Pros & Cons Of Cre Appraisal? Seeking Mid-career Guidance

[Bruce3495]

I am looking to get back into the commercial real estate industry after a decade away running my own retail business. I am currently in my late forties and live in the Southern California region. I have an MBA and also received the CCIM designation while I was working in CRE previously. My last job in the industry was working as an Acquisitions Analyst for an institutional pension fund advisor. I was very good with Argus software and running financial models in Excel. If I had stayed on that career path, I would probably be a Director of Acquisitions somewhere by now, but I chose differently. Since I’ve been out of the industry for a while, I plan to take some refresher courses through CCIM and Argus (I understand Argus Enterprise is the new “standard”).

I am at the point in my life now that, while I want to be fairly compensated, salary isn’t the most important thing. I realize that I will have to start off low as I re-enter the industry and I’m okay to build back up over the next few years. I’d like to have a certain level of job flexibility, since I have three children of varying ages. I say flexibility, not to be confused with part-time hours. I’m willing to put in the full-time hours, although nothing crazy like 60-70 hours per week (except maybe on occasion). So when I say flexibility, I mean working the hours that work best for me, and the ability to work remotely at times. For example, I don’t mind working in the evening from home so I can go to my kid’s soccer game at 4pm. When you think flexibility, you usually think brokerage. But I’m definitely not interested in the brokerage side of the business since I’m much more of a data analysis kind of person. So this got me to thinking that maybe commercial appraisal would be a good career option for me. Given my situation, would commercial appraisal make sense? What would the pros and cons be? I’ll respond as I get feedback. Look forward to hearing from you!

 

[leasedfee]

Read the thread prior to yours.

 

[Bruce3495]

Yes, I did read through that thread. Honestly, it doesn't sound good for the commercial appraisal profession. It's harder to get assignments while fees are getting further compressed? It appears quality is getting sacrificed.

 

[PL1957]

Yes, I did read through that thread. Honestly, it doesn't sound good for the commercial appraisal profession. It's harder to get assignments while fees are getting further compressed? It appears quality is getting sacrificed.

There's a high demand right now for people with ARGUS skills, especially if they also have an acquisitions background. You should be able to hook on with a national firm pretty quickly.

 

[Michael P Jacobs MAI]

Aside from what it does to the industry, going into CRE with the expectation of low-income/stress isn't a good prospect for anybody - sales and leasing would be better, even car sales. I know you aren't talking about "semi-retirement" but that's who you will be competing with if you aren't full time.

I was able to go "semi-retired" successfully for a few years while dealing with some family issues but I found that taking a relaxed or distracted approach to writing the three approaches actually took more time, so even on half-speed I became hyper-focused to maintain the "deep dive" necessary for the majority of CRE properties. It was NOT part time, either, just lower-exceptions from myself. We can't simply "process" commercial appraisals - throwing comps together in a boilerplate that may or may not have much customized insight. This is especially true on the smaller assignments where little issues make relatively larger differences... small assets frequently require more brain cells, in fact. Each assignment is a learning experience for the next similar assignment - this efficiency is where we generate much of our efficiency and money.

This said, here in SE Florida we have snowbirds every November through March that do a few assignments to pay for their vacation. I get several calls begging for data each year, and fees take a small but perceptible dive. The last few less-than-full-time appraisers I spoke to take $3,500 assignments for $1,500, spend about 35-40 hours on getting the report out the door between going to the pool and beach, and aren't terribly confident in their observations and conclusions. The local banks I know that use them are not concerned about risk, so I assume they get the high-equity/low risk assignments... I've forgotten but they have a name for these appraisers. At least two local appraisal offices hire snowbirds because of prior relationships, but nobody with any hopes of maintaining credibility is going to take on a trainee or junior appraiser who doesn't want to make money.

A great deal of computer skill is essential these days so we don't spin our wheels on administrative "typing" tasks, but I don't see any great demand for Argus skills except as PL1957 says at national firms - I don't see a large pop in fees for Argus-profile properties. Argus is very straightforward 90% of the time, and you aren't going to get the complicated lease-by-lease analysis properties if you aren't gunning for high-fee work. The national firms prefer younger employees, of course, to groom for profitable production over many years to pay for their training and feeding at the beginning. The hours are long and pay low, too.

I wish I had a better grounding in sales and leasing because I'd be doing it. Every time I renew my license and start rolling, I get busy and as every appraiser knows the report-pipeline is always urgent while prospecting and following up are merely "very important" lol.

I haven't really addressed your situation, but this is a good business if you are willing to join a good office, dive in full time, work like mad to establish yourself, and then continue working like mad to maintain your relationships through good reports delivered on time (with emphasis on "on time"). With your background you have more important experience than somebody who has only appraised through their career, so look higher!

 

[Bruce3495]

Michael and PL1957, thanks for sharing your insights. Just to clarify, I wouldn't say I have the expectation of low income/low stress. I just figured that I would probably start out with a lower income until I became certified. I realize there will be stress, especially with the deadline nature of the business. And I'm definitely not looking to be semi-retired as I would expect to be full-time. Of course, some people would define full-time as 40 hours per week. It seems that is unrealistic in appraisal. Is 50-60 hours the norm? I guess what I'm asking is does the commercial appraisal profession offer more independence and flexibility compared to working for say a private equity firm in acquisitions or asset management? Perhaps it depends on the particular company you work for and whether or not you are an independent contractor vs. employee?

 

[PL1957]

Michael and PL1957, thanks for sharing your insights. Just to clarify, I wouldn't say I have the expectation of low income/low stress. I just figured that I would probably start out with a lower income until I became certified. I realize there will be stress, especially with the deadline nature of the business. And I'm definitely not looking to be semi-retired as I would expect to be full-time. Of course, some people would define full-time as 40 hours per week. It seems that is unrealistic in appraisal. Is 50-60 hours the norm? I guess what I'm asking is does the commercial appraisal profession offer more independence and flexibility compared to working for say a private equity firm in acquisitions or asset management? Perhaps it depends on the particular company you work for and whether or not you are an independent contractor vs. employee?

There are really two comp models for commercial appraisers - some type of variable comp system where you get paid for what you do, or a salary system. On the "incentive" system, nobody really cares what you do or when you do it, as long as your work is done well and on-time. On a salary, expectations would be different. Of course, different firms will have various nuances, but if you're incentive based, you have a lot of flexibility. As to hours ... my thought has always been grab everything you can while it's there, because you never know what next week will be like ...

There's a lot more flexibility than in acquisitions or asset management.

 

[Michael P Jacobs MAI]

...Is 50-60 hours the norm? I guess what I'm asking is does the commercial appraisal profession offer more independence and flexibility compared to working for say a private equity firm in acquisitions or asset management?

Yes, I'm really sorry about my "part-time" tangent, I just thought I was reading between the lines there. I make a good living and rarely work after 5:30 or on weekends but am usually in by 7 AM. The thing is, there are probably 100 moving parts in a simple CRE appraisal and there could be more than a thousand in something more complex, and you have to be on top of every one of them as well as available to change them as you go. A slight change in a HBU variable - like the most probable buyer - can ripple through the entire report from the way you describe a property to whether prospective value upon stabilization is an issue. Or, if you reveal something under supply and demand it had better be consistent in HBU and each of your approaches. If distracted or you skip a step, you can find yourself re-writing a great deal. It could be said that the most important thing about writing the three approaches profitably is focus. Experience comes later, so you have to hyper-focus at first and spin some wheels. The most important thing is that you WILL re-write that report, have to select all new comparables, or add an inconvenient but necessary analysis or discussion at the last minute. The report must be on time. Your client did not contract with you subject to your kids' parent-teacher meeting or the million other things that will happen. Try writing a cohesive report while babysitting a sick child, or even one doing homework... UGH.

Well, what about taking on less work so that you have the time to split your focus? That actually works to your disadvantage. The less property you see - and the less of a variety - the less efficient and effective you will be on future assignments. The synergies can be amazing - just inspecting properties close to one another and sharing comparables between them saves tremendous time when you consider rent, sale and investment parameters.

You do have more flexibility as a fee appraiser, and as long as you are set up at home you can make up for some of the distractions although I don't think you'll be making a good living if you are working eight hours a day and then putting in another three or four before going to bed after the kids are down.

I might inadvertently be discouraging you because I'd rather be in a market where a large number of appraisers are reaching for $200,000+ than a few happy with $60,000. I am discouraged by the collapse of fees not so much because it impacts my bottom line but because of how it erodes vendor quality. I can't compete with low quality, although I can compete at a much lower fee. So, appraisers seeking a professional compensation level with a sustained high-quality output, is better for everybody regardless of the fee levels which will take care of themselves as long as we're all playing by the same rules.

I would prefer to convince you not to join the profession if you aren't willing to do whatever it takes to be a financial and professional success. We have enough people who fell into the job, aren't excited about conveying an interesting and relevant analysis, but somehow don't feel like they're qualified to do anything else. If you are willing to hit it hard and carve out a place for yourself, like I said you seem to have better qualifications than most.

 

[PL1957]

We have enough people who fell into the job, aren't excited about conveying an interesting and relevant analysis, but somehow don't feel like they're qualified to do anything else.

I call that the "golden handcuffs" syndrome. They hate what they're doing, but make too much money to start over. As a result, instead of looking at it as a profession, they look at appraisals as something to get out the door as quick as they can. The result is shooting for a "C" product which is good enough to get past internal review and the client's review, with minimal effort ... the bane of my existence ...

 

[JTip]

Interesting report on NPR the other morning talking about interviews and the current job market.

There are two types of people: Zero experience with DRIVE, and the other has a resume packed with qualifications/experience and looking for easy work aka 'full time hours'.

I interviewed 7 people, 6 of which had years of experience/packed resumes and 1 young lady had a summa come laude in elementary education with ZERO real estate experience. You can easily teach math, forms and processes to someone (especially with a stellar gpa), but finding that DRIVE is rare.

Three weeks in, she was the BEST hire I have ever made.