Starting an appraisal business

[hoppybun333]

Also, it is a good idea to contact your local SBA office, they can help you determine if any grants or subsidized business financing is available for your situation and help you classify as a SBE or MBE, or any other classification, so that you can best compete for projects.

Thank you for the thorough and detailed recommendations, Russ.

 

[hoppybun333]

I will be facing similar issues in the next few years. I'm wondering, will you have any access to your past appraisals with your previous firm, did you have to purchase them? I mainly appraise agricultural properties and have many that are appraised a couple times in a few year span for estates and also some institutional investor work that are appraised every year.

The institution I was with has a policy that if you receive a complaint letter from the state board, that they will release your digital workfile to you. That's the only way unless you saved additionally yourself.

 

[hoppybun333]

You need about $10,000. Set up an S-Corp. You need to subscribe to the local MLS (mine is close to $2,000/year). You need a good computer. I have a new computer every five years that is custom-built for about $2,000 and the guy that builds mine gets me a gaming computer for speed (I am not a gamer). I run three screens. You need two forms of backup; one being cloud.

I use alamode which is about $500 (I hate still using them since they are now Corelogic, but it is the best software in my opinion). I got rid of my website because I can't keep up with work but you would want one. Don't do a basic one, make it unique.

E and O will be about $800-$1,000 for $1M coverage.

Send yourself templates you use from your current work.

Set up spreadsheets for all of your expenses.

Hopefully, you are 3-5 years certified, or else you are going to have a hard time finding clients. You will most likely be stuck with AMC work for a while. Try to make your reports more thorough so you can find direct lenders.

Have a goal of many small volume clients instead of only a few main clients. I cringe when I see appraisers state that they have only 3-6 main clients. Lose one and it could be hard to make your house payment. I have 30+ clients and a lot of private work so if I lose one I don't miss them. Reduce your debt so you don't have to worry about that. I have a $60,000 truck but it is paid for and my mortgage is 1/10th of our family income and we have no other debt besides my wife's car but she also makes six figures.

Health care is a major concern. On this forum, many appraisers saw health care costs quadruple when Obamacare went into place (not being political, just stating facts). My wife's employer provides family medical coverage. A heart attack is $200,000 in medical bills. Do not neglect medical insurance.

Your budget should include retirement. You will be self-employed, you need the tax deduction so every year, with no excuses contribute to your retirement the maximum you can.

Plan ahead. This market will end and a bad market will emerge sometime. It might not be next year or the year after but it will happen sometime. 20% of appraisers went out of business from 2008-2011 and that could happen again.

I think designations might become important again, but I am biased as a designated appraiser. Appraisal waivers are huge, although declining. Once demand lessens the fees AMCs pay will decline but direct lenders tend not to do that. My lending work is all direct lenders with six AMC reports in the last three years.

Once you get up and going find an assistant to do data entry although labor is hard to find right now.

Great info. Thanks.

 

[GWISC]

I found that the first and foremost item prior to setting up all those other things is deciding on a name for your business, then googling that name to see if it is already taken. You will want a website with your name on it. After you have your business name figured out, get your EIN number and the other stuff.

Good luck.