What Can the Government ‘Shutdown’ Teach the Appraisal Industry?

First of all, let’s be clear… it was not really a complete ‘shutdown.’  A large majority of federal workers were still at work, but for those who were furloughed, it was uncomfortable and scary for sure.  Though the can has officially been kicked down the road for a few more months, we will face another ‘crisis’ soon enough.  So, what can this debate teach us about appraising?  It turns out… quite a bit.

Why did Congress and the President choose to delay the real problem with our national debt and budget—yet again—rather than just deal with the problem?  Why was it easier to pass a continuing resolution rather than a budget?  The answer is simple… motivation.

Human beings are moved through either pain or pleasure (Tony Robbins taught me that).  We act when the situation is either too painful to endure or we want something enough to counter the effort to move.  The fact is, most of our elected officials are not yet motivated by the pain inflicted upon our country (and future generations) with the mounting debt or these recurring government shut-downs. Their motivation is re-election.  Pure and simple.  They choose to keep the government ‘open’ for a few more months, then postpone again, then again, rather than deal with the tough-love that would come with actually fixing the problem.  Their motivation is to keep their constituents comfortable . . . and voting.

Though the situation we are dealing with as appraisers is much different, there is at least one, big similarity-that of motivation.  Currently, we have a huge exodus of appraisers from the industry.  They feel jilted by the new regulations and their way of life has been disrupted.  Furthermore, there are very few new appraisers coming into the industry to take their place.  Why?  Motivation.

As an appraiser, I am a huge advocate of training new blood.  I think it gives someone a hand up, allows me to pass on my knowledge and training to someone else, and makes me a better appraiser (you never really learn something till you teach it to others).  However, there is very little financial incentive to training a new appraiser right now.  It takes many, many months to teach a trainee how to pull comps, make adjustments, and reconcile without micro-managing everything they do.  It takes far less time to train a newbie how to inspect and gather all of the information needed at the site to develop a credible appraisal report.  However, most AMCs and clients will not allow a trainee to inspect (and some do not allow them to work on the report at all).  Why should I go through the hassle of finding, hiring, and training a new appraiser in my firm if there is little to no financial incentive to do so?  What is my motivation?

Many are running around wondering what it will take to save the appraisal industry.  Because human nature is what it is, there are only two ways to do so; make it painful to not hire a trainee or—better yet—incentivize the hiring of new appraisers by financially motivating them to do so.  Lift the regulations and rules which restrict the use of trainees in the appraisal development and reporting process.  Then, those of us who still remain, would be motivated again to hire and train new appraisers.

Now, go create some value!

Dustin Harris is a multi-business owner, but he has found most of his success as a self-employed, residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc., and is a popular author, speaker and consultant. He owns and operates The Appraiser Coach where he personally advises and mentors other appraisers helping them to also run successful appraisal companies and increase their net worth.  His two-day workshop will be held on Nov 11-12, 2013 in Las Vegas. His principles and methodologies are also taught in an online, Mastermind group. He and his wife reside in Idaho with their four children.

19 thoughts on “What Can the Government ‘Shutdown’ Teach the Appraisal Industry?”

  1. The “tough love” is something which should be directed against those who participated in creating the manufactured financial crisis in 2008, and not the majority of US taxpayers who were ripped off by Kleptocrats (Greek for thieves,) in the banking industry who had set personal wealth as a priority above the health and welfare of an entire nation. Now the tea party still dreams they’re fighting against taxation without representation, and against a nonexistent monarch, all while pitting the majority of US citizens against each other, and being sponsored by the Koch brothers. It’s high time, that the people responsible for the US budget mess, enjoy the austerity measures necessary to do something about it, without blaming the victims of opportunists.

    1. Well Well… Finally someone who is paying attention… I thought all the smart people were carted off by the space aliens.

      I might add this notion: In addition to the afore mentioned senerio. If you do not have jobs, you are not going to have alot of value in the neighborhoods that surround that enviroment. Location quotiant. So who is to blame for that.. Well that is up to what ever side of the isle you come from. Fact is still, wheres the beef? (or jobs)

      Someone thought that it would be a good idea to outsource, pack up all the equiptment and move out of the country the manufacturing of hard goods. Who then continues to profit from this enterprise? Not the workers or the economy. How about the factory owners (who certainly have the right – or do they) ?

      Truth is, some day soon the masses will no longer have 2 cents to buy a loaf of bread at Wal-Mart. Then what will happen? We will be on the same level (wage wise) as China or Pakistan and all will be well for the world economy. Or will it? You can put your head in the sand and listen to Limbaugh and build your life on his diotribe but remember: When you are down and out El Rushboe is not going to give a whoot because he too has more money than God…

      Good Luck Patriots – Good Luck
      I suppose when we were young we should have fixed this problem when we all had the energy…I do not. Wish I could help, but this is all I have. PEACE

  2. Why not be in the corner of the existing appraiser to get better fees. Since 5 years ago, i have had my fees cut which has lead to a negative in my business and i am searching for a job so i can never appraisee again. $265-300 is not enough. At minimum, $350 and up is needed to make it worth staying in.

  3. Debra,
    You say you had your fees cut. Reclaim your business and start telling them (AMC) what your fee is not them telling you. We have allowed the client to tell us how to run our business and for how much. Start looking into non-lender work and you won’t need to look for another job.

  4. I could be putting out high quality appraisals if I were in the office actually appraising, while a trainee or qualified office person is out inspecting a house…..and many more of them too. Now I have to do the “grunt work” while trying to train those office people to do my job. What a backwards way to do things.

  5. Hey Coach, I like your passion for the appraisal profession. I’d love to train my son, a HS Math teacher, to learn the appraisal profession during his summer break and the busiest time of the year for me. He has the skills to produce twice the appraisal volume as I do because of his computer skills and sharp mind. The older I get the more time it takes me to reconcile value in multiple challenging markets. Anyhow, I see two major obstacles to training new appraisers besides the potential loss of personal income in the beginning.
    The major obstacle is the industry’s lack of acceptance of trainee’s signing off on appraisals. When I started as a trainee 34+ years ago it was no problem for a trainee to sign off on the appraisal as long an experienced appraiser inspected and singed off on the appraisal as the Supervising Appraiser who was usually designated. It should still be allowed to work that way as long as a Certified Appraiser signs off on a trainee’s report and whether or not he personally inspected the property or not.
    The second major obstacle is the actual training of an trainee. Much can be done in the classroom but, much must be done in the field and office and I imagine that many of us do not have the time, skills and patience to train others. There should be a nationwide Appraiser Training School that no only provided the theory, principles, and practices of appraising real estate but also provides the classroom hours and field experience hours to gain an appraisal License and it shouldn’t require 2000 hours of logs sheets either, that’s overkill. So, I’m hoping you start up another business in training the real estate appraisers of the future; you seem the best fit for the job!

  6. The age old problem with the appraisal industry is a lack of power and representation and the continual lack of unity by the individual appraisers themselves. In 37 years of appraising I have witnessed no change in this situation. Laws, licensing, procedures, markets, rates, Presidents, etc. come and go and the appraiser remains near powerless. The appraisal leaders like to talk about “controlling” your business. The only thing you can control is what business you accept and who you accept it from. What’s the answer? Use MD, attorneys, CPA models to enhance the professionalism of appraisers? Unionize? I don’t know…but it’s not going to change. This industry is “branded” for what is it and will not change. It’s a cottage industry in the land of Big Business…. and Roy? you are spot on!

  7. Having been active in the Appraisal business for several years before it became a licensed profession, I have seen the steam roller of rules, regulations,the formation of State Appraisal Boards, government intervention, and finally the birth of AMCs.
    It appears to me that Appraisers from all parts the country suffer from the same issues. My fees had changed little over the past 10-15 years due to competetion from folks that I refer to as “starvin’ Marvins”. I recognize that someone has the right to charge any fee that they can live with, but some folks believe that they can undercut everyone else and therefore corner most of the business. I had a two man shop until two years ago when the lead appraiser on most assignments retired due to frustration with trying to please the often idiotic requirements or requests from the AMCs. I don’t relish the idea of getting older, however I am glad that I am now in the retired ranks but I still do some work. I no longer do work for lenders! My work is limited to private individiuals, Attorneys and for estates.I do not plan to accept any further trainees or to enter into the business full time. The business has been awfully good to me, and I am glad that I was among the first folks to be involved in the business. I only wish that the future of the Appraisal business looked as promising to the new comers as it did to us old hands.

  8. Why do everyone think AMCs set the fees and requirements? AMCs are appraisers retiring from the field and going inside due to competition. They are guided by the Lender’s requirements, Fannie Mae, USPAP and in some instances Government requirements. AMCs are taking the downfall for everything negative that happens in the appraisal world. They are simply the middleman between appraisers and lenders.For the appraisers that say AMCs are making their lives miserable please understand it is not they that make the rules.

  9. My husband and I both felt that as professionals, it was our duty, not to mention, the life of growing our business, to bring new appraisers on board. To take on trainees. What we learned from doing that with 4 different people is:
    1. They are not coming into our business caring whether they provide any service to us as their trainers, all they care about is getting their ticket punched.
    2. It is expensive for an appraisal office to train new appraisers. Time and loss of revenue.
    3. Trainees don’t want to work for free. They also don’t want to work for what they can bring into the business.
    4. Our model of putting the burden of the expense of training appraiser trainees on certified appraisers is NOT a professional model followed by any other professions.
    5. There has to be a paradign shift in our professional training model IF this profession is to survive.
    6. Less competition is NOT a bad thing.

  10. I HAVE BEEN DOING THIS SINCE 1980 (PLEASE DON’T LAUGH). THE UNDERLYING PROBLEM IS SIMPLE…UNIFY OR DIE. EVERYTIME THE MORTGAGE RATES RISE AND THE VOLUME GOES DOWN, WE (SOME OF US, ANYWAY)LOWER FEES TO REDICULOUS LEVELS. 50% DISCOUNTS NOW WIPE OUT ANY PROGRESS ON FEES THAT MIGHT HAVE BEEN ESTABLISHED DURING MORE ACTIVE PERIODS IN THE PAST. WE JUST BEGIN TO MAKE THIS INDUSTRY SOMEWHAT LUCRATIVE AND THE DOWN CYCLE BRINGS IT BACK TO THE BOTTOM AGAIN. WE HAVE TO UNITE TO CREATE MINIMUM FEE STANDARDS. IT IS GOOD FOR EVERYONE ELSE IN THE PROCESS TO HAVE US FRACTURED, CONTINUALLY HURTING EACH OTHER IN THE PROCESS. THIS INDUSTRY IS DOOMED AS LONG AS THIS CONTINUES, AND THE AMC’S HAVE CONTRIBUTED TO THE PROBLEM, ENCOURAGING APPRAISERS TO TAKE 50% FEES WHEN IT IS SLOW. I AM CONTINUALLY OUTBID WHEN I ASK A STANDARD FEE OF $350, WHEN ANOTHER APPRAISER QUOTES $175 FOR THE SAME SERVICE. ONLY WE AS A UNION CAN PROTECT OUR BUSINESS. THE POWERS THAT BE BENEFIT FROM OUR SUBMISSION AND ARE CLUELESS AS TO WHERE WE ARE HEADED.

  11. Ken MacDonough SRA, CRP

    The powers that be don’t want a new crop of trained appraisers. When the next wave of work hits, and there arn’t enough appraisers, the Banks will appeal to Congress to let them use thier AVM’s and all the UAD data that we are feeding them. Kiss the bank work goodby.

  12. Good comments here! I used to have 4 trainees, and I enjoy the training process, but I no longer have any. The reason is because the lenders want us to inspect every house and take every exterior photo for comps. The overlap of duties that is required by a supervisor leaves little value that a trainee can offer.

    I have been saying for years that the key to getting supervisors to want trainees, is to change the lender (and AMC) guidelines to allow them to sign reports and do independent work. I would suggest that the National Appraiser Agencies come up with a list of training skills and hours that would be acceptable to lenders. Our lobbyists should propose a skillset list and get the GSAs to agree that ‘x’ is enough hours to allow the trainees into the field to do independent work. Then officially post a new guideline regarding trainee signatures and work on reports. It would revolutionize our industry regarding getting new appraisers in the business.

    Otherwise all new trainees will generally be sons and daughters of a supervisory appraiser, and simply keep the business in the family. Offering a leg up to a family member has a lot more incentive; (dare I say) philanthropy to family begets loyalty and the trainee is less likely to become competition. A supervisor appraiser who offers their time, money, and skills is offering a huge gift to a trainee, and often trainees generally do not recognize that sacrifice.

    Yes it would mean that there are more appraisers per state, but those who are supervisors and good trainers will highly benefit for having more people working for their firm.
    Sonja
    San Jose, CA

  13. John in New Orleans

    I feel the industry will continue to decline overall with some ebb and flow. Eventually as others have said the UAD data and better software will be the end of us. Just like the travel agents before Pirceline. All that will be left will be the “new” $400 assignments…. but they will ONLY be the ones that the software cannot figure out. The oddball house on 26 acres with 2 guest houses, a pool, barn and chicken coops in the back. Other examples are the fishing camp with no comps for 20 miles or the $3,000,000 custom home. Those they will need us for, the suburban tract house, or simple 4 plex, they will just use the AVM software and a 21 yr old that works for the bank to go take a few photos to prove it actually exists. Make your money now and invest in rental property, that is what I am doing. As far as trainees, I had a nice guy call me yesterday and I explained that there is no way to fit one into my life or my clients requirements anymore.

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