Placing a Value on Your Services - a Guest Post by Michael W. Armetrout of AM Appraisals
As every appraisal firm manager knows, gauging the direction of the current business environment can be a difficult task. Some may see every new trend as a time to reinvent themselves while others may simply lay low through fluctuating periods.
One thing is for sure, the constant wave of financial fiascos and regulatory changes have made it nearly impossible to figure out what is on the horizon for our industry. Whether you subscribe to a “glass half full” or a “half empty” approach to the appraisal profession, maybe we should first take stock of the basics. What do we really have to offer? We are in the business of placing value on real estate so why can’t we place an accurate value on our services?
I don’t want to get off course with promotional tag lines or sales pitches but rather want to examine the real reasons why our potential clients utilize our services.
I have narrowed down a list of six primary areas of what I believe encompass our worth and appeal in the marketplace.
Ability to Render Value
It doesn’t get any more basic than this. Our ability to produce a determination of value is the hallmark of what we do. Today’s appraiser’s offer credentials based on licensing, education and experience and have specializations that cover a wide array of disciplines.
The word “ability” can be a subjective term but is ultimately determined by our expertise. A client may or may not desire expertise but it obviously is something we should endeavor to improve constantly.
We are not however, the only source for value determination. The increasing use of the AVM has offered potential clients a much lower cost alternative to our services and BPO’s have become a favorite product for asset management companies in foreclosure work. We may proclaim the shortcomings of these alternate valuation vehicles but their growing use indicates that end users view them as a viable option for some purposes.
Competitive Fees
What we charge for our services can vary widely based on locale, client type, volume and the scope of assignment but is still in effect set by customary fee ranges in a particular market. If the same client pool has access to a set number of appraisers, the market will obviously not lend itself to wide extremes for the same service without some attrition. Fees then become relatively competitive in that market.
Recently, fee trends have been one of the pivotal issues related to appraisal management companies in the wake of the implementation of HVCC. Many of the larger AMC’s allocate assignments to appraisers willing to work for as much as 40% less than pre-HVCC rates.
The balancing act for appraisers who work with AMC’s is now to attract new clients with attractive rates yet somehow streamline processes and implement new efficiencies to make up lost revenue. It is possible though; that shortcuts may lead to a reduction in overall report quality and further add to an already fledgling public sentiment toward appraisers.
Quality Products
If you were to ask a group of appraisers if they all produced quality products, I’m certain you would hear a resounding “absolutely” and without exception. We all want to believe that we are completing reports that are accurate and reliable but we must come to terms with the fact that not all reports are created equal.
Someone has said that an appraisal is only as good as the available data but while there is a grain of truth to that, a quality appraisal consists of many parts, not just raw data. Market expertise, academic and logical analysis, supportable conclusions, and clear presentation are just some of the components that make a quality appraisal. Making sure we are turning out the best possible quality is the key to our long term survival.
Communication
How we communicate with clients is what I believe to be one the most valuable traits of any appraisal organization. It is the bedrock of all business relationships and has historically been the factor that either keeps or loses clients.
In the past, mortgage lending relied heavily on the ability to communicate freely with appraisers. How ironic that this is also what was scrutinized by many in our profession and eventually was a contributing justification for HVCC. Regardless of the opinions on HVCC, the end result has clearly led to a decrease in communication as a growing “form-filler” role has been placed on many appraisers.
The large AMC model makes it difficult to cultivate business relationships on a national or even regional basis due to the scale and protocols of companies that order appraisals overwhelmingly from computer databases. This is where I contend that HVCC has caused the most damage to our ability to do business as appraisers.
Turn-Around Time
Besides death and taxes, we can always count on a client’s expectation for their requests to be completed as soon as possible. After all, if they have ordered it, then they are ready to receive it. It is funny how they are not always ready to pay for it.
A quick turn-time has been the norm since the advent of appraisals began and I’m sure will continue until its demise. For all of the changes HVCC has brought, it has had no effect on the expected delivery window for appraisal reports. All clients still want it yesterday.
Liability
I have saved this one for last because it is often overlooked but I believe it has become our single largest attraction to the lending market. Our financial, legal and professional liability is what sets us apart from the alternate valuation methods noted above and may very well be what keeps us in business in the years to come. It is also one of the prime motivators for maintaining quality in our services and products.
Don’t believe for a moment that many national investors and banks would not opt for a low priced AVM or BPO if they had recourse against them upon loan defaults. This is why the use of “no appraisal” programs was utilized in some lower risk loans during the buildup to the meltdown of the financial and housing markets.
I urge appraisers not to sell their services away for cut-throat rates. If they do not properly value your professional skills for what they are, then maybe they will value the liability you offer. It’s not free to us and it should not be free to them.
So how do we parse these points? Understanding prospective clients is the key to creating a business model that works and must always be guided by ethical conduct. For instance, if our primary draw is our ability to render value, a client may want predominantly high values therefore creating a dilemma that would lower quality and increase liability which in the end should not be a decision we accommodate.
Striking a balance of these issues can be difficult but is imperative for our success in the appraisal industry. As we continue on the roller coaster ride, we must continually be evaluating a client’s perception of the services we provide.
Other Posts By Michael Armentrout:
- Properly Define “Declining Markets” - A Call To Mortgage Lenders
- Appraisal Independence at Crossroads, Again!
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