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On My Own, Or Join An Established Office?

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Paul Burger

Freshman Member
Joined
Oct 23, 2002
First of all, thanks to all of you for the best appraisal info in the world! You have no idea how many of us non-posters learn from you.

I'm aware that this post may get moved to newbies, but it may fit here in the general forum.

I have been a part-time appraiser for the last 6 years, with a full-time job in another non- real estate related field. In the last three years, I grossed $60k, $75k, and $90k. My full time job is a 40-hour a week job, and I do the appraisals in the evenings and on weekends, usually doing 2 to 4 inspections during the week and then 2 or 3 more on Saturday.

Well, it's killing me. I don't see my family anymore. I get no sleep. And I'm miserable. See, I'm already acting like a full-time appraiser!

I've decided to go full-time. I love the work. I enjoy nearly everything about this job. I may not be the smartest guy out there (that's why I appreciate this forum), but I try to do the right thing. I can sleep at night because I believe in the work I do. And I'm getting to be a pretty decent appraiser. :)

I have an opportunity to join a well-respected appraisal firm, with good contacts, good data, and a good system. Of course, I already have access to some data, and I already have my own software, computer, camera, scanner, etc. I already have a decent client base, although most of my work is refi. I'm licensed, and plan to get my certification in the next couple of months.

Here's my problem. I'm strongly leaning toward doing it on my own, working out of my home to minimize overhead. My fear is that I'm overlooking some vital point that could mean the difference between eating and starving.

I enjoy working on my own. However, the appraisal firm would have good contacts, they would provide data, a secretary, supplies, camera, etc.

AND they would take 40 percent of my earnings, regardless of whether the work is from one of my existing clients or one they supply.

Any suggestions?
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Tough call....after 6 years you should have a good handle on your market and what is available out there and not need a company to provide you with work. There are certain other advantages to working for an established company such as secretarial support, a place to go to work (really good if you have kids at home), and someone to run stuff past. While the forum can help with some things, having a professional appraiser familiar with your market can be a real blessing. On the other hand, working from home can keep expenses down, saves lots of commuting time, and you can get up and go to work in your underwear.

Its your decision, what ever you decide....I can live with! :rofl:
 

liznindy

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Indiana
Does the appraisal firm give you benefits (insurance, vacation, etc.) with their 40% take?

If not, and you are still considered "self-employed" and must pay your social security taxes, get your own insurance, etc., I would recommend you go it alone (just my opinion). Because the 60% you keep is not enough if you have to pay your own expenses and get no benefits.

If you have your own clients you are ahead of the game on going out on your own. It should be fairly easy right now to make new contacts with potential clients as well (especially with the 2 and 3 week turn times most appraisers are quoting).

And working out of home, you will see your family more :)
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
Being alone is a different deal. But so is handing over 40% of the fee in exchange for the administrative advantage and reduced (but not completely eliminated) overhead. Just how badly do you need the secretarial support or the bells and whistles? Badly enough to pay the premium? Do you need the technical expertise a veteran appraiser can offer? Are you looking to expand your capabilties by taking on more demanding assignments that might not otherwise be available to a relative newcomer working solo? There are a lot of aspects of this, of which I'm sure you're aware.

You might consider a third option; associating with another appraiser to share fixed expenses. That's what I do. If you rent office space, it doesn't cost that much more to rent enough additional space to accomodate another appraiser. Same for adding phones, DSL access, software, fax and other business hardware, etc. I figure I only have to do one extra SFR appraisal or so a month to cover my share of the extra expenses of this office when compared to when I was working from my home. In exchange for that, I have access to more resources, a dedicated place to work away from my home, and I tend to be more productive in general. It's money well spent in my book.

This is not the same thing as operating a multi-appraiser fee shop because your partnership can be limited to sharing expenses; each individual handles their own workload, billing and fees.

If you're smart enough to do so, you might hook up with a more experienced appraiser (whom you can trust) so that you have a resource to bounce ideas and solutions in your work off of. Work it right and it's almost like having a mentor without really paying for it. It can also end up increasing your bottom line because of the ability to refer overload to each other as the oportunities arise.

There are some potential downsides. Partnering up with another appraiser is just like living with a roommate. Choose well and you can come out ahead, choose poorly and you can end up suffering. Then there is the living-together aspect of the relationship, which is a skill that appraisers (as a group) are notoriously lacking in.

You have to search inside to see how this option might apply to your situation. It works great for me, but your mileage may vary.
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
One suggestion, and I was just talking about this today, do you best to figure out you expenses. Try to figure out everything that you will need to stay at home. Paper, business phone line, internet access, insurance, advertising, taxes, auto expense, computer repairs, upgrades, misc expenses.... It can amount to more than you think. I was just talking about this with another appraiser. I have never done it but I am going to look at my last few years and try to see just what my expense have averaged. I have a feeling I am going to be surprised. I know I shell out a lot to just stay in business.

I think you will be surprised if your are honest with yourself. I think 40% may not look as bad as it does now. I also think you are better off on your own but if you have someone to type and other tasks it will free you up to do more appraisals.

Remember that you have to do billing, accounting, sales, answer the phone, etc. No secretary to screen calls.

There are pros and cons to both. Oh yea, no paid vacation or insurance either!
 

Paul Burger

Freshman Member
Joined
Oct 23, 2002
Originally posted by Jeff Horton@Jul 10 2003, 02:56 PM
but if you have someone to type and other tasks it will free you up to do more appraisals.

There are pros and cons to both. Oh yea, no paid vacation or insurance either!
Jeff, I'm 36 years old, my 4 kids are between 7 and 13, they're growing up so fast it makes me sick. The fact is, I don't want to do more appraisals. What I'd like to do is work less for $x, rather than work more for $x. Know what I mean? I don't want to be freed up to do more appraisals at $350 x 60%. I want to do less at $350 and keep all the fee.

There, I said it!

Working with this firm, I'd get some small insurance and pension benefits. I would, however, be an employee rather than a sub-contractor, so there are some tax incentives there.

I will try to figure out all my estimated monthly expenses and see where the bottom line falls.

Good advice. Thanks guys.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
George made some very good points. I tried the "partnership" thing for nearly 10 years. Unfortunately it never quite works out the way you want it to. Someone always ends up doing more than the other. Please be sure if you decide to enter into that kind of a business arrangement that you have it all written down and agreed to with a provision for disolving the partnership.

When running a business for yourself figure 15 to 20% more time just doing the book work and tax stuff. If you work for a company and are paid as an employee, it is worth about 7% to 8% in FICA alone.

Check with your bank...most have some good booklets on starting a small business. It could also be a good source of business for you. Ask for a line of credit when you establish your business checking account. Find a good accountant too.
 

Ramona

Sophomore Member
Joined
Feb 3, 2002
Professional Status
Licensed Appraiser
State
Maryland
A bit more to think about... as an employee, you may be asked to take a minimum of work per week, regardless of personal plans, etc. You may have to "get permission" for a specific vacation time. You may not have the freedom to turn down a nasty one, or a long distance one, a weekend one when you have plans, or one for too low a fee, because your company is eating your insurance, pension, vacation, holidays, employer matching taxes, etc, that they would not be paying an independant appraiser. Ask alot of questions about exactly how your employee-employer relationship will work, exactly what will be expected of you, and get it all in writing, so there are no misunderstandings later.
 

Paul Burger

Freshman Member
Joined
Oct 23, 2002
Mike, I'm meeting with my CPA next week to discuss this stuff, and whether to incorporate, etc.

Something else I'm concerned with...when the refi's slow down and we lose a little of our workload, it's going to hurt a lot more when I'm giving up 40 percent.

I guess I know what I WANT to do, I just hope it makes financial sense when I work all the numbers out...again.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Paul, you keep saying that you are giving up something. If you can't view it as "gaining something" then don't do it.

Corporations provide protection but they can be complicated for a one person business. I have just found that out when it comes to taxes. You might want to just be a sole proprietor. The IRS is telling me I have to pay myself a salary, do monthly tax deposits too. Once I am salaried then I am liable for Federal Unemployment insurance and State Unemployment insurance...both of which I must pay but am unable to draw as the primary stock holder. In some states you need more than one person to incorporate too.

Other considerations are liability insurance, automobile insurance (commercial policy), MLS membership, and maintenance agreements for both soft and hardware. Telephone lines, DSL Lines, and internet provider are additional costs too.''

Lastly, for me, it gets lonely here ....alone all day long, sigh....time for another nap! :asleep:
 
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