Points to ponder

[Tim Hicks (Texas)]

Well guys and girls everybody is busy and we all think that we are the best business people in the world. But, I have one question. How would your business be if the interest rates went up to 9 percent tomorrow?

Yes, there would be a quick rush of people panicking to get their loans done worrying that the rates will go up even more. But, one to two months later, the refi market would be dead. How many appraisals for sales are you performing? It is good to be associated with lenders who service sales, too.

Then you would need to worry about outstanding invoices because a lot of small time mortgage companies will close shop. Does anybody remember 1993-1994? 1992 was the first big refi binge in many years. In 1993-1994 the rates jumped and business got real slow around here.

My point, many appraisers have not suffered a down turn. Many have jumped into the business in the past 5-6 years and think that this is a never ending pot of gold. I thought so, until 1993. I just about starved. Many appraisers falsely believe that it is their expert business acumen that has brought them to prosperity. It is not. It is more than any thing the market and interest rates that fuel our business. Yes, you can diversify, but who are we kidding here, we are making the bulk of our business because of the low rates. Look at how much of your business is coming from 1-2 lenders. If you should lose one, how much would it affect your income?

I am sorry for being such a gloom and doomer, but I have watched too many appraisers come and go with the changes in the market. Oh, the number hitter thrives in the slow market. Lenders need their loans to close in a slow market and the appraisers who can get the deals done will survive the slow times. The honest ones survive by being smart and recognizing all clients are valuable to some degree and furnishes service and communication with the lender that nobody else offers or recognizes.

I realize that there are many appraisers out there who don't depend on refi appraisals for business and they should be patted on the back. They have thought ahead. However, the majority of appraisers have never had to think ahead. I worry for you.

 

[Mike Garrett RAA]

Timmy..Timmy...Timmy, I fully remember those times but can you remember 1985 ~ 1990? Turn out the lights..the party is over. Mortgage companies closed every day. Then a funny thing happened ... I started getting lots of foreclosure and REO assignments. Last month I received 7 of those assignments. Here we go again.

 

[Roger]

Seems to me that there is a segment of the refi market that will refi every year or two, just to pull out any equity that they have built up from principle payments or market appreciation.

This segement of the market will, I believe, continue to refi on a regular basis, regardless of the rates. They treat any increase in equity as current income, and they spend it.

They generally don't care what it costs, just ask "what are the payments?"

True, if rates popped up to 9% tomorrow, things would slow down. My opinion is that at least a portion of the borrowing public has become so much into the habit of yearly refi's, they will never stop.

The only thing that is going to stop this market segment is when and if values start dropping so much that they cannot refinance. When and if that happens, we will have enough foreclosure appraisals to keep us busy.

 

[Elliott]

Tim,

You think your busy when rates are low and decling....
just wait until they rise, that's when everyone rushes
in too.

In the near term, rates can't change much, cause
raising rates would kill a very fragile economy based
on consumer spending.

elliott

 

[Steve Owen]

I have an appraiser friend who is fond of saying, "we are all just thirty days away from unemployment." (Actually, right now, with the backlog, it's probably closer to sixty days.) That is probably true for any individual appraiser. Even most union workers don't have an iron-clad guarantee they will have a job next year. Markets ebb and flow; it's the nature of any free market system. However, what I've found in the past is that market swings don't really affect the volume of business I'm doing so much as the character of that business.

 

[Richard Carlsen]

I'm fairly confident that if rates went to 9%, the business I've established and the reputation that we've made in the market would serve us well. Sure we would not be doing the numbers that we do now but we've actually made the decision to slow down our weekly output. By the end of last Oct-Nov-Dec rush, I was so rundown that the first bug that came along had me in its grip for over 3 months. Enough of that nonsense.

What would I do if interest rates went to 9%?

Fish for winter steelhead. Bow hunt more often. Trudge around on the snowshoes. Hunt some grouse as soon as my ankle gets a little better (I re-injured it a week or so ago). Build 2 or 3 new flyrods and a couple of spinning rods. Listen to Interlochen Public radio a lot longer. Spend a weekend now and then downstate visiting my daughter and her family. Oh yes and we would have orders enough to keep the wolf away from the door.

There are lots of things I would do.

Worrying about the future, however, is not one of them.

 

[Thomas N. Morgan]

Tim,

Hard as it is for some of us to recognize, the success of most persons, including me, can mainly be attributed to being at the right place at the right time. Many of us flatter ourselves into thinking our exceptional abilities have been the cause. But. being at the right place at the right time will not help those people who lack the basic abilities to perform.

Regards.

Tom

 

[Tim Hicks (Texas)]

Boy, I just re-read my original post and I sound pretty pathetic. Actually, my main point is now that we are busy is the best time to align yourself with good clients. Lenders are anxious to get appraisals and you may be able to get your foot in the door where you previously could not. It is easy to recognize mortgage companies and banks that will still be in business when rates go up, so it might be a good idea to get to know them now while you can.

 

[Joe Birrell (NY)]

Ah, 1993-1994 I remember it well. Things were so slow I started looking for other ventures and at one point I thought let's make this a positive
experience, finally I had a good excuse to get out of this business once and for all............hmm, obviously still here.

 

[Steve Owen]

Ah, 1993-94, I remember it well. I had a total of two weeks involuntary unemployment during the entire cycle. I haven't had as much in any period since, that's why I'm so far behind on my record-keeping and office work. lol.