Cheapest is Not Usually Bestest

I have a small, single-family rental property.  Recently, the house was vacant and in need of some flooring work. A home inspector once gave me some sage advice.  “If you aren’t familiar with the potential companies you want to hire, always get at least three bids,” he counseled, “then, go with the middle one.  That way, you do not pay top dollar, but you also don’t get the company who is always scraping the bottom of the barrel for business.”  Obviously, that advice may not always pan out, but in this case, it was likely the best option.  I tried his advice and called three hardwood-flooring companies.  The company in the middle was not much less expensive than the highest priced servicer, but it came with better customer reviews.

Generally, I run my business in a similar way.  I try to keep abreast of the local appraisal fee trends.  I look at surveys, talk to others, and have been known to ‘mystery shop’ appraisal fees.  I am not the guy offering to do things at the lowest price, but I am also not usually the highest priced game in town either.  It is more important to me to be the company with the best reputation than with the lowest prices.

There are many appraisers who are pretty upset right now with some of the shenanigans being played by some appraisers  (who will remain unnamed) in some markets (which will remain unsaid).  From the outside, it would seem that certain appraisers do not place a very high value on their own services.  That is too bad.  It makes us all look bad to some degree.

I hear appraisers across the country often say things like, “I hate AMCs.  They do not care how good I am at my job; they only care about who will do it for the cheapest dollar.”  That may be true in some cases, but it has not been my experience for the most part.  I put all of my clients into three categories as I have experience with them. A Clients, B Clients, and Y Clients.  You can probably guess what A and B Clients look like.  Y Clients are the “Why (Y) the hell am I working for you?” Clients.  Those are the clients who I purge from my list and never look back.

I see appraisers on social media constantly being up in arms about the advertised orders they are receiving over email and, “Some dipstick accepted it for dirt cheap.”  Here is my question, “If you are so upset by a certain AMC’s way of doing business, why are you still doing business with that AMC?”  Isn’t it time to move on and focus your attention on your A and B Clients?

Another complaint I hear often is centered on scorecards.  “What other professional gets scored like an elementary student?” I often hear.  Actually, all of them do.  Oh, they may not get an emailed attachment showing turn time, number of revision requests, and other information, but be assured all are constantly being evaluated by clients (all of them).  Frankly, I prefer a scorecard being emailed to me on a monthly basis rather than guessing or not knowing how I am measuring up in my client’s eyes to my competition.  I know the argument is they use arbitrary criteria on which to judge us.  That is a fair point, but I again remind us all that we do have a choice in whom we work for.  Ultimately, the decision is ours and if a client does not measure up to our own scorecards, there are other fish in the sea.

I was recently sent a meme from a member of my All Star Team.  It said, “If you think it is expensive to hire a professional, try hiring an amateur.”  Oh, how true that is.  Whether you are hiring a hardwood floor company or pricing your own appraisal fees to your clients, remember that a professional is paid well.  Ask for what you are worth, and be worthy of your hire.

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About Dustin Harris

Dustin Harris
Dustin Harris is a successful, self-employed, residential real estate appraiser. He has been appraising for nearly 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 free podcast can be listened to on iTunes and Stitcher. 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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    I agree with much of what you stated. I have recently had a cause to raise my fees for a certain vendor, as they have been practicing the concept of “scope creep” for the past several years. They finally reached a breaking point for me when they asked us to address every comp that an AVM “might” come up with in a search. I haven’t received an order since I raised my fees. They all try to tell us that turn time is as/more important than fees, but I rarely get shown the door for an extended turn time if my work is good. Not true with the fees, unfortunately. The industry is going through some conceptual changes, and I hope we come out on top. As of today, this appears to be a fight we’re destined to lose. We simply don’t have the money or organization of the big banks and AMCs. I’ll keep my fingers crossed, but it sure would be nice to see an appraiser win every once in a while.

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    Here we go again. Dustin, your articles and opinions on how to handle the problem (fill in the blank), always gets solved from the assumption that my local area is your
    local area. You also approach the problem from the 20% side of things and not
    the 80% (80% of work now goes through AMC’s). Garbage in equal’s garbage out.

    You can keep abreast of local fees and mystery shop all you want, but from 15 states away and 80% of the time, the appraisal fee will be a take it or leave it proposition
    from the AMC.

    Dustin, when YOUR state has 1,000 appraisers in it and you most likely only compete against a few dozen (+/- 50 miles), your solutions to the problem (fill in the blank), will be different than most/mine. I understand per capita appraiser calculations, but in Southern CA I have 1,000+ appraisers in my single county (+/- 50 miles) and 4,000 within a few hundred miles. I like to put the appraisers into three categories. Within my county (1,000 appraisers), 800 will do any assignment at any price (fill in the below market AMC fee here), 100 will SAY they never do work with AMC’s, and the other 100 actually work with AMC’s while telling the world they don’t. Good luck holding your ground when hundreds in your county will work for cheap, and a few thousand from outside the county will say yes when they say no.

    I would ask you Dustin, from an industry standpoint is the cheapest appraiser the best? BOA just sold Landsafe appraisals for $122,000,000 million. Wells Fargo just sold the rest of RELS for $67,000,000 million. FNC. Inc. (Appraisalport) was just
    sold for $475,000,000 million. All were built on the philosophy of discounted
    split appraiser fees (the cheapest). It doesn’t matter what we think Dustin, just ask Corelogic who has spent over $600,000,000 million dollars in the past 3 months buying all of the above companies.

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      It is great that people like you are around us, young or elders. thank you Mr Johnson.
      and this is what appraisers get back if asking a simple order related question: “The lender can not dictate this. You are the FHA appraiser. You need to put it on the correct form for what is highest and best use. Please advise if you are going to comply with the Basic requirements of an FHA appraisal, or if we should reassign this file.” or “Please advise if you are proceeding or declining this assignment” or you are asked if you are ‘bailing out” – yeh, I am very upset. for better values

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      Thank you for saving me the typing.

      To be fair, it’s not just Dustin. Article after article on appraisal blogs and magazines have been taking the same tone…
      Hey, if you don’t like your AMC, don’t work for them!
      Hey, you should get more private appraisal assignments!
      or, my favorite…
      AMC’s are having trouble finding good appraisers, you should raise your fees and position yourself as an expert and they will flock to you!!

      It’s obtuse and insulting to think that the vast majority of appraisers have not had the same ideas already.

      1-Yes, there are great AMC’s out there, but the one’s that Bill mentioned have 85% of the work.
      2-Yes, there are plenty of lawyers and accountants out there, but most already have their bases covered (they’re lawyers for cryin out loud!)
      3-Yes, there is a shortage of appraisers but, refer to line 1.

      And of course, the major underlying flaw in all of this reasoning is that valuation for private assignments is a business, valuation for mortgage banking IS NOT, it is regulation. It exists in a paradox. You are there to protect the public trust and interest but you cannot do that unless you are first hired by the people you seek to regulate. It’s as if a building contractor got to hire his own Code Enforcement Officer. (ever seen lamp wire run inside a wall to an outlet?, I have)
      And the reason that appraisers have been losing this long protracted battle is because the banking sector has never had any illusions about this relationship.
      They don’t need you, and they sure as heck don’t want you.

      The only real solution is if mortgage lending appraisals start getting managed by a State regulatory agency, and we all know the likelihood of that happening.
      No, the model that the banking industry prefers is the one where the Wolf continues guarding the Henhouse.

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      With all due respect, Bill… I deal with clients from across the nation and from every market type imaginable. My perspective does not just come from “my local area.”

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        Thank you for the response Dustin, but the lack of detail to my concerns solidifies my points. My statement stands. The backbone of the appraisal industry is residential lending and with 80% going through AMC’s, your looking at the world from the remaining 20%. Lenders/AMC’s don’t care that I want a higher fee, longer turn times, a complexity fee increase, they want the fastest and the cheapest to maximize profits. Looking at the world through your 20% may help drive memberships, but by not naming names, talking a stand, WE are losing the war.

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        Dustin, here’s an idea for your next blog that relates to perspectives from across the nation. Apply your income from Idaho Falls to other parts of the county by way of a cost of living calculator to see if most should be as happy as you are. Do your preaching’s and practices hold up? How does an Idaho mandated $450 VA appraisal fee compare to the SAME fee that is paid in my area of San Diego/Carlsbad? If you apply a cost of living increase (80% higher / Bankrate calculator) then to make the same amount that CA appraiser SHOULD BE PAID $810 AND NOT $450. If you turn it around and say that Idaho appraiser should make 80% less than the CA appraiser, THEN ARE YOU STILL IN BUSINESS DUSTIN AT $90 PER APPRAISAL? As most in this profession aren’t located in the sweet spots (your area of Idaho) of the nation, I would ask you to write your next blog from the though of making 80% less of what you make now. Again, will your message be the same?

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    Retired Appraiser

    I have to agree with you here Dustin. The cheapest is not always the “bestest” appraiser for AMCs to hire. They strongly prefer to hire the cheapest & the dumbest appraiser when possible.

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