|“One of the best courses that I have had in 17 years!”
By Richard Hagar, SRA
If you’ve ever watched wolves or lions attack their prey, one of the first things they do is isolate an individual animal; once isolated, the group attacks and usually dinner is served—there is strength in numbers and weakness in isolation.
When they work together, a pack of wolves can take down an animal weighing hundreds of pounds more than the individual wolf. Even whales, the largest beings on the planet, know that their best chance for survival, prosperity and more food is by working together in groups or pods.
For this very reason smaller, weaker animals tend to stick together in herds or some sort of collective. The larger the group, the more likely it is that the individual will survive and prosper. Weaker animals typically know it’s folly to go off on their own into the woods or jungle. Most appraisers, however, are a different animal altogether.
The typical contrarian appraiser, in the often false belief that they can make more money on their own, avoid “fee splitting” by setting up a one-man shop, usually right after obtaining a State Certification. In other words, they set themselves up to be isolated prey to the wolves of the lending world.
Poorly run AMCs, in their quest to make more and more profits, look for, if not require, appraisers who are isolated from others. Isolated appraisers are easier to manipulate into accepting lower fees, easier to intimidate into providing lightening quick and often sloppy appraisals and easier to convince into accepting odd “requirements” that help the lender, even if they are not USPAP compliant. Some of these poorly run AMCs don’t worry if something goes wrong with the loan because they will simply blame the appraiser. In other
words, when the bank wants someone to shoot, the AMC will duck out of sight and we all know whom the bullet often finds.
Why is it easy for certain clients to manipulate isolated appraisers? They use a method called a self-weeding garden, which is same game used by Nigerian scammers to locate potential victims. The theory goes that more careful, higher-quality and higher paid appraisers will “weed themselves” out of the appraisal process (the garden), making it easier manipulate the appraisers who are left—the weaker prey. They accomplish this “weeding” by offering ridiculously low fees, figuring that if an appraiser is willing to accept a $325 fee, they are also likely to be isolated, desperate for work and easier to control. AMCs find that isolated appraisers are easier to pit against each other too. Even if it’s a lie, they will say: “Well appraiser Bob down the street is willing to accept the order for $350 so it can be yours if you’ll do it for $325.” Since individual appraisers aren’t aware of what others are charging, they rely on what the AMC/client tells them. Remember, the lower the fee accepted by the appraiser, the greater the profit margin for the AMC.
There’s a particular AMC based on the East Coast that, having failed to pay appraisers hundreds of thousands of dollars, will likely have entered into bankruptcy by the time you read this. This company was paying their appraisers around 40 percent of the appraisal fee and keeping the other 60 percent for themselves. On a regular basis this and many other AMCs get together to discuss fees and compare notes on how little they pay appraisers. The wolf pack drinks bourbon, laughs, and makes huge profits, all at the expense of the individual appraiser.
Yes, competently run AMCs do provide a valuable service. However, their service provides a direct benefit to the lender, not the appraiser. Lenders should be the ones paying for the service. It’s unfair that appraisers pay for that which benefits a lender, but since the AMCs have formed a wolf pack—the appraiser, working alone in their home office becomes prey and often makes less money.
The Internet was supposed to allow people to work more successfully from their homes, a model that many appraisers falsely believe is to their benefit. However, it can’t replace high-quality, face-to-face communication that is required for innovation or complex appraisal problems. Amazon and Facebook, two of the most technologically advanced Internet-based companies, are spending billions building campuses where they can bring people together to provide products and services. They’ve learned that isolated people can’t exchange information or learn as much unless there’s real-life, face-to-face collaboration, the same-type of interaction that appraisers desperately need.
How can appraisers improve their lot in life? You can improve your practice by not being so isolated. Follow the example provided by the animals and Amazon—come together in a collective or larger group.
Join a national appraisal organization (Appraisal Institute, etc.) and your local state coalition. These large groups exist to help appraisers. They offer the opportunity to obtain information that benefits appraisers. The information and help they provide more than offsets membership dues.
Figure out how to work for or in a larger office with multiple appraisers. This solution can include numerous appraisers, working for their own companies but in a common space. It would be nice if a client called your phone number, a receptionist answered, quoted a fee, and the potential client believing it’s too high, hung up and dialed another company, only to reach the same receptionist who quoted an even higher fee for the “other company” working out of the same space!
I had a client who ordered dozens of appraisals that we completed and when I wouldn’t deliver them prior to being paid, the client hung up the phone, called another appraisal shop, and ordered new appraisals on the same properties. How do I know? The other company was leasing office space from us and we had talked about it. By working together, the other appraisal firm didn’t get hood-winked by the client. When the client couldn’t find any other appraisers to “stick it to,” we got paid and the other company didn’t get stuck with a non-paying client. The larger office provided more money by protecting its members from the nonpaying wolf.
Humans are social animals. We learn by talking (not texting) with others. Verbal conversations can produce appraisal solutions that back-and-forth emails simply cannot. Every day when I get in the office I circulate and talk to appraisers. I moan and groan about my appraisal problems and they about theirs. Often someone in the office will say “Hey did you think about using this method or looking for information at X website?” My response can be “Yep, tried it” or “Ohhhh, I forgot about that; that’s a great idea!” Collectively we talk and produce solutions that email or text can’t provide; it’s called the Mastermind Group. Three people working face to face and interacting together can create the equivalent of a fourth person, an additional problem solver. As a result of working collectively our appraisals are Tier 1 and clients come to us for solutions that isolated single-person shops simply can’t produce. We get paid more because we have the ability to solve more problems for more clients.
I teach a class all across the U.S. regarding the common appraisal failures that hold appraisers back from achieving Tier 1 status and higher fees. I’m often surprised by the lack of knowledge many have concerning basic appraisal procedures and systems. Many of the isolated appraisers have incorrect information regarding the use of MLS photographs, adjustments, highest & best use, etc. The education for many of these appraisers ended the moment they became isolated. By working in groups, different appraisers can take the same class and come away with different tidbits of information. Afterward, these same appraisers come together and talk about their different perspectives. When an appraisal problem arises they learn from each other and solve problems better by working together and using their different points of view. Education combined with different points of view can help elevate appraisers to Tier 1 status where fees are higher and you are no longer prey for the wolf pack looking for weaker stragglers.
Appraisal Business 101
An appraisal business is broken into three primary tasks: A) obtaining business, B) managing business and C) creating the appraisal. The more time spent on obtaining and managing the business means less time available for appraising—where you earn your fee. Do what you do best—focus on the appraisal and allow others to handle the management; this will increase your efficiency and income.
By working in a larger office of some design, several costs such as a phone system, receptionist, bookkeeper, trainee, software, or construction cost services can be spread out over numerous appraisers—thus lowering costs to the individual appraiser. Multiple appraisers promoting the same office create a multiplier effect enhancing advertising and increasing business.
When a client calls your phone number do they reach you while you are driving down the highway at 70 mph or standing in a subject property with an owner, or do they reach a professional working in an office? In our office, clients reach a properly trained person who will offer to help, even if there’s no appraiser around. The person takes down information, provides fee quotes, explains the appraisal process and helps clients in a professional manner. Often we obtain the order while other appraisers are promising a callback at the next freeway exit—or worse, the next day! A one-person office can’t afford to pay the professional answering the phone, but if the cost is spread over a group it becomes much more affordable. I’ve tried the isolated way. The cost of an office administrator and appraisal assistant has “more than” paid for itself by the increase in orders…at higher fees.
There are some banking powers who would like to eliminate appraisers and they are actively working toward that goal. Individually they can pick us off one by one, but collectively banding together while producing higher quality appraisals, we can fend off the wolf pack and make more money in the long run.
If I were to move somewhere else, I wouldn’t start a new company and work for myself; I’d go to work for a high quality office and I recommend that you consider the same. While the take-home fee from individual appraisals might be somewhat less, the operational time and costs will be lower because they are spread over more appraisers. In the long run you will likely make more money and you’ll have less stress. How much is that worth?
If appraisers would like to become more professional, they need to learn more, provide superior appraisals, and earn higher fees. Stop being so isolated and take a tip from the Beatles—Come Together—Right Now!
About the Author
Richard Hagar, SRA is a long-time appraiser, renowned educator, and author of the VERY popular CE courses How to Support and Prove Your Adjustments (7 Hours CE) and Appraisal Adjustments II: Solving Common Problems (7 Hours CE). Join thousands of other appraisers and learn proven methods to support your appraisal adjustments at OREPEducation.org.
Richard Hagar, SRA, is an educator, author and owner of a busy appraisal office in the state of Washington. Hagar now offers his legendary adjustments course for CE credit in over
40 states through OREPEducation.org. The new 7-hour online CE course Identifying and Correcting Persistent Appraisal Failures shows appraisers how to avoid CU’s red flags, minimize callbacks, save time, and earn more! Learn how to improve the quality of your reports and build defensible reports! OREP insureds save on this approved coursework. Sign up today at
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