There will always be disagreement as to what liability is present with desktop or other alternatives that do not involve the appraiser as the party observing the property. In the end, our standards do allow us to invoke extraordinary assumptions that would limit the liability for doing such assignments. While this article will not delve into this topic in any depth, let’s just assume that desktop valuations are acceptable. What I want to devote this piece to is the 300-pound gorilla in the room, the time to prepare a file. We can’t really get into fees in any detail, but the premise is that more time should equal more fee.
Many appraisers would embrace alternative products at a higher rate if they believed the fee being offered was commensurate or even better than a traditional interior valuation product. I have performed a few of these assignments as a test for my company to see if it is a worthwhile endeavor just from a return on time perspective. As an appraiser who cares about the valuation process, I probably spend more time per report than many appraisers. While the lenders and AMCs requesting these products want to focus on time spent, I do think that they overly simplify the process as part of the sales pitch. Even with these limited products, there is still a minimum due diligence required to create a reliable report.
Let’s walk through an example using hypothetical figures to determine if it is financially feasible to perform desktop appraisals. Our goal is to break down both products into an average hourly rate. Obviously, the fees are different in various regions of the country, and some assignments will take longer, but more complex assignments should command higher fees.
We are going to use my previous article on deconstructing the fees, located here, as the basis for the hourly rate a typical assignment should take. This, of course, uses my typical procedures applied to the survey supported fee for my state. Mileage will vary based on how you work through your assignments. The fees used in that linked article are hypothetical based on a fee survey and are not suggested pricing points. Every market is different, and you should spend time researching and pricing your market competitively.
Traditional 1004 File in a Standard Subdivision
A full break down of the time accountancy is in the provided link above.
Typical Desktop Appraisal
I have done about two dozen of these alternative products in the last 12-months or so, and I am using the assistance of a trainee in building the work file and inputting data. The amount of time needed to complete one does hover around 90-minutes, even though I have been told repeatedly that it should be closer to a third of that. I think the difference is that there is not enough consideration given to what proper analysis would look like if done appropriately. The premise the clients are using is that the ability to locate the data, decide what is worthwhile to use and what should be discarded is simply glazed over and applied to their estimate of time as simply inputting data.
The biggest gripe that I have with the desktops products thus far from simply a business perspective, is that I have spent hours and many dollars creating a database of my comparable sales data. These desktop products require me to not use my own data and to essentially start cold with each comp on every assignment. I really wish that these products were set up through my forms provider so that I can import the data that I have collected and verified. I do not want to link my database with the clients; I would like to have these products in my forms software. Essentially, the client would provide a meaningful property inspection report and allow me to create the report in my own system.
Modified Desk Top Fee
This simple analysis does not include other items to consider like gas/mileage on your vehicle, time spent communicating with your client regarding status, etc. Although the possibility of revision requests is possible for a desktop, they are less likely due to the limited scope once you get familiar with the assignment conditions involved. Like any assignment, the assignment conditions are substantive and may require a few assignments to get used to that client’s needs.
As I stated previously in this piece, this is assuming there are no issues from a standards perspective. This is a facet of the conversation that I would like to cover in another piece, hopefully soon. In some markets, 1004 appraisal fees are significantly higher than other regions, and it may not be a wise business decision to perform desktop appraisals based simply on the return. To make an educated decision, break the numbers down based on your typical appraisal fee and time involved. Crunch the numbers.