Diversify, But Verify

This article was originally published in the Second Edition Spring 2016 Appraisal Buzz Magazine.

Finding a new client is a good thing right? Finding a well-paying new client is even better.  However, finding a well-paying, new client that wants a good appraiser is ideal.  Let’s face it, the amount of clients one can work with is staggering. I just looked through my company’s list of past clients, and it’s long. The diversity of the clients we all deal with can go from the simple homeowner, to a small bank, to a large lender, to a corporation, etc.  We all want a diverse client base and lots of work.  Anyone who has run a business for any length of time finds out pretty quickly there are such things as good clients and bad clients.  Good clients can make life great whereas bad clients can quickly ruin your day.  So how do we make sure we are starting a new business relationship with a good client?

Let’s start out by determining what a good client is and is not (this works both ways).  I think most will agree that good clients have a good relationship with their appraisers, and reasonable expectations.  They tend to have genuine concern for their vendors and want to work with appraisers rather than be adversarial or attempt to intimidate. Part of having a good relationship is the ability and desire to pay timely and a fair fee. Timeliness of payment is also crucial.  Many parts of the relationship can be marginal but if the client doesn’t pay on time, they are automatically off the good client list.  Customary and reasonable fees is a big topic in valuation presently, and all I will say about it in this piece is that good clients want to pay it, bad clients try not to pay it.

Like any small business, the typical valuation practice has limited resources. Many are individual entities or at most, a few people.  The smaller the practice, the more hats one person may have to wear and vetting a client falls under the client development/retention hat. I have found, even in my own practices over the years, that this can be the most overlooked responsibility in a practice. Who has time to develop and manage clients when we are all busy writing appraisals and doing the other 235 things we must get done in a week?

Someone within each firm has to take on the mantle of client management.  Along with accounts receivables, client management is something that must be at the forefront of any firm. I am lucky that I work at a larger firm where we have staff for much of this, but we still have to carefully onboard new clients. So where does one begin?

Large Clients
Let’s start by taking a look at large lenders and appraisal management companies (AMCs).  Vetting these clients used to be difficult.  With the use of things like Facebook groups and the various forums it is quite easy to get specific feedback on just about any larger client.  I see other appraisers posting inquiries all the time about potential new clients.  It never fails that within a few hours there are often dozens of posts about how great or how weak a client may be in payment timeliness to how often they send less than meaningful revision requests.

As far as using social media, there are two drawbacks.  The first is that larger clients often deal with many different markets across the country, and some even have several divisions.  Each division within a company is often little businesses unto themselves and has completely different policies or behaviors that differ widely from the other divisions. The second drawback, is that social media can sometimes bring out vitriolic attacks because of a bad experience. Appraisers, and I include myself in this, can be less than cordial when asked our opinions about almost anything. So be aware that one person’s bad experience may not be yours.  Pay attention to who is being overly negative. See if they are always negative or on the attack, and if you find nothing is right in their world, then you may want to disregard their feedback.

A tried and true method is to discuss clients when you attend professional meetings and classes.  While I am a fan of social media, I find that discussing clients (good and bad) in person is the best way I have ever seen for finding out who is good and who is not.  The quarterly meetings I attend for the Appraisal Institute, as well as for my state coalition are valuable.  Making it to trade shows and annual meetings like AI Connect, Valuation Expo and the others pays off as well.  In some cases, you get to meet the chief appraisers, lead management for various agencies, lenders and, AMCs.  I have started and strengthened relationships with clients through this avenue.  In fact, with large clients, management may not have insight into day to day interactions between their organizations and appraisers.  They are interested to learn about it from someone they know, and there is no better way to get to know someone than in person.

A marketing strategy some recruiters use is the promise of volume.  Volume is important, but a diversified client base is better than one or two large volume clients. Extending credit to these clients can be risky so pay particular attention to what others have to say about their payment practices. By all means, extend credit if you are getting reasonable feedback but start any client off slow.  Volume can also have a diminishing return as many large clients use automatic rule checking or auto-review programs.  This can and often does add the extra work that this technology causes.  There is also a good likelihood that these companies use unlicensed quality assurance staff.  I have found that this can be problematic.

When you speak with the potential client’s representative, make sure you ask about their expectations. Some AMCs are up front about how they review and may even have a list of priorities they want to see in their reports.  Some have developed a scoring system, which I have found to have pluses and minuses that I won’t get into here, but are worth noting.

Small Clients
Regional and local lenders and AMCs are a different breed than larger clients.  They are often plugged into the local community and require more work to get your foot in the door.  Thus, finding information about them can be daunting.  It is unlikely a local colleague will share much with you if you are both competing for the same pool of work.  For the most part, local lenders and AMCs are not as specific in what they want in the work product and, from what I have experienced, are easier to work with.

Usually these types of clients have appraisers on staff or someone that is responsible for the management of appraisers.  They understand how to read an appraisal and if they are bringing on new appraisers, will talk to you in person or on the phone.  You really need to be willing to do a client visit or get lucky with a phone call to meet with these clients.  Ask them about their expectations and payment policies.  I have even managed to get a copy of what they consider to be a good report.

Private Parties
Attorneys, homeowners, agents, etc. can all be great clients.  Obviously, it can be difficult to vet these clients so payment up front or at least a deposit for work is a must.  This overlooked niche of work can be a good source of revenue.  You are often in complete control of your scope of work, technically you always are, but lender clients will have lots of assignment conditions.  It is paramount that you spend time discussing the needs of the client up front and then making sure you put their needs as well as a thorough retainer agreement in writing.  For members, the Appraisal Institute has a couple of template engagement letters available.

In the End
While there are many good lenders and clients from an appraiser’s perspective, there are still some that are challenging to work with.  I think it is important to stay plugged in with your colleagues.  While we can’t discuss fees in groups we can certainly discuss our good and bad clients.  The importance of showing up at Appraisal Institute chapter meetings (or other organization meetings) and sharing with your peers is irreplaceable. Those personal connections you make with others can be quite helpful.

If you would like to read additional articles from the Second Edition, Spring 2016 of the Appraisal Buzz Magazine, click here for our digital version.

Have content of your own that you would like to submit? Email comments@appraisalbuzz.com

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About Woody Fincham

Woody Fincham
Woody Fincham- Woody Fincham, SRA, AI-RRS, RAA, Member of RAC is the founder and President of Accurity Fincham and Associates, a Virginia based valuation and consulting firm. He is also a member of the national leadership for Accurity Valuation. Woody specializes in high-value residential homes, conservation easements, high-performance homes, review and consulting as well as both lender-based and non-lender-based work. He has been a featured panelist at the Association of Appraiser Regulatory Officials (AARO) and presented at the Appraisal Institute annual conference. He has also been a non-member participant in the Collateral Risk Network (CRN) and is one of the national instructors for the Appraisal Institute on residential topics.

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