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Retrospective and future business of Appraisal at end of year

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Ray Miller

Thread Starter
Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
Starting to take a hard look at our economic future of my business Miller Land & Livestock, Co. as the year closes and the new year opens up.

Over the past year we have integrated the insurance for the Auction, Appraisal and REO Preservation business. Integrated a number of business expenses such as office, phone, equipment. Making it a totally integrated business for all division sharing the cost.

However as we start to look at each part of the business, we (CPA, bookkeeper, lawyer and my self) are finding that the RE Appraisal business is not holding its own in sharing the cost of doing business. We are finding the following:

1. More hours spent with less return on the investment of time.

2. More increase in the cost of insurance, memberships, dues, publications.

3. More increase in the cost of software with out an increase in return.

4. More increase in the cost of marketing with a lesser return then in pervious years on the investment.

5. Auto expense really appears to be out of control, require long drive times between township and county court houses, subject properties and sales selected as comparables with out a fair return on investment of that time and the expense.

6. AMCs demanding faster turn times (which is getting to be impossible if you are going to do a USPAP appraisal and meet all the requirements of USPAP), offering less pay per report (but still paying my asking fee on the ones I do).

All in all it looks as if the Auction, Personal Property, Equine and Livestock appraisal business is supporting the Real Estate Appraisal Business.

Currently the bottom line is showing me one of three things, I need to drop the RE Appraisal business and only do them where associated with: a divorce and I am doing the personal property, with a real estate auction or with a real estate, livestock and personal property auction.

Or increase by fees, 55% so that the RE Appraisal contributes to the general income of the over all business and shows a profit.

Or complete my CG test and get the CG license, take additional courses from one of the association and get some letters behind my name and do more commercial work.

I guess my questions is do you as appraisers are do you see a current need to raise your rates for services? Are you really covering the nut to show a total return on the investment of time and expenses as well as a return on the investment you have in the Real Estate Appraisal Business?

Where do you see this Real Estate Business heading for 2009 to 2010 when I plan my full retirement?
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
I guess my questions is do you as appraisers are do you see a current need to raise your rates for services? Are you really covering the nut to show a total return on the investment of time and expenses as well as a return on the investment you have in the Real Estate Appraisal Business?

Where do you see this Real Estate Business heading for 2009 to 2010 when I plan my full retirement?


The market pays what the market pays. If you can get it, do it. If not, then you have a business decision to make.
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
Ray, it seems your service areas have nothing but cookie cutters, the AVMs will take over very soon, so you might wish to take that into account.....
 

Steve Metz

Member
Joined
Jun 1, 2005
Professional Status
Licensed Appraiser
State
Georgia
Currently the bottom line is showing me one of three things, I need to drop the RE Appraisal business and only do them where associated with: a divorce and I am doing the personal property, with a real estate auction or with a real estate, livestock and personal property auction.

Or increase by fees, 55% so that the RE Appraisal contributes to the general income of the over all business and shows a profit.

Or complete my CG test and get the CG license, take additional courses from one of the association and get some letters behind my name and do more commercial work.

I ran the numbers this July and came to the same answer. The RE appraising section of my business was being held afloat by my other businesses. I got more into the personal property end of things and doing lots of estate work. Looking to get my CG now. I limit my business to no more than 3 RE appraisals a week so I can spend time making more money in my other businesses.

For me to make a profit in a rural area on a 1004 I need to make $550-$600 an appraisal. The mortgage market will not bear that so no more mortgage work after Sept.
 

Ray Miller

Thread Starter
Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
Currently the bottom line is showing me one of three things, I need to drop the RE Appraisal business and only do them where associated with: a divorce and I am doing the personal property, with a real estate auction or with a real estate, livestock and personal property auction.

Or increase by fees, 55% so that the RE Appraisal contributes to the general income of the over all business and shows a profit.

Or complete my CG test and get the CG license, take additional courses from one of the association and get some letters behind my name and do more commercial work.

I ran the numbers this July and came to the same answer. The RE appraising section of my business was being held afloat by my other businesses. I got more into the personal property end of things and doing lots of estate work. Looking to get my CG now. I limit my business to no more than 3 RE appraisals a week so I can spend time making more money in my other businesses.

For me to make a profit in a rural area on a 1004 I need to make $550-$600 an appraisal. The mortgage market will not bear that so no more mortgage work after Sept.


I am looking at the same numbers but it appears to be nearer the $600 to $650 range. I just don't understand how these people can run around here for $150 to $250 an appraisal. I need to go to thier school and learn business 101.
 

REM sleep

Sophomore Member
Joined
Oct 23, 2007
Professional Status
Certified Residential Appraiser
funny you wrote this thread

I was discussing the very same thing today with a longtime colleague and friend - without the horses, farms and livestock. Is it worth running the RE appraisal business anymore?? My conclusion: The day of running a small appraisal business with a staff of 2 - 10 guys is gone. It5 is no longer profitable. The day of being able to make a living running just an RE appraisal business is gone. 17 years in this business and this is a sad realization. I actually enjoyed running the business. I can still run the appraisal business but I will definitely have to supplement it with other endeavors. The numbers just do not bear out. I have been lucky, in part, because a representative percentage of my volume is derived from non mortgage avenues but the mortgage stuff "brought home the bacon". :sad:
 

Vermonter

Senior Member
Joined
Mar 21, 2007
Professional Status
Certified Residential Appraiser
State
Vermont
Don't get it either. We've got people driving up from Mass to do appraisals at the Canadian border (3+ hours 1 way) for $150.

Even if they are slapping together a garbage report in a couple hours, that's still a minimum 9 hours and not even taking into account the cost of licenses, CE, gas, insurance, MLS, etc.... You're better off at Walmart.
 

TEL2002

Elite Member
Joined
Jan 16, 2002
Professional Status
Retired Appraiser
State
Louisiana
Ray, I would suggest dumping your appraisal business. I think the appraisal business has brought you more frustration than rewards over the last couple of years.

Doing retirement right is not just something you leap into....you gotta work your way into it, to do it really right.

I currently supplement my appraisal business income with a military retirement, a teacher retirement, and social security. Works for me. I only have one appraisal client left....and I like it like that. The last month has been too busy though, since they gave me more work in Oct, than they did total in June, July, August, & September.

Unless you gotta have the money, it is time to do the things you enjoy (well at least work wise).
 

country girl

Freshman Member
Joined
Apr 9, 2008
Professional Status
Licensed Appraiser
State
New Hampshire
Running a profitable appraisal business

Hi All

I'll tell you how to run a profitable business. It's "Virtual" no rent, lights, or heating bills. Appraisers pay for everything except the E & O. All education, MLS fees, car up keep, gas, insurance, computers ect. If you want to work comply or rely on welfare.
Maybe Obama will sent my my check soon.

I'm waiting at the mail box.

Country girl
 

The Warrior Monk

Moderator
Staff member
Moderator
Joined
Mar 30, 2005
Professional Status
Certified General Appraiser
State
New York
However as we start to look at each part of the business, we (CPA, bookkeeper, lawyer and my self) are finding that the RE Appraisal business is not holding its own in sharing the cost of doing business. We are finding the following:

1. More hours spent with less return on the investment of time.

2. More increase in the cost of insurance, memberships, dues, publications.

3. More increase in the cost of software with out an increase in return.

4. More increase in the cost of marketing with a lesser return then in pervious years on the investment.

5. Auto expense really appears to be out of control, require long drive times between township and county court houses, subject properties and sales selected as comparables with out a fair return on investment of that time and the expense.

6. AMCs demanding faster turn times (which is getting to be impossible if you are going to do a USPAP appraisal and meet all the requirements of USPAP), offering less pay per report (but still paying my asking fee on the ones I do).

All in all it looks as if the Auction, Personal Property, Equine and Livestock appraisal business is supporting the Real Estate Appraisal Business.

If I was involved in several businesses, and one of the businesses was not holding its own, nor was likely to in the foreseeable future, I would dump that business. There's no sense in wasting time and money.

Or complete my CG test and get the CG license, take additional courses from one of the association and get some letters behind my name and do more commercial work.

I've been recommending this to many people for a long time. For many market areas, it allows one to never work for a lender again, as well as sets the floor for appraisal fees at a high level (most GCs here charge in the 4-figure range for anything but the most basic assignments).

I guess my questions is do you as appraisers are do you see a current need to raise your rates for services? Are you really covering the nut to show a total return on the investment of time and expenses as well as a return on the investment you have in the Real Estate Appraisal Business?

I think one has to charge appropriately, which has been a major problem in this profession. For example, AMCs, due to their turn-time and stip requirements, have to be charged more, not less, than other less-demanding clients. The same goes for field reviews with new value conclusions; it's more work than just doing an appraisal, and the appraisal has to be compensated accordingly.

Where do you see this Real Estate Business heading for 2009 to 2010 when I plan my full retirement?

I see it being very good for GCs with diversified client bases, and extremely bad for everyone else. I expect many that depend on appraising for lenders as a source of income to leave the business. Total appraisal volume that we've seen in 2002-2006 will likely not be seen in the rest of many appraiser's careers (though relative volume could, provided many appraisers leave the business).
 
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