May, 2009 - This article, first published in 2007, seems more important today than ever. In my opinion, artificially low appraisal fees are the number one threat to the appraisal industry today. The HVCC has ushered in additional concerns about fees in our industry. Oddly, most of the blame for low fees lies with appraisers, who continue to make artificially low bids on jobs. I want to be clear that I am not in favor of price fixing, even if it was not illegal. I don’t blame appraisal management companies either. It is my belief that many appraisers are unaware of how to bid on an appraisal job. Here I address how to develop your personal hourly billing rate (PHBR); how technology can improve your earnings and how to properly price “odd” jobs. A program written in MS Excel can be downloaded to help you develop your hourly billing rate (WorkingRE.com; Sidebar Info, Hourly Billing Rate Calculator.)
Understanding how Much You Really Make
I have developed a bad attitude concerning the financial rewards associated with a good residential appraisal practice. I know there are many residential appraisers who are exceptions to the rule and make more money than is typical. I will go on record as saying that probably fifty percent of those appraisers are not doing a very good job of meeting the required scope of work. Yes, I am saying that many appraisers have adapted to low fees by short-cutting on their due diligence.
This discussion is not for those appraisers because they believe the best way to achieve a higher gross income is by taking the “let’s not but say we did” approach to appraising. What is a fair charge for the appraisers who complete each task with the diligence necessary to contributing to the solution of the intended user’s needs? Antitrust laws prevent me from discussing the amount appraisers should charge for a specific job or from setting a standard hourly rate for appraisers. This is alright because there is no one hourly rate that is right for every appraiser and no one fee that is right for each type of assignment in varying parts of the country. While I think that the residential appraiser is having a much harder time in terms of earnings than the commercial appraiser, this discussion applies to both.
There are a couple of things appraisers must understand: First, it doesn’t matter how much money you gross, only how much money you get to spend. And clients do not care what you earn on an hourly or yearly basis; they only care how much you are going to charge to complete the next assignment.
Many appraisers who obsessively monitor their gross income have no idea what they really make in terms of disposable income. If you have an annual tradition of getting a large second mortgage in March or April of each year to pay the tax man then you probably fit in this category. It is often two or three years down the road before some appraisers realize they are not making as much as they thought. You might believe that it is good if your competitors are earning less, as they might go out of business thus improving your position in the marketplace. Quite the contrary, these appraisers are bidding against you with unrealistically low fees based on their need for immediate cash.