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Factors That Affect Commercial Appraisal Fees

by Administrator on Feb 11, 2012 General Appraisal 913 Views

I often get callers asking me what my fee would be to complete an appraisal assignment with no information given regarding the scope of work, reporting, purpose or even property detail offered.  I'm sure that if you are in the appraisal business this has happened to you, it's something that most of us deal with on a daily basis.  Many approach bidding with a "management plus appraiser compensation" mentality, or what is the firm going to net after the appraiser is paid, but many of the fees quoted by appraisers relate to; project size, degree of difficulty, turnaround time, report type needed and the supply / demand for services.  

I generally try to explain to potential customers that there is considerably more work involved appraising a 50,000 square foot multiple tenant retail center than a freestanding single tenant 2,500 square foot retail or office building.  This explanation usually gets me past offering a meaningless quote and secures me the information that I need to make a reasonable bid without further explanation.  Properties with one tenant and one unit are less difficult to complete appraisal reports on than multiple tenant / multiple unit properties.

One of the details that often do not get volunteered by a potential client is one concerning the existence of surplus or excess land.  That's why I try to look at the aerial photo of the property on the Internet while I have a potential client on the phone.  If the assignment is going to require the added work to complete, it's better to know before you bid on it.

Turnaround time is also an important factor that affects my bid.  I usually advised potential clients regarding what my typical turnaround time is.  If they take exception to it, because they need the work sooner, I usually offer them a different fee for what amounts to a "rush" order.

Of course the report type is important.  Most of my work is completed in a summary narrative format.  A few clients each year must have a self-contained report, and there are always a few others who want "minimal" reporting.  Since work file must basically contain the same research an analysis, I don't offer large discounts for "minimal" sized reports.

Since my time to complete appraisal reports is my only product how much I bid generally has to do with how busy I am.  If I'm bidding "low" it's because I am not busy.  If I have work then I will usually bid "high."  My "high" and "low" bids have to do with my assessment of the work required to complete an assignment in the period of time discussed and nothing to do with my competitors.  So I have ended up being both higher and lower than competitive bids.

Bidding on appraisals is thus heavily based on the supply and demand for services.  The supply of appraisers in an area is an important factor, in a small town there may be room for one but if you add one or two more the appraisal business becomes marginal.  The lack of demand that established itself as part of the economic recession of 2008 has of course also been a negative factor that has reduced the volume of many appraisal firms and lowered appraisal fees. 

There are some potential clients / appraisal customers who are unhappy with any bid that you make, even if the bid would basically pay $ 5 an hour for your time . . . you just can't make everyone happy.

For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.

Article source: http://www.appraisalarticles.com/General-Appraisal-Articles/2816-Factors-That-Affect-Commercial-Appraisal-Fees.html

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