Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. John quickly gets annoyed about clients trying to hire hime on the cheap.
Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is,
on Thursdays on Mondays, one of the smartest guys I know. …Jonathan Miller
One of my clients, a major and very active national real estate lender, sends fax solicitations for “bids.” Most recently their bid request forms have been accompanied by the lender’s internal instructions to the appraisal department.
On top of the page, above some very general information about the property (which very often needs to be clarified before a reliable quote can be given) and borrower contact were these instructions:
Engage based on: ___________ Quickest turnaround ___________ Lowest price
I looked high and low but couldn’t find the check box for:
- best quality
- most proficient
- most experienced with this property type, or
- best database
In nearly each instance, both boxes were checked. The instructions to the appraisal department were crystal clear:
Get me an appraisal fast and cheap.
In some cases the property was straightforward; in other instances it was quite complex.
No doubt that loyal Commercial Grade readers will recall a recent post where I discussed the joy of seeing an account officer finally get it, the realization that preparing a good appraisal is not easy, but critical to the underwriting process.
It is clearly going to be a sisyphean task to get the entire lending community to come around.
Tags: Soapbox Blog, Appraisal Fees, Commercial Grade
One of my clients stopped working with me a year ago because my fee was expensive. I argued that I give him more appraising than I charge. He said he’s got appraisers who charge 25% less. He started to work with one of those. He used him when he bought a condo (a 2-bedroom garden unit). Last week he asked me to appraise his property and sent me a copy of that report. The fee was lower. The comparables were 3-bedroom 1st and 2nd floor with no adjustments. My clinet paid $278,100 (and the appraised value on that report was $278,100) for a property worth around $240,000. He knows it was overappraised as 12 months after he bought his garden unit, the unit dirclty above his, identical to his (both built 2 years ago) sold for $280,000. I pointed out to him how much his cheap appraiser had cost him. Why does it take such an expensive lesson to teach a loan officer?