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Editor’s Note:
Appraiser Mike Brunson explains how serving clients best often means
giving them what they need, not always what they want. This story is
reprinted from the current edition of Working RE magazine, now in
the mail to over 80,000 appraisers. Also note that the OREP/Working
RE Customary and Reasonable Fee Survey recently surpassed the 10,000
participant threshold and is still growing fast! To add your fee
data or to check what others in your area are doing,
Growing Business: Giving Clients What They
Need By
Mike Brunson
In this period of economic and social change, clients are
looking for professional appraisers to answer questions that until
now have not been asked. Price and timing are the hot-button
issues. While many appraisers are raging against the downward
pressure on fees and the increased pressure for faster turn times, I
have instead begun to offer my clients an alternative service.
Here’s how.
I
have several clients who order valuations for internal asset
management. The client typically holds paper on a non-performing
loan and needs to determine the best course of action. While
bidding a recent land assignment, the client noted that my bids were
coming back much higher than they expected. The client wanted to
know why this assignment warranted a fee that was so much higher
than what they desired/expected to pay.
(story continues below)
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As we
discussed the complexity of the assignment and some potential
reductions in scope of work, they said, “We don’t really care how
much this thing is worth specifically, we just need to know if it is
worth more than $x.” It turns out that the client is in second
position behind a sizeable first. They suspected that there was
little or no equity in the asset but needed an appraisal in the
file. The client was requesting bids for a “full appraisal” because
that is what they were accustomed to ordering. However, they had no
need for the detailed analysis of a traditional “complete” appraisal
that provides a specific value reported in summary format.
Here
was an opportunity to serve a good client by giving them what they
need instead of what they ask for. At the same time, it provides
an opportunity to expand my options with this client regarding the
services that I can provide as a professional appraiser. I
explained that by definition, an appraisal can be expressed as a
“specific amount, as a range of numbers, or as a relationship (e.g.,
not more than, not less than) to a previous value opinion or
numerical benchmark (e.g., assessed value, collateral value).”
In this case, the amount of the first trust deed would serve as the
benchmark.
We also discussed the question they were asking: “Is
the property worth more or less than $x?” The client agreed
that the majority of a traditional appraisal was extraneous to the
question. I also explained that despite the negative connotation of
the term “restricted,” in this case, a restricted-use appraisal
report is acceptable for the intended use and intended user of this
assignment. Honestly, my client was hesitant because, like most
clients and many appraisers, they are not familiar with the concept
of a limited scope, restricted-use assignment.
I
spent some additional time and eventually went in to their office to
discuss this and future assignments with a similar intended
use. Ultimately the client agreed that a restricted-use appraisal
report with a limited scope of work is appropriate for their needs.
The next day, I delivered a two-page narrative appraisal (plus a
certification page and a few client specific documents) using the
amount of the first trust deed as a benchmark for the
valuation. After completing my research and analysis, I concluded
that the subject market value was less than the defined benchmark.
I wrote the narrative report from scratch in less than 30 minutes.
Not including the time I spent visiting the client (which I consider
marketing) I completed the assignment in about 2.5 hours. The $250
fee for this appraisal is well within the client’s expected range.
Since
my conversation with this client a few months ago, I have completed
six of these assignments for five different clients. This may not
seem like much but four of those clients are banks that have
increased their volume of traditional appraisals over that same
period of time. Lending clients are still hesitant about the
product because it is “different.” I have had dozens of
conversations about the benchmark assignments that were ultimately
ordered as full appraisals.
David
Brauner Insurance Services/ OREP/Working RE Magazine
David
Brauner Calif. Insurance License: 0C89873
(story continues)
Individual Investors
I have also completed similar, limited-scope, benchmark
appraisal assignments for individual investors and
homeowners. One particular client was applying for
financial aid for one of his children to attend college
and needed to know whether or not to list several
investment properties as assets. They contacted me
asking for a discount because they were “pretty sure the
houses were worth less than they owed.” Again, I
explained that if the question that they really need
answered is, “Is the house worth more or less than I
currently owe?” than a limited-scope, benchmark
appraisal assignment is cost-effective and timely.
I am currently negotiating with several other bank and
portfolio management clients to provide this type of
valuation service. In truth, the reaction has been
mixed. Homeowners and investors love the idea of asking
a specific question and getting a timely and
reasonably-priced answer from a Certified appraiser
without all of the “fluff.” Most institutional clients
seem to have difficulty getting passed the “but this
is not what we are used to getting” mentality.
However, I believe this will change as new and different
alternative valuation products come into the market and
are recognized by primary and secondary market
participants.
Ultimately I have a group of clients, and this one in
particular, who recognize me as a true professional and
call on me more often than they used to. This is the
type of proactive thinking that will differentiate me
and my company from other appraisers in my market.
About the Author
Michael Brunson is a Certified Residential Appraiser in
Nevada. He is a graduate of University of Nevada at Las
Vegas with a B.A. in Psychology. Brunson is an AQB-Certified
USPAP Instructor. In addition to teaching USPAP classes,
he provides USPAP Consultation to private clients,
attorneys and practicing appraisers. Since 1997 he has
held the position of Owner and Chief Appraiser for
Ascent Appraisal, Inc., an independent real estate
valuation and consulting firm specializing in complex
valuation assignments; USPAP compliance reviews; and
expert witness/litigation support. Brunson is an
Associate Member of the Appraisal Institute; a general
member of the IRWA; a founding member and the interim
Vice-President of the National Association of Appraisers
(NAA); a founding member of and the current president
and chair of the Government Relations Committee for the
Coalition of Appraisers in Nevada (CAN). He also serves
on the Nevada Real Estate Division Appraisal Advisory
Review Committee. In 2009, Brunson chaired the CAN
Government Relations Committee that sponsored the
successful passage of AB 287 – Nevada’s Appraisal
Independence and AMC Registration bill.
