential mortgage, lower-volume private party, a mix of the two, and what kind of sub-property/client base I'm going to target) I'm going to compete within.
My fellow appraisers (and I) are the ones that determine how,
within that arena, we compete.
Forget the oligospony argument as well: Appraisers in Oregon are getting $1,000 to $2,500 an assignment for what cost 2-years ago maybe $500-$600. No amount of purchasing-power by an AMC is changing that.
Appraisers in Los Angeles where there are a lot of them? Maybe they start around $250 to $300 for a similar mortgage-appraisal. Do I really have to point out what the reason is for the fee difference between those two markets?
