Diversification, An Appraisers Path To Survival - Time to Put that New Years Resolution in Motion...

Are Residential Real Estate Appraisers Soon To Become An Endangered Species?

There is growing pessimism in the air, particularly concerning the future of residential real estate appraising as we have known it. The future will be bleak indeed for those who insist upon approaching the future by hoping for a return to the ways of the past. Their blinders and tunnel vision may well do them in.

There is an enormous shakeout of residential appraisers already well underway.

Sub-prime meltdown, extreme weakness in the Alt-A and Jumbo markets and rapidly bursting real estate bubble have slowed refinance activity down to a trickle of the volume experienced in the recent past. Many leading economists are saying the refinance boom of 2002 to 2006 will be the last, or anywhere near its magnitude, largely due to structural changes evolving in the way the lending business is and will be conducted.

AVM's, BPO's and other emerging forms of desktop underwriting will continue to take an ever larger market share of what once was exclusive domain of the residential appraiser. Predatory AMC's, pitting appraiser against appraiser, will continue to pick away at the net fees most appraisers will get to take home.

The consequence of all these factors has been residential appraisers leaving the industry in record numbers, with many others hanging on by a thread and/or supplementing their income with often unrelated part-time work.

The brightest hope for a residential appraiser’s future survival lies in diversification, with the non-lender arena as the primary target. I have been focusing my marketing capabilities and learning how to harvest business from these niche markets for more than 12 years. I typically have far more full fee business (on average, well over 80% was non-lender originated [new mortgage]), than I can handle. The biggest problem for most appraisers who desire to follow in my footsteps, will be that it cannot be accomplished overnight and can take years for a typical appraiser to build up a sizable non-lender client base.

My suggestion is that you begin to broaden your client base immediately. With the refinance boom over, you don't have a moment to waste. If you are waiting for high volume refinance activity to return, and don't intend to right-size, your demise is probably already written in stone, unless you have very deep pockets. You may well be a casualty if you can't change gears and right size quickly enough. A large operation can be great when there is heavy sustainable profitable volume, but when the economy tanks and lender business evaporates, the fixed overhead can be oppressive. Remember, the only meaningful statistic that underscores your economic health and viability is your bottom line...

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I learned a long time ago you must diversify your client base to survive the down refinance cycles. If you put all your eggs in a couple of refinance baskets, you shouldn't be surprised that your business falls off to next to nothing if and when the market contracts. There are many under filled non (loan origination) lender niche's waiting to be served and most (other than mortgage brokers and commissioned loan officers) actually want to know what the property is really worth.

Here are just a few niche specialties, many of which are under served in many markets:

• Sellers wanting assistance pricing their property;
• purchasers wanting assistance formulating an offer to purchase;
• partnership dissolution;
• consultation;
• matrimonial/divorce;
• estate settlement/probate/trust,
• estate planning/gift tax;
• tax grievance/certiorari;
• condemnation; bankruptcy ;
• REO - many if not most large lenders and GSEs have REO Departments;
• relocation/third party/ERC;
• elder care/Medicaid entitlement;
• PMI Cancellation/Elimination;
• guardianship/conservatorship;
• bail bond;
• family sale;
• litigation support;
• stigma damage;
• LLC transfer;
• market rent analysis and many others.

Once you start along this path, over time, much of the work will come from friends and family of satisfied clients. In the beginning, however, you will need to make a concerted effort to market your services to those niche specialties you wish to pursue.

Here are a few suggestions of what you can do today to get the ball rolling.

First, get listed in as many on-line directories as you can afford, particularly those which permit FREE Listings - see attached Excel Chart. Download directory.xls  You must, however, do your homework. Search the major search engines for each potential directory’s placement using terms that mean something for the specific niche you are interested in servicing (stated differently, try to think how your potential target client might search for someone to solve their valuation problem). (i.e.: try Google or Yahoo for "certified real estate appraiser" or "certified estate appraisals" or "pmi cancellation" or "tax grievance", or "bail bond appraisal" or "Residential Appraisal Reports" or whatever search terms likely to be used by most potential users of appraisal services for the niche specialty in question.)

You must also consider your placement in the directory. A directory with great placement might be a total waste of money if you will be listed far down on a long list - I put together an excel spreadsheet of popular internet directories and their current google search return placement (natural returns only) for some typical search terms that users of appraisal services might use. I didn't include sponsored returns because they can be turned on/off at will by the advertiser. The searches were done 1/1/08 between noon & 2:30 PM. I also listed whether each directory provides any FREE listings. Not or not in top 50 means the directory did not appear anywhere in the 1st 50 google search returns for the search terms specified. I tried to be careful and be as accurate as possible. What amazes me is that some of the priciest directories are nowhere to be found for some pretty basic appraiser related search terms. See attached Excel Chart. Download directory.xls

Internet Appraiser Directories Offering FREE Listings:

• ( http://www.quickval.com/ Mine :-);
• http://appraiserusa.com/ ;
• http://appraisermatch.com/ ;
• http://www.e-appraisersdirectory.com/ ;
• http://zipappraiser.com/
• there may also be others

Conversely, a directory with good but not great placement; might be a better choice if you can be assured placement near the top of the list.

Second, if you don't already have a web site; or if you have a copy cutter tombstone web site, consider investing in an in- depth custom web site that showcases your unique capabilities. A web site can offer you unlimited space to explain the benefits of your experience and special skill set as well as tout the unique qualities of your work product. Many people today use the web as their primary source of information. When they have a valuation problem, they seek to educate themselves first, before deciding what to do and who to hire to accomplish their goal.

The goal of your website is two fold.; Initially, it must be easy for your potential client to find. Secondly, it must be able to educate your client about the solution to their valuation problem and why it would be in their best interests to choose you to provide the necessary services.

A web site can be an extremely effective tool. It can be the equivalent of having a multiple full page ad in all the major newspapers, magazines and other publications in your market for the cost of a small classified ad. It truly allows David to go toe-to-toe with Goliath.

Ultimately, your success will require several things.

1. You must educate yourself how and where to market your services effectively.
2. You must formulate a comprehensive plan to achieve your goals and
3. You must make a concerted effort to implement your plan on an ongoing basis.

Many appraisers today are very down on the direction this industry is headed. If they are to survive, they must change their way of approaching the appraisal business. There are many niche options available, just waiting to be filled.

Appraisers need to find those niches and create an effective way of filling them by learning how to market to them. I Am a firm believer that all of us can ultimately control our own destiny.

Author: Ken Rossman - Click here for a free listing (no strings - no credit card needed to register) in your home county on my All Area Affiliate Appraisal Network on-line directory.  For more information about All Area: click here