What is a typical fee split rate?

[Alamo Cowboy]

National firms, as a policy, are targeting an average compensation expense of 35% per employee. In practice, it depends on your market, your manager, and the services you provide.

Look at this as a learning experience. Endure what you must but do everything you can to work towards servicing NECREIF clients, right-of-way work, anything litigation support related, and master Argus Enterprise. Understand debt and equity and capital markets. Learn to appraise property using the methods market participants use, even if you cannot report it (FIRREA requires all cash capitalization and discount rates). Most market participants have a low opinion of appraisers due especially to the lack of understanding of debt and equity. You can get a lot of work from developers if you understand waterfall models and equity yields.

The MAI designation is not worth as much as it once was, but it is worth pursuing if you are young. It will open doors to really any other aspect of the business if you are smart. The best advice I give my trainees who are smart and productive is you can make a lot of money in your 20s. If you build relationships and skillsets, you can transition into any role in the future.

Right now, appraisal is complete turmoil. Virtually every report that goes out violates USPAP. For example Appraisal Institute Guide Note 12. We are required, by law, to produce a fundamental market analysis for every appraisal when market conditions are unstable. 99% of appraisers don't even know how to perform a fundamental market analysis. Most scarcely understand basic economic concepts like supply and demand. Guide Note 10 is similarly ignored. And then we have the near universal ignorance of debt, equity and global capital markets.

The money quote from Guide Note 12, which will undoubtedly come up in many courtrooms in the near future, is "The appraiser must decline or withdraw from an assignment if the client will not allow the appraiser’s scope of work to be adequate for the assignment. The level of market analysis performed must be appropriate for the assignment and not limited solely because the client wishes to reduce the appraisal cost."

In 5 years, I would estimate 75% of appraisal work as we know it will be automated, if only because systemic incompetence and data fabrication has rendered statistical analyses more reliable. As long as you can survive, focus on this inevitability.

To me the NCREIF (National Council of Real Estate Investment Fiduciaries) is too small (less than 300 members) to impact everyday appraisers. The professional practice members of which appraisers are a small part of is populated mostly by pension fund managers & information type brokers. This group is dominated by academics and data contributing members. This group IMHO wants to publish statistical data and sell it. Its like AVM models used by investors/RE companies today.

The US marketplace still needs appraisers with their 5 major senses to do a report. Some would say "kick the tires".

When I started appraising in the early 80s many financial publications said the appraisal industry would end in 10 yrs. Appraising was a dinosaur profession or an airplane replacing a train moment. In the early 2000s I remember the financial publications saying that statistics would make appraisers obsolete as the data would be faster to produce and more accurate than an appraiser's opinion. These threads of thought never happened.

The appraisal industry is not in complete turmoil. It is functioning well. It is evolving every year to be more responsive to the marketplace. IMHO in 5 yrs the appraisal industry will be humming along as it is today. Guides from any entity will change to reflect the changing marketplace. To me commercial appraisers will always be in demand.

 

[AirstreamCO]

A trainee cannot operate as an independent contractor.

Really? Do you have a source for this or is each state different? I didn’t find anything in my state’s bylaws or code of ethics regarding supervisor/trainee rules. Seems odd to me that a supervisor would have to employ a trainee if they were a small shop and would be more evidence why trainees have a difficult task finding a supervisor. However, real estate firms seem to often skirt the rules of who is an employee and who is a 1099 contractor.

 

[PL1957]

Really? Do you have a source for this or is each state different? I didn’t find anything in my state’s bylaws or code of ethics regarding supervisor/trainee rules. Seems odd to me that a supervisor would have to employ a trainee if they were a small shop and would be more evidence why trainees have a difficult task finding a supervisor. However, real estate firms seem to often skirt the rules of who is an employee and who is a 1099 contractor.

Check IRS requirements ... they’re the ones who make the determination ...

 

[Deleted member 152047]

Really? Do you have a source for this or is each state different? I didn’t find anything in my state’s bylaws or code of ethics regarding supervisor/trainee rules. Seems odd to me that a supervisor would have to employ a trainee if they were a small shop and would be more evidence why trainees have a difficult task finding a supervisor. However, real estate firms seem to often skirt the rules of who is an employee and who is a 1099 contractor.

The relationship is counter to what a 1099 contractor is. The trainee cannot operate independently, has to be paid by their supervisor, cannot work for others without participation from their supervisor, cannot procure their own business or clients.

 

[Russ Kitzberger]

Really? Do you have a source for this or is each state different? I didn’t find anything in my state’s bylaws or code of ethics regarding supervisor/trainee rules. Seems odd to me that a supervisor would have to employ a trainee if they were a small shop and would be more evidence why trainees have a difficult task finding a supervisor. However, real estate firms seem to often skirt the rules of who is an employee and who is a 1099 contractor.

FL states compensation has to come directly from the supervisor (cannot go directly the trainee). Not sure about other states.
If you read the rules on what supervisor has to do to comply with The Appraisal Foundation guidelines, which trickle down to all states, and you compare that to the IRS classifications, it would be very hard to argue that the trainee is not a w2 employee.

The relationship is counter to what a 1099 contractor is. The trainee cannot operate independently, has to be paid by their supervisor, cannot work for others without participation from their supervisor, cannot procure their own business or clients.

Yep, that is one of the tests of 1099 vs employee.

Check IRS requirements ... they’re the ones who make the determination ...

Yep, trainee employment meets most tests for w2 employee, fails most for 1099.

Hypothetically, a 1099 trainee could, either by spite, injury or layoff, or just changing their mind after licensing say they were misclassified as a 1099 contractor, and the appraiser or firm could be held liable for all the fees and taxes. Note what is going on with uber and lyft "contractors". or maybe they just feel that 1099 was unfair.

Here is some info for 1099 v w2. I think if you tell them what software to use and how do to the job (which you have to as supervisor), they are pretty clearly an employee. I would ask one of you employment attorneys to opine.

https://www.irs.gov/newsroom/understanding-employee-vs-contractor-designation

https://worklogichr.com/news/how-correctly-classify-your-employees/

More info:

https://www.upcounsel.com/1099-employee#:~:text=June 25, 2020:-,What is a 1099 Employee?,works under their own guidance.


If the IRS finds that you did not submit a W-2 form for an employee who should have received one, it will subject your company to pay strict penalties, including:

• Back tax that equal up to 41.5% of the independent contractors' wages (up to three years)
• A criminal conviction of up to a year in jail
• Fines as high as $500,000

Independent Contractors versus Employees
To avoid accidentally misclassifying your workforce, how can you discern the difference between an independent contractor and an employee?
While the IRS gives a thorough explanation, the basic logic lies in understanding three principles, including:

• Behavioral control
• Financial control
• Worker/business relationship

First, as the employer, do you maintain the right to direct and control the work that the worker performs? Second, are you in a position to control the financial aspects of that person's job?
Finally, what kind of relationship have you established? Did you sign an official contract outlining work terms, and is this worker a critical part of your ongoing business endeavors? Do you extend benefits to this individual?
If the answer to all of the above questions is "no," then you're likely working with an independent contractor. If there is any confusion, be sure to clarify it before moving forward.


Hypothetically, a 1099 trainee could, either by spite , injury or layoff, or just changing their mind after licensing say they were misclassified as a 1099 contractor, and the appraiser or firm could be held liable for all the fees and taxes. Note what is going on with uber and lyft "contractors". or maybe they just feel that 1099 was unfair.

 

[alebrewer]

I pay my trainee by the hour and will until she can almost write a full report by herself. We do residential, farm and commercial properties. For instance, we have a $1,800 fee for an agricultural property. I appraised the property next door, literally, and have all the comps and the subject from last year sold since that appraisal last year. The report is basically written already. I am not willing to pay 30% for ten hours of work when she will only have about ten hours into it.

but isn't that about the same? $1800 x 0.3 = $540. 10 hours x $54 an hour = $540...