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Why Cut Business Expenses?

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Ray Miller

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Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
Why cut business expenses? We have a bottom line for expenses, we have a nut to crack on each and every appraisal as to cost to produce and profit. So why are we trying to find ways to stay in business and continue to meet the lower and lower fee’s offered by the lenders and AMC’s? Cutting our selves short to meet other demands???? m2:

If the buyer of our services can’t afford to pay the cost of doing business let them figure out some things else. How many people do you dicker with on lowing their fee’s or prices. How many times do you walk into your grocery store and fill you cart, walk up to the check out stand and tell them all you are going to pay is $10 cause that all it worth to you?

I not saying its not ok to be efficient in your business cost. My feelings are you already should have been. There would be no way you could cut cost now, if you had been.

How long it the race to the bottom for the lowest fee going to continue for the residential appraiser????
 

Terrel L. Shields

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Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
I think a prudent person should always watch their expenses. But I agree. We are watching everything and everyone raise their prices. The idea that we should swim against the tide and not raise our prices is absurd.

The real issue is quality. The need for it has never been greater. The client should not dictate quality to us. And those who do should go on our do not use list. When we see the subpar work, espcially when it is a trainee without proper supervision, then trainee and supervisor needs to be spanked. Only you can do it by turning them in. If we turn in enough $125 appraisals, the ranks of the el cheapo diminishes.

There is an idiotic article in Working RE about someone claiming to do 1000 appraisals per year - making $300K for res appraising and someone else who profitably works for the AMCs...maybe with some keypunch help but..frankly I bet the quality of the more unique properties HAS to be subpar.

Anyone is free to price their service for what they want. But I am a firm believer that if you pay a high price, you might not get a high quality job. But if you pay a low price you KNOW you are not going to get a high quality job...period.
 

Couch Potato

Elite Member
Joined
Mar 15, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
Ray, the is some truth to your thinking, but just because you had maximum efficiency last year does not mean the same methods of operation are the most efficient this year. Products come along that change the formula, like MagicJack which was not available last year. The most efficient way to do 40 reports a month will be different from the most efficient way to do 20 reports a month or 15 reports a month.

If a $200 a month subscription to a data service enables you to do an extra 15 reports a month, it is worthwhile to subscribe, if an extra 15 orders are available. As technology and demand for services changes, so must an appraisal business. That may or may not include raising or lowering prices.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
As technology and demand for services changes, so must an appraisal business. That may or may not include raising or lowering prices.
If an auto company designed a new electric vehicle that reduced the cost of such vehicles by 1/3rd, do you think they would reduce the price to match their costs compared to other electric vehicles or to just match the competition?
 

Scott Lanz

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Joined
Dec 13, 2002
Professional Status
Certified General Appraiser
State
Minnesota
Terrel is correct, expenses should always be monitored.

If appraiser's are trying to cut every dime to stay in business they are focused in the wrong area and most likely nearing the point of being out of business.

A streamlined operation shouldn't run any more than 20% for expenses with an approximate 30% for taxes. This leaves around 50% after-tax cash. If all of the cost cutting ideas trim 3-5%, the end result is a 3-5% increase. If an appraiser isn't making it on 50%, it is doubtful one will make it at 53-55%.

Bottom line, an appraiser should be spending almost all their time getting business.

I am currently working on my 2010-2015 strategy for my business. Successful appraiser's are proactive and not reactive.
 

Ray Miller

Thread Starter
Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
All what has been posted as answers is what I was thinking. Yet I am seeing and hearing appraisers trying to cut not just to bone but into the joint to try and stay in business. Too try and meet the increasing lower fees offered for thier services.

I am also moving forward with my marketing for 2110 for all my ventures. You got to keep you name out in front at all times.
 

Scott Lanz

Member
Joined
Dec 13, 2002
Professional Status
Certified General Appraiser
State
Minnesota
Dang Ray, you are proactive. A 100 year plan. I thought you were getting close to retirement? I guess not only do appraiser's never retire, they apparently never die either. :)
 

Couch Potato

Elite Member
Joined
Mar 15, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
If an auto company designed a new electric vehicle that reduced the cost of such vehicles by 1/3rd, do you think they would reduce the price to match their costs compared to other electric vehicles or to just match the competition?
If they are happy with their market share, they would likely match the competition, which may well involve a price decrease from their previous position depending on their state prior to the advancement. If they want to build market share, they would undercut their competition. With the significant cost advantage, they would always be the winner in a price war for market share. Once the competition is decimated, then they could raise prices.
 

Dan/Fla

Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Yes we all have to monitor our expenses, both personal and business. I know I what my bills both personal and business are per month I know how many appraisals I have to perform per month to pay those bills. If I do less per month I need money from saving to cover; if I exceed the number needed I put money back in savings and or go out to dinner more. I do not think in dollars any more I think in assignments. I plan on replacing my Fridge this year and the one I want (sorry Wife wants) is 4 appraisals, including tax and delivery. Yes I have had to change my thinking with the slow down, some bills are month in month out but others well we can lower. Like eating out or traveling less. Yesterday I was adjusting for gas prices. I know when the volume some-what returns I need for same spendable earnings above cost will be. Example Yesterday I bought gas at $3.97 a gal filled up for $60. Last real time I did this it was about $2.00 a gal. So basically I now pay $2 more. When business is good I would fill up twice a week. I will pay about $60 more a week which is about $3,120 a year more for gas than before. Which in my case is about 10 more appraisals a year, so I need to increase my volume by 1 appraisal a month when the volume comes back to cover my added gas expense. For low fee appraisers you might need more.
 

Ray Miller

Thread Starter
Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
Dang Ray, you are proactive. A 100 year plan. I thought you were getting close to retirement? I guess not only do appraiser's never retire, they apparently never die either. :)



You caught me. Remember Twilight Zone where the wife put two and two together, because she was aging and her husband was not. Then she found an old picture with Pres. Lincon, Gen. Grant and her then at the time Col. husband in it who looked the same then as the day she married him. She then drilled him with a .32 as he died he aged and when dead turned to dust in a matter of 60 sec on the program. Don't tell any one please or the will send me back to the mother ship for transport home.:icon_mrgreen:
 
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