Poll: Will you trade fee for volume in a slow market?

[Terrel L. Shields]

The only time I 'competed' with other appraisers were a bid system. I never used the AMC model...which presumably would be similar. I found that in reality a bid system used by a bank often sees the low bidder not win. The loan officer already suggested a candidate to the "Credit Department" or whatever they called their ordering department. And they selected them.

 

[George Hatch]

If you have lost bids because of the fee then that was a competition-by-fee whether you thought of it in those terms or not. The other bidders won and you lost. And vice versa when it was your bid that was lower or otherwise more attractive to the decision makers.

None of us work in complete isolation from the market for services.

 

[J Grant]

The below applies to res lending work for GSE use-

Why is this even a theoretical question -- in the AMC realm, appraisers compete against other appraisers on bids/ fees for noncomplex orders. This has been demonstrated throughout the years.

Other appraisers refuse to do AMC work . (or accept only a portion of their orders from AMC's )

When lenders order without an AMC, their panels do not get pitted against each other to bid for regular noncomplex orders. With lender-owned cost plus AMC's, it is a middle ground - the panel accepts a somewhat lower fee, but the fee that is the standard in an area for noncomplex work, and the panel is not bidding against each other for it.

 

[J Grant]

If you have lost bids because of the fee then that was a competition-by-fee whether you thought of it in those terms or not. The other bidders won and you lost. And vice versa when it was your bid that was lower or otherwise more attractive to the decision makers.

None of us work in complete isolation from the market for services.

The AMC is a specific sub-market for our services. See my post 113.

Appraisers compete for non AMC work as well of course, but it should be clear that the AMC has a special interest in lower fees since it is not a simple matter of cost control - the AMC's very existence and compensation is based on them making as much as possible in profit from paying as little as possible to the vendor ( A vendor first and an appraise second in their model )

 

[George Hatch]

Thank you for responding to a question I never asked. I'm still not asking asking about how AMCs should act.

I'm asking how you think appraisers will act when faced with that choice.

Full disclosure, I have been losing a larger percentage of the bids I have submitted. Can you guess how I have responded? I'm not immune from competition-by-fee in the market, either; and 100% of my clients are direct engagement.

 

[J Grant]

Thank you for responding to a question I never asked. I'm still not asking asking about how AMCs should act.

I'm asking how you think appraisers will act when faced with that choice.

Full disclosure, I have been losing a larger percentage of the bids I have submitted. Can you guess how I have responded? I'm not immune from competition-by-fee in the market, either; and 100% of my clients are direct engagement.

My response is based on still being amazed. It is a question of how appraisers act.

Clearly, any appraiser who has been in business for more than a few months realizes that Apprasris are competing in many ways for work, and one of them is fees.

However, in the lender realm , the way appraisers compete and the resulting fees for the AMC segment is very different than the results for non AMC order bidding.

 

[alebrewer]

The only question which matters is;

Will you accept anything less than the borrower paid for the appraisal service?

That's a duplicitous question, is it not? What you're really asking is, 'will you do work for AMC's?' Why not just ask it that way. The answer for most appraisers is obviously 'yes'.

 

[alebrewer]

That's the problem. To make room for the next generation, appraisers should retire at 60. Fewer appraisers, higher fees.

Let me guess: you're nowhere near 60 are you?

 

[GWISC]

Reducing fees is easy. Raising them back up is hard. Once you reduce your fee, that new lower amount will become the new standard for a while. It's a dry season (has been for over 2 years now). Live cheap and weather the storm until volume picks up again. I try to increase fees every other year. The clients have all been supportive of my fees and I have not lost out on work. Most of my clients rotate, so as long as you are not outrageous, you will get the work.

Ask yourself if the lower fees will trigger enough volume to offset. Seems to me, we would get a larger volume, but at a reduced fee. It likely ends up a net zero sum gain, or close to that. I would not anticipate appraisers would see a significant increase in volume during a dry season even with a slightly lowered fee. A 10% increase in volume is probable. A 25% increase is not likely.

Math illustration:

If I anticipate doing 100 appraisals in the next year at $400, I would gross $40,000. (Just keeping the math simple and using the fee quotes already mentioned in this thread)

If I lower fees to $375 and get a 10% bump in volume, I would gross $41,250 (110 appraisals x $375).

The difference being a positive $1,250 for the year. On average each appraisal takes 8-10 hours of work, at least for me (taking the order, research of property and set up of file, travel to and from property, inspection of property, write up, travel to take comp photos, proof read). And do not forget we also take time to do bookkeeping, IT and other maintenance for our office files.

It is reasonable to conclude 10 hours per appraisal.

Additional 10 appraisals for the year x 10 hours = 100 additional hours for the increase in volume.

$1,250 / 100 hours = $12.50 / hour.

Not worth my time. I would rather have the time off.

 

[GWISC]

I also think that slow seasons and dry seasons are perfect environments for AMC's to test appraiser resolve in rolling back fees. There is always someone that needs the work and will bend to drop the fees. Once accomplished, the AMC's make it difficult for that appraiser to return to the higher fee.