I have been looking for something interesting and insightful to post to the Appraisers Post. I recently came across a real estate site which mentions several important factors about real estate appraising. The central topics or categories were interesting. Some were applicable and some not. Many of the details and specifics did not really fit or transfer to personal property appraising. I decided to take the liberty of using a few of the main categories and filling in the details with my own ideas and thoughts on how they apply to personal property appraising.
The main categories I selected were the ability to develop values, fee structures, quality work product, and communication.
Develop Values
The ability to develop values is of course at the core of what we do as professional personal property appraisers. In order to develop values we must have familiarity with the different types of values and differing market levels. If we don’t understand this, then we are doing a disservice to both our client and our profession. Appraisers also must have the basic and needed product knowledge in order to properly identify and then further develop the proper value as required by our client.
The way I look at assignments and my final value conclusions is rather simple, can I defend them. If I had to take my work file, comps, selected market, comps and final value, could I make a reasonable and rational defense of my final conclusions? Could I explain the value rationale and adjustments. That is not to say there could be legitimate differences in opinions and different value conclusions. The personal property profession includes many subjective factors, yet we should try to minimize those issues and moderate differences. Solid knowledge and a process for determining and developing values is so important to our profession, and all personal property appraisers should stay current with valuation concepts and emerging models.
Click READ MORE below for the rest of the article.
Appraisal Fees
Fee structures are a very delicate subject in our profession. Perhaps more than it should be. What we do have to understand is that we should be charging a rate that reflects our experience, business acumen and professionalism. Our fee structure should include factors such as overhead, expense coverage, time and knowledge base. Fees should be charged at what the market can bear. The fee or hourly rate should include compensation toward office rent, travel, computer costs, software costs, communications, insurance, professional fees, advertising, billable hours, and profit or salary.
In determining a fair compensation structure the personal property appraisers must also consider maximum billable hours versus non billable hours and how many hours per week are actually working on client assignments or other aspects to operate a legitimate professional office. A simple formula for an average billing rate equals expenses and overhead plus desired profit divided by billable hours. After taking these factors into consideration appraisers should also focus on charging what the market can bear. What does that mean? I believe that would be an acceptable range of what the typical, professional appraiser charges in your demographic area. The hourly fee range can be from an acceptable low rate at the lower end of the scale to an acceptable high hourly rate, being at the upper end of the fee scale. Acceptable being the operative word. Outside this acceptable range causes damage and credibility issues for both the individual appraiser and the profession. Charge too little and there is the distinct possibility for fee dilution and the weakening of appraising as a true profession. Excessive charges outside the normal range can also negatively impact the profession and the value of any work product. Think of how attorneys charge. There are some that are very high, and rightfully so, and there are some which are much more reasonable. The personal property appraisal profession should be no different, yet everyone once in while we hear of rather unusually low rates which make many professional wonder how such a low fee can be charged and still provide a quality work product, be in compliance with USPAP in addition to individual societal report writing standards, cover overhead and put a few dollars in the appraisers pocket.
Work Product
Delivering a quality work product is very important to our profession. How many times have professional appraisers looked at a simple laundry list appraisal. I would bet if I asked 100 accredited or certified personal property appraisers if they produced a quality work product, I believe many would say yes. I am sure I would, and I know of many other appraisers who would answer in the affirmative as well. But are we really doing all we can do. Appraisers love product knowledge, but how many really work on our appraisal principles and methodologies, fine tuning our reports to specific client needs and the scope of work. I have noticed at our local DC Chapter events that when we have a good product knowledge speaker we get a large number of attendees, yet when we focus on appraisal theory, the numbers have a tendency to fall off. We all have our likes and dislikes. I happen to enjoy good discussions and debates on appraisal theory and practices just as much as discussing American or English furniture of the 18th century.
Our work product can not be our best unless we view all aspects of what goes into appraising as important and necessary. Yes, USPAP is dry and not very exciting. USPAP is important for our profession, as appraisers need to both follow and understand the various standards and protocols. Understanding scope of work, appraisal concepts and theory is so important in the development of value conclusions and a quality work product. A poor work product is a poor reflection on the profession, and misleads many on what a true and competent appraisal and appraisal report is. If appraisers don’t understand it all from product knowledge to theory, markets, adjustments, scope of work, etc, the final work product will be less than what is should be, and that only hurts the individual appraiser and the profession..
Communications
Communication is the last topic. Communications with our clients about scope of work, intended users and appraisal assignments is going to be an important element in upcoming USPAP modifications. An Appraisal Foundation exposure draft released in January for USPAP 2012-2013 focuses on client communications. Personal property appraisers should start to prepare now for the new communications rules. Although they are not definitive at this point in time, there is enough information to determine the proper and ethical direction for communicating to intended users appraisal service that is straight forward and understandable. It appears the emphasis is going to be on the client understanding what the appraiser is doing, and if that has been communicated properly and to the level that the client understands what he will be receiving in the appraisal document.
The exposure draft states
To read the full expsorue draft, click HERE.
The main categories I selected were the ability to develop values, fee structures, quality work product, and communication.
Develop Values
The ability to develop values is of course at the core of what we do as professional personal property appraisers. In order to develop values we must have familiarity with the different types of values and differing market levels. If we don’t understand this, then we are doing a disservice to both our client and our profession. Appraisers also must have the basic and needed product knowledge in order to properly identify and then further develop the proper value as required by our client.
The way I look at assignments and my final value conclusions is rather simple, can I defend them. If I had to take my work file, comps, selected market, comps and final value, could I make a reasonable and rational defense of my final conclusions? Could I explain the value rationale and adjustments. That is not to say there could be legitimate differences in opinions and different value conclusions. The personal property profession includes many subjective factors, yet we should try to minimize those issues and moderate differences. Solid knowledge and a process for determining and developing values is so important to our profession, and all personal property appraisers should stay current with valuation concepts and emerging models.
Click READ MORE below for the rest of the article.
Appraisal Fees
Fee structures are a very delicate subject in our profession. Perhaps more than it should be. What we do have to understand is that we should be charging a rate that reflects our experience, business acumen and professionalism. Our fee structure should include factors such as overhead, expense coverage, time and knowledge base. Fees should be charged at what the market can bear. The fee or hourly rate should include compensation toward office rent, travel, computer costs, software costs, communications, insurance, professional fees, advertising, billable hours, and profit or salary.
In determining a fair compensation structure the personal property appraisers must also consider maximum billable hours versus non billable hours and how many hours per week are actually working on client assignments or other aspects to operate a legitimate professional office. A simple formula for an average billing rate equals expenses and overhead plus desired profit divided by billable hours. After taking these factors into consideration appraisers should also focus on charging what the market can bear. What does that mean? I believe that would be an acceptable range of what the typical, professional appraiser charges in your demographic area. The hourly fee range can be from an acceptable low rate at the lower end of the scale to an acceptable high hourly rate, being at the upper end of the fee scale. Acceptable being the operative word. Outside this acceptable range causes damage and credibility issues for both the individual appraiser and the profession. Charge too little and there is the distinct possibility for fee dilution and the weakening of appraising as a true profession. Excessive charges outside the normal range can also negatively impact the profession and the value of any work product. Think of how attorneys charge. There are some that are very high, and rightfully so, and there are some which are much more reasonable. The personal property appraisal profession should be no different, yet everyone once in while we hear of rather unusually low rates which make many professional wonder how such a low fee can be charged and still provide a quality work product, be in compliance with USPAP in addition to individual societal report writing standards, cover overhead and put a few dollars in the appraisers pocket.
Work Product
Delivering a quality work product is very important to our profession. How many times have professional appraisers looked at a simple laundry list appraisal. I would bet if I asked 100 accredited or certified personal property appraisers if they produced a quality work product, I believe many would say yes. I am sure I would, and I know of many other appraisers who would answer in the affirmative as well. But are we really doing all we can do. Appraisers love product knowledge, but how many really work on our appraisal principles and methodologies, fine tuning our reports to specific client needs and the scope of work. I have noticed at our local DC Chapter events that when we have a good product knowledge speaker we get a large number of attendees, yet when we focus on appraisal theory, the numbers have a tendency to fall off. We all have our likes and dislikes. I happen to enjoy good discussions and debates on appraisal theory and practices just as much as discussing American or English furniture of the 18th century.
Our work product can not be our best unless we view all aspects of what goes into appraising as important and necessary. Yes, USPAP is dry and not very exciting. USPAP is important for our profession, as appraisers need to both follow and understand the various standards and protocols. Understanding scope of work, appraisal concepts and theory is so important in the development of value conclusions and a quality work product. A poor work product is a poor reflection on the profession, and misleads many on what a true and competent appraisal and appraisal report is. If appraisers don’t understand it all from product knowledge to theory, markets, adjustments, scope of work, etc, the final work product will be less than what is should be, and that only hurts the individual appraiser and the profession..
Communications
Communication is the last topic. Communications with our clients about scope of work, intended users and appraisal assignments is going to be an important element in upcoming USPAP modifications. An Appraisal Foundation exposure draft released in January for USPAP 2012-2013 focuses on client communications. Personal property appraisers should start to prepare now for the new communications rules. Although they are not definitive at this point in time, there is enough information to determine the proper and ethical direction for communicating to intended users appraisal service that is straight forward and understandable. It appears the emphasis is going to be on the client understanding what the appraiser is doing, and if that has been communicated properly and to the level that the client understands what he will be receiving in the appraisal document.
The exposure draft states
Therefore, just as the SCOPE OF WORK RULE was created to provide clarity in how to determine and disclose the array of services that appraisers provide for their clients, the ASB believes it will be valuable to have a similar Rule that provides clarity in how to address and disclose the diverse levels of communication that clients request or require.
The COMMUNICATION RULE is proposed for placement following the SCOPE OF WORK RULE. It begins with recognition of the primary expectation of the PREAMBLE that “it is essential that appraisers…communicate…to intended users of their services in a manner that is meaningful and not misleading.” It also clearly places responsibilities on appraisers to serve the public trust during communications at all stages of any service provided as part of appraisal practice.
The Rule covers appraisers’ responsibilities through all their activities, including everything from initial contact with potential clients to interactions with a client, intended users or other relevant parties following completion of an assignment. The Rule does not, however, include or address business-related communication such as completion dates, the timeframe for inspection of the property, or similar activities that are best classified separately as general business practices. Nor is this Rule intended to regulate internal communications among appraisers and others who are working together in an assignment.
To read the full expsorue draft, click HERE.
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