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Professionals Bill by the Hour
by Dustin Harris, The Appraiser Coach
“But that’s the way I have always done it” is not just an appraiser thing, it is a human thing. In general, change is hard for people, and really, it makes sense because there is safety in routine and security in the familiar. However, no one who ever achieved great success did so by saying, “I think I am going to do the exact same thing today that I have been doing forever.”
I recently found myself in need of an employment contract for one of my new employees. Due to our negotiations, it was clear that the contract I was using (and had been for so long it smelled of stale coffee and Idaho dust), was not going to fit the bill. Furthermore, I am old enough to know when something is beyond my skill set. Writing a new contract with everything I needed it to include, while trying to ensure it was in compliance with local, state and federal laws, was just not in my wheelhouse. I needed a professional!
Accordingly, I turned to a labor and employment attorney for assistance. Frankly, I did not know any lawyers who did this kind of work, so I did what any self-respecting Information Age junkie would do—I Googled it (searched online and asked around). In a short time I had a list of two–three credible candidates. Now I am typically cheap as dirt (which isn’t a very effective simile with appraisers who understand how valuable dirt really is), but I didn’t even think to ask about price or fees when I was calling around. Frankly, it was not much of a consideration to me. “What do you charge?” was not a question that seemed appropriate at the time. Whatever I ended up spending on a good contract would be returned in multiples by satisfying a good employee and myself and by avoiding other problems down the road including possible litigation. In other words, I was looking for the qualified professional, not the cheapest.
So it is when we are looking for any type of valuable service; we go to a professional and rarely do we decide solely on price. When was the last time you looked at your doctor bill and switched because she was charging too much? I have no idea what my financial advisor earns per hour but I know I will never switch. The service and value he provides far exceeds whatever commission he takes. Attorneys, accountants, financial advisors, doctors, consultants and others have something in common: they work in billable hours. If you ask any of these professionals what they earn per hour, they would be able to tell you without even thinking about it (if they chose to). They are professionals and they work based on what they are worth. Is this true for you?
Years ago, I took my two assistants and we travelled to four cities to present a two-day workshop for appraisers called Go Create Some Value. It was a packed house full of appraisers in every city we visited. The subject was how to stop looking at their appraisal work as a “job” and begin seeing it as a “business.” During that workshop, I would go around the room and ask each appraiser individually if they knew what they made per hour. The percentage of “yes” answers was never greater than 15 percent in any city. Less than 15 percent of the appraisers nationwide could answer that very basic question. The first step to seeing your appraisal office as an actual business and recognizing yourself as a professional is to know what your hourly billings are.
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It is a known fact that most appraisers have not had a lot of formal training in accounting or how to run a business. Appraisers are usually talented and skilled technicians but need some assistance when they put on that CEO hat. Yet, more and more appraisers are seeing their work as a profession and not just a job. More and more appraisers are learning how to read a balance sheet, a profit/loss statement and calculate gross income, hard/soft costs and what their actual net take-home is. An ever-growing number of appraisers are not just doing an amazing job at valuing houses but also learning how to value themselves. Part of the process is understanding that what you bill per hour is what separates the workers from the professionals.
Knowing what you bill per hour also makes the bidding process much easier. In my circle of connections, I see more and more appraisers who are no longer looking at the fee for each assignment only but translating the fee into dollars per hour. Another way of putting this is that, the appraisal fee by itself may not tell the whole story. Allow me to give you a couple of examples of how this plays out in our office.
I work a very diverse area with more unique than homogeneous properties. It is not uncommon to get multiple calls per day from clients who start out with, “I got an interesting one for you and I need to find out what your fee is.” In fact, a large percentage of my work begins in a similar fashion. No problem, we have a procedure for that. Those in my office who take phone calls know roughly what I earn per hour net and what we need to bill per hour gross for each assignment to get to that net. They also have a fairly good idea as to how many man hours a particular assignment will take given the details. It does not take them long to answer bid requests. Often, but not always, the process involves a short consultation with me. It is not unusual, due to the complexity of some assignments, to be upwards of thousands of dollars. If we get the job great. If we don’t, we do not stress over it. There is plenty of work happening for appraisers right now.
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On the other side of the coin, a seemingly low fee does not always translate into low billable hours. A smaller scope of work can dramatically reduce your man hours on an assignment and allow you to bill accordingly. The key is to know what your time is worth and not be afraid to ask for it.
Do you know what you are worth per hour? Do you think of yourself as a professional? What are some things you can do to increase your worth (and thus your billable hourly rate)? The valuation profession is changing. It looks different now than it did three years ago and it will look even more different three years from now. As appraisers, it is time to see ourselves as professionals and to demonstrate that to our clients, customers and the world. In terms of payment for what we do, it is time to stop looking only at the fee and begin seeing the assignment in terms of billable hours like all the other professionals.
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About the Author
Dustin Harris is a successful, self-employed, residential real estate appraiser. He has been appraising for over two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc. and is a popular author, speaker and consultant. He also owns and operates The Appraiser Coach where he personally advises and mentors other appraisers helping them to also run successful appraisal companies and increase their net worth. His blog is read by over 20,000 appraisers nationwide and he facilitates several appraiser membership groups both online and in person. His free podcast is listened to by thousands of appraisers each week and can be downloaded on iTunes and Stitcher Radio. He and his wife reside in Idaho with their four children. He loves playing in the outdoors and watching movies indoors.
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