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“One of the best courses that I have had in 17 years!” -Amy H.
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Professionals Bill by the Hour
by Dustin Harris, The Appraiser Coach
“But that’s the way I have always done it” is not just an appraiser thing, it is a human thing. In general, change is hard for people, and really, it makes sense because there is safety in routine and security in the familiar. However, no one who ever achieved great success did so by saying, “I think I am going to do the exact same thing today that I have been doing forever.”
I recently found myself in need of an employment contract for one of my new employees. Due to our negotiations, it was clear that the contract I was using (and had been for so long it smelled of stale coffee and Idaho dust), was not going to fit the bill. Furthermore, I am old enough to know when something is beyond my skill set. Writing a new contract with everything I needed it to include, while trying to ensure it was in compliance with local, state and federal laws, was just not in my wheelhouse. I needed a professional!
Accordingly, I turned to a labor and employment attorney for assistance. Frankly, I did not know any lawyers who did this kind of work, so I did what any self-respecting Information Age junkie would do—I Googled it (searched online and asked around). In a short time I had a list of two–three credible candidates. Now I am typically cheap as dirt (which isn’t a very effective simile with appraisers who understand how valuable dirt really is), but I didn’t even think to ask about price or fees when I was calling around. Frankly, it was not much of a consideration to me. “What do you charge?” was not a question that seemed appropriate at the time. Whatever I ended up spending on a good contract would be returned in multiples by satisfying a good employee and myself and by avoiding other problems down the road including possible litigation. In other words, I was looking for the qualified professional, not the cheapest.
So it is when we are looking for any type of valuable service; we go to a professional and rarely do we decide solely on price. When was the last time you looked at your doctor bill and switched because she was charging too much? I have no idea what my financial advisor earns per hour but I know I will never switch. The service and value he provides far exceeds whatever commission he takes. Attorneys, accountants, financial advisors, doctors, consultants and others have something in common: they work in billable hours. If you ask any of these professionals what they earn per hour, they would be able to tell you without even thinking about it (if they chose to). They are professionals and they work based on what they are worth. Is this true for you?
Years ago, I took my two assistants and we travelled to four cities to present a two-day workshop for appraisers called Go Create Some Value. It was a packed house full of appraisers in every city we visited. The subject was how to stop looking at their appraisal work as a “job” and begin seeing it as a “business.” During that workshop, I would go around the room and ask each appraiser individually if they knew what they made per hour. The percentage of “yes” answers was never greater than 15 percent in any city. Less than 15 percent of the appraisers nationwide could answer that very basic question. The first step to seeing your appraisal office as an actual business and recognizing yourself as a professional is to know what your hourly billings are.
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It is a known fact that most appraisers have not had a lot of formal training in accounting or how to run a business. Appraisers are usually talented and skilled technicians but need some assistance when they put on that CEO hat. Yet, more and more appraisers are seeing their work as a profession and not just a job. More and more appraisers are learning how to read a balance sheet, a profit/loss statement and calculate gross income, hard/soft costs and what their actual net take-home is. An ever-growing number of appraisers are not just doing an amazing job at valuing houses but also learning how to value themselves. Part of the process is understanding that what you bill per hour is what separates the workers from the professionals.
Knowing what you bill per hour also makes the bidding process much easier. In my circle of connections, I see more and more appraisers who are no longer looking at the fee for each assignment only but translating the fee into dollars per hour. Another way of putting this is that, the appraisal fee by itself may not tell the whole story. Allow me to give you a couple of examples of how this plays out in our office.
I work a very diverse area with more unique than homogeneous properties. It is not uncommon to get multiple calls per day from clients who start out with, “I got an interesting one for you and I need to find out what your fee is.” In fact, a large percentage of my work begins in a similar fashion. No problem, we have a procedure for that. Those in my office who take phone calls know roughly what I earn per hour net and what we need to bill per hour gross for each assignment to get to that net. They also have a fairly good idea as to how many man hours a particular assignment will take given the details. It does not take them long to answer bid requests. Often, but not always, the process involves a short consultation with me. It is not unusual, due to the complexity of some assignments, to be upwards of thousands of dollars. If we get the job great. If we don’t, we do not stress over it. There is plenty of work happening for appraisers right now.
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On the other side of the coin, a seemingly low fee does not always translate into low billable hours. A smaller scope of work can dramatically reduce your man hours on an assignment and allow you to bill accordingly. The key is to know what your time is worth and not be afraid to ask for it.
Do you know what you are worth per hour? Do you think of yourself as a professional? What are some things you can do to increase your worth (and thus your billable hourly rate)? The valuation profession is changing. It looks different now than it did three years ago and it will look even more different three years from now. As appraisers, it is time to see ourselves as professionals and to demonstrate that to our clients, customers and the world. In terms of payment for what we do, it is time to stop looking only at the fee and begin seeing the assignment in terms of billable hours like all the other professionals.
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About the Author
Dustin Harris is a successful, self-employed, residential real estate appraiser. He has been appraising for over two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc. and is a popular author, speaker and consultant. He also 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 blog is read by over 20,000 appraisers nationwide and he facilitates several appraiser membership groups both online and in person. His free podcast is listened to by thousands of appraisers each week and can be downloaded on iTunes and Stitcher Radio. He and his wife reside in Idaho with their four children. He loves playing in the outdoors and watching movies indoors.
Send your story submission/idea to the Editor: isaac@orep.org
by J Winn
I charge $100 an hour for my time, and always estimate every job in advance. I then bid accordingly. I record my time on each job, and always meet my estimate. If I don’t win the bid, I don’t regret it since that person did not care to pay me what I know I’m worth. I bill $100 for regular work, and $350 for court work / testimony, including prep. I’ve been doing this for 37 years. Most appraisers don’t estimate their time in advance, and don’t know what they make per hour since they don’t track their time. Unfortunately, too many offering the low fees don’t understand this, and aren’t compensated at rates commensurate w/ professionals, and just as likely aren’t really professional.
-by michael Ford
Dustin, I think there is a big difference between knowing what one is worth per hour and billing clients that amount per hour.
MOST CLIENTS for residential appraisers will not accept hourly billing. It’s not something that we will ever collectively change. If we cant get compliance with C&R fees hourly billing acceptance has no chance at all.
I personally estimate time for completion and ‘silently’ apply an hourly rate to that. Generally it is in a $150 to $200 per hour range for non litigation assignments.
I draw a distinction between fees charged for appraisals and appraisal report work; and fees charged for any kind of court related expert witness work. The skill sets required are different, along with the ability to remain factually accurate while avoiding opposing counsels sophist pitfalls. I charge (and receive) $500 per hour for depositions and Expert Witness testimony.
I cannot bill my legal (EW) rates to non litigation assignments because the market itself prices me out of range on my hourly rate. Therefore I had to temper that rate with hourly rates charged by other appraisers.
THE REASON i DONT POST ANY HOURLY HOURLY RATE OTHER THAN EW FEES IS THAT OPPOSING COUNSELS WILL INVARIABLY USE THE DUAL RATES TO CHALLENGE YOUR EW FEES,. WORSE, THEY MAY USE IT TO IMPEACH YOUR OVERALL CREDIBILITY.
i URGE THOSE DOING EW WORK TO ALSO AVOID MULTI TIERED WORK RATES FOR THE SAME REASONS. if YOU WANT TO OFFER A LOWER RATE TO YOUR CLIENT YOU CAN DO SO VIA A DISCOUNT WITHOUT DOCUMENTING IT.
When all is said an done Dustin, professionals are not judged by whether they bill hourly or not. We are judged by the professional quality of our work.
-by William A. McCann
As an appraiser that had a staff of a dozen or more appraisers, I used to preach the wisdom of quoting fees based on the number of appraiser hours an assignment could be expected to take. We were awarded far more appraisal, consulting, and litigation support assignments than we lost and we were always profitable and as the owner of the company, I averaged a profit margin of 20% after all expenses year after year. If an appraiser is not cognizant of what their time is worth and only quotes fees to undercut his or her competition, they are going to make less money for their time than some of the lowest paying manual labor jobs. WAM MAI
-by michael Ford
Excellent advice
-by J Winn
William, your comment about some making less than unskilled labor is so true. Having 37 years in the business, a college degree in RE, finance and appraising, I have enough self respect to bill accordingly. I too estimate my time on every job I bid, and always meet my targets. Those that don’t know their worth, or just throw bids out to see what sticks, or sell themselves short will usually earn less. Unfortunately, most of these practitioners are the same ones that cut corners or never really measure up to the profession, and their worth is reflected in their fees. But if someone will not pay me what I’m worth, I don’t regret not getting that work. What I do regret is not getting fair compensation for my expertise. I’d rather not work and collect no compensation than perform work and not be properly compensated. Even my free time is valuable!
-by Hans G. Schaetzke II
I make $50 per hour but I charge a pretty flat fee for my assignments. I view the amount of time it takes me to finish the work as my problem. Complexity rarely increases the amount of time the assignment requires. Proximity to my office has a large impact on how long an assignment takes. Maybe I’ve just been molded by the bidding process of most AMC clients but this works for me.
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