The following article is by Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, The opinions expressed are the author's and do not necessarily represent those of the Appraisal Scoop blog.
Somewhere along my path, it dawned on me that if I was going to have to spend money taking classes or seminars to keep a license in force; that it would make sense to spend the money on the ones with the most legs. That is, to spend the money on courses that count for something, like a degree, designation or certification.
Dollar for dollar, the 1-day continuing education (CE) seminar is the most expensive way to accumulate credits. And, for the most part, they do not have legs. That is, they only count for one thing, renewing an appraisal license. Those I see offered in my area range from about $125 to $175 per seven-hour seminar. This translates into $17.86 to $25 per hour of CE credit.
After licensing, I began taking courses, not seminars, courses that counted either for a professional appraisal designation or a degree. Since 1989 when the license law was passed, using my system, I completed two college degrees and two appraisal designations. All for less money than most have spent on CE seminars that did not count except to renew their license.
In my State, a related college course can be approved with a copy of the course description and syllabus. Some of the courses I have taken since finishing my degrees have included Environmental Site Inspections, Subdivision Law, and Environmental Takings. All were approved for 40 hours. Each cost $395 or $9.87 per CE hour.
My most expensive college courses were at a private university graduate school, and cost $1,200 each or $30 per CE hour. More expensive, yes, but in the end, they added up to an MS in Real Estate Appraisal, which lasts forever.
My most expensive appraisal course through the AI was $500 for 40 hours or $12.50 per CE hour.
As this non-recession we are in, continues and housing issues remain in the forefront; it is my notion that those with more skills, and yes, credentials will better survive the next three years.
The demand for cheap and fast is still there. We received a request from the FHLMC yesterday looking for exactly that, on a property in a market that is going down 5%+ per month, where there are 4-5 new foreclosures for every valid sale each month, and where there is a 2+year inventory with just what is in the MLS, not counting the Invisible Inventory. We responded with the following:
Dear FHLMC, Your standard request and fee does not take into account the dynamics of the particular market this property is in, the crime rate, the lack of real sales, the fact that many sales are frauds or include cash back to the buyer terms, etc, etc, etc.
In the last six months, there have been 5 Sales reported in the MLS in this Zip Code that are 2-4 units. There are 45 Listings !
There have been over 74 property transfers in the last six months of 2-4 unit buildings in this area. The vast majority of which are Trustee's Deeds, not sales at all. Only a portion of these are Listed for sale in the MLS, the remainder represents what I call Invisible Inventory.
I am not sure how your management expects appraisers to deal with these issues without adequate time and fee, not to mention the awareness of the issues and skills combined with the necessary due diligence to get to the reality of what is happening in this Market.
This Market has declined over 50% since the peak 2-years ago and it is continuing to decline. There are FHMLC owned properties listed that have not sold even after large price reductions.
We can fill out the 1004 form as you request as fast as you want and for the fee you seek, IF you release us from our Due Diligence responsibilities regarding doing real Market Analysis of Supply, Demand, Value Trend, or from taking the time to actually Verify the Terms, Conditions and Motivations of the Sales, or to find out if they were actually Valid and Arm's-Length.
Again, we are happy to do as little as you want to keep the fee cheap or as much as should be done to really exercise the Due Diligence level expected of a license professional, and for which the Market Dynamics really demand. I am certain you do not want to end up with an opinion of value at a price level above where the property can be sold.
Each month this year, the Declines in the local Market Increased, peaking at -5% Per Month. We have not reached the bottom of this Market, although it might only be another 4-6 months. We can tell you when that will occur too, if you want to pay for the time for us to do the analysis.
The fee they wanted to pay, based on using the old 1004 form, was what we were making in 1984 and less than half of what we charge today. Too low to actually allow for a real appraisal to today’s standards and certifications.
When I was less educated and eager to build a client list based on cheap fees and speedy deliveries; doing work for the likes of a FHLMC on the cheap was a great thing in my mind. Maybe the whole lending world is based on that presumption. If is it, then why stay in that arena. Getting out, requires education, skills and credentials.
Interestingly, after my email response, they want to talk to us about doing work for them in our Region, talk about the scope of work, due diligence and the appropriate fee for service. I guess education pays off.
Most of the work we do today is not for lenders, does not have the delivery time pressures, the fee pressures or value pressures. We like it like that, much better than in the old days where appraisers go demerits if they could not deliver work in 2-3 days.
Education, skills and credentials can be accumulated during the same time period and at a lower cost that taking fluffy CE seminars. Why not map a path for yourself that will add up to something that will help step up one or two rungs where there is less competition.
Just to bring things into context, there are licensed appraisers taking assignments at less than $200 per house in June of 2008. At the same time, there are educated, skilled, credentialed appraisers taking assignments to appraise a house at a $6,000 retainer to start the job, in June 2008.
We each choose how we want to be in this business. The future can be like the past, or it can be better. The choice is ours.
"Appraisal is only hard if you try to do it right, or if the market is going down, or both."
AUTHOR: Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, 936 San Jacinto St., Redlands, CA 92373, Real Estate Appraisals, Consulting, Expert Testimony, Forensic Reviews, Fraud Research and Analysis, Litigation Support, Fraud Training 909-798-8855 , fax: 909-798-0139
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