You're in the Wrong Biz!

The name of this episode says it all! You’re in the wrong business! Now, when you read the title, I know what some of you were thinking, some of you were thinking that I was going to go off on the appraisers who complain about the industry or the AMCs or the real estate agents, and I was going to say “hey, you’re in the wrong business! Move along!”, but no, that is not the actual meaning of the title of today’s episode. Although, as an aside and on that particular topic, I certainly would tell the forever complainers to move along. If they cant find any redeeming qualities about the appraisal business and the people they work with in it, by all means, you’re in the wrong business and life is too short to spend it doing something that just brings pain and suffering so, for your own health and well being, please go! Not only does it leave more for those of us who do love our work, it may be the very thing that saves your life and helps you find your passion.  ​

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No, my friends, the real meaning behind the title is that I see and hear all too often appraisers discussing their perception of the problems facing the appraisal industry and some of the very real issues we all deal with on a daily basis. But the big problem I see is that the vast majority of the people talking about the issues are talking about them as if they are valuation issues, policy issues, politics issues, fee issues, and/or even appraiser and appraisal specific issues. They’re not! Most of the issues that face us on a daily basis are issues related to how we perceive those issues. 
  
What I mean by that is simply that how an individual sees a problem or issue determines how they’ll attempt to solve or overcome the issue. Where every problem is a nail, every solution is a hammer and where your only tool is a hammer, of course, every problem becomes a nail! Of course, there are very real challenges in the appraisal industry and I don’t mean to minimize or make light of them. There are problems and challenges in almost every industry, certainly every one that I’ve ever been involved with. But the ones who overcome, bypass, or thrive in spite of the issues are the ones who learn to frame everything in terms of people and marketing problems. 
  
You see, when I say you’re in the wrong business, I’m talking to everybody out there who believes he or she is in the appraisal business, or the opinion of value business, or the business of producing credible reports business, or the graphing, charting and stats business, or the market expert business, or any other definition, buzz word, or belief system out there that has you believing you’re in anything other than a people business and a marketing business.  
  
When more appraisers grasp the idea that almost every problem they experience in their business or the industry as a whole can be framed as a people or marketing problem, they’ll begin to think differently about the solutions. Remember when I said how an individual sees a problem determines how they’ll attempt to solve it? Well, its never been more true and visible in the appraisal industry. Again, that’s not to say there aren’t real concerns about process, policy, the future, decreasing fee scales, AMC issues, legislation issues, changes, and on and on the list goes. The problem is more of a question? What are you going to do about it? What are you going to do about decreasing fees? What are you going to do about the policy decisions made in Washington? What are you going to do about Fannie Mae and Freddie Mac changes to help close more loans with fewer appraisals? What are you going to do? I know what most do, but I’m asking you because the listeners of this podcast are not the typical appraiser. So what are you going to do? 
  
I can tell you what most will do…nothing! Why? Because they’ve framed the problem incorrectly. (This it true of most problems people face in their lives, by the way) Another group will complain about it while still doing essentially nothing. And yet another group will blissfully ignore the issues altogether and plod along until change forces them into something. And by the way, those things are only problems if you let them be problems. All of those things simply are… they simply are the way of things. It’s called Tao (Dow) in Chinese, Do in Japanese and Korean, and ‘the way’ in english. They are simply signposts to a new era and a new way of seeing and dealing with things but if you cant frame them as people and marketing problems then you’ll always feel somewhat helpless to creatively solve some of the perceived problems you face. 
  
I’m sorry, but you’re not going to change congress. You’re not going to change Fannie and Freddie. You’re not going to change CoreLogic, You’re not going to change policy at the Fed. You’re not going to change the mortgage industry, interest rates, seller concessions, how purchase agreements are written, how much AMCs pay, or any of the other issues that are, more or less, out of your hands. You’re not making Zillow, Keller Williams, Inman, or Redfin go away so if they’re out of your hands, there is no point in even discussing them accept as a way to frame a solution that works for you. And I hate to say it my appraiser brothers and sisters, you aren’t going to change the fee structure in the AMC system. Those of you continuously complaining about low fees from lenders and AMCs are giving constant attention, energy, and focus to it every time you jump into a public or private forum and bitch about it. You’re looking for some kind of support and adulation from your colleagues and to be welcomed into that select group that only accepts certain fees from select clients. I get it and I applaud you for having some standards.  
  
We are definitely in the group that has a minimum threshold under which we simply will not accept an order. We don’t bid for work and we don’t play in the arena where appraisers are pitted against each other in a race to the bottom. We are extremely lucky in that regard, or we’ve simply done a few things along the way that put us in that position. But do you know what we don’t do? We never sit around and complain about it and here’s why. Any time you give something attention, energy, and focus you invite more of it into your life and business. What you focus on determines what you experience. If you give energy and focus to all of these things that you perceive to be negative in your business and life, you are constantly activating the negative aspects in your brain and emotion centers. And since your personality becomes your personal reality, you’re constantly bring more of it into your life and business. The best way to avoid this trap is to learn to reframe the world around you so that everything is just information without the emotional baggage attached to it.  
  
We certainly discuss trends in pricing in my office and we are not ignorant to what has gone on in the market. But we also have some solutions and strategies that we employ that allow us to negotiate when possible, but turn down work when it just doesn’t meet our criteria and, when we do turn it down, its done…over with…and we’ve moved on already. We don’t jump into forums and show off our nasty emails and middle fingers to the AMC, we don’t tell them how insulting it is to our industry and profession, we don’t give it even one ounce of energy, thought, or discussion because we have moved immediately back into working our plan, our numbers, our goals, and our marketing. I’ll talk in another episode about our goal setting, business planning, and marketing planning process, but for now… people problem and marketing problem. When we see low fees we think…people problem and marketing problem. When we see AMCs with less than acceptable turn times, bid emails, reverse auctions on fees to the lowest bidder, we simply move on. No negative energy spent bitching about it.  
 
Here’s the magic that happens when you can start to behave like this: when you can turn down that kind of work because it simply doesn’t fit your goals, plans, and business model, and you have no negative emotion around (or you can at least quickly get back to a positive state after being negative about it), you open the path for new and better business to come in. It has never failed me or my businesses in all of the years since learning how to train my conscious and subconscious mind in this manner. The business may not come in on that very day, although sometimes it does, but it definitely comes in! And when you start to train yourself this way, you stop seeing things as problems outside of you and problems that cant be overcome. You start to frame things in terms of people and marketing.  
  
Part of the people and marketing problem is the appraisers themselves, and part of the people and marketing problem is the AMC and lending system having conflicting goals, or so they think. Unfortunately for appraisers and some of our fees, our plans (or lack of a plan) and their plans conflict in some cases. Which one will win in the end? Nobody knows! What I do know is that you’ll never solve that particular problem until you’re able to frame it in terms of people and marketing. That may mean saying, “hey, these people don’t see the value of the work I do, I need to find more people who do and then I need to market to them in a way that they’re able to see my value and I’m then able to add value”…people and marketing. As it stands, most appraisers are simply seen as a commodity and so the lowest price wins. It simply is… bitch about it, complain about, be upset and stomp your feet about it, it simply is the way things are for some subset of clientele. If you’re lucky enough not to have to deal with them, its probably because you see solutions instead of problems. I’m sure every appraiser who has been doing this for 15 years or more can tell you that fees, AVMs, low ballers, value pushers, under cutters, part timers, and form fillers have always been an issue. With the advent of the internet and the availability and easy access of information, its simply growing and we’re hearing more and more about it. Add in the birth of the AMC and you have a new twist to the business model.  
 
My point is simply that business is fluid. Always has been and always will be. Every business I have started, developed, grown and sold, been part of, or worked in has had its challenges, competitors, and those seeking to commoditize the product and process. We talked about this commoditization process in a previous episode. It is simply business my friends! Get used to it, accept it, work with it and move forward.  
  
Now I know, there are some areas of the country where the market may be saturated with appraisers, there may be lots of low fee appraisers and competition may be stiff so I don’t mean to disregard that scenario. The point I’m trying to get you to however, is the point at which you realize things are not going to just magically change for you. You can wait around and hope the market crashes, it cleanses the market of the low fee appraisers and low end lenders, and the good appraisers rise to the top again. How long are you going to wait for things to go back to 1995 or 2005? What are you going to do? Jump into a forum and complain about it? No, you’re going to write down what your annual income goal is, divide that number by the average appraisal fee for you, you’re going to then divide that by 12 to determine how many of those appraisal orders you need per month and then you’ll divide the number by 22 to determine how many appraisals you need to do per day to get there. What happens from there is just pure magic. We’ll discuss goal setting and business planning in another episode but, for now, do just that one thing whenever you feel like the negativity is all around you and then focus on those numbers. Look at them every single day. It may not start to happen right away but by just doing that little exercise you’ve activated something wonderful.   
  
Another one of those people and marketing problems I just mentioned, with regard to appraisers and how they see themselves and their place in the market, is simply that most appraisers think in terms of time and not value. I’ve talked in previous episodes about how appraisers can start to add more value to the process and to start thinking in terms of value and not product. What I mean by appraisers thinking in terms of time and not value is that the vast majority of appraisers frame their experience, their fees, their marketing, and their problems in terms of time: meaning, how long they’ve been in the business or how long appraisers have been paid a certain dollar amount for an appraisal. I’m sorry my friends, but the only people who think that way are factory workers and prisoners. The only people who think they're entitled to something based on years on the job are people who work for other people, people who work in factories, and prisoners.  
  
I see this argument all the time being passed around and reinforced by appraisers that say, “an appraisal cost $350 back in 1975, it was $375 in 2005, and now we’re paid $400 in 2018”. What a distorted understanding of the market! A flat screen tv was $2000 in 1999, you can pick up one 3 times the size and resolution for $199 now. Digital cameras were $1500 in 1995, you can pick one up with 10 times the megapixels now for $100. This mentality that appraisers are somehow deserving of a ‘pay raise’ simply for still being around 30 years later is an employee mentality and the market is speaking loud and clear. Don’t get me wrong, I’d love for our fees to continue rising without question! I’d definitely take the increase in fees and for a few solid reasons: 
  
My business is far more efficient today than it was in 2001. The technology is vastly advanced from 2001 and allows me to be a better appraiser in exponentially less time than it took me in 2001. I can touch more people and more clients using technology advances than I could in 2001 and I can provide more value for my clients via video, audio, things I can add into reports at the touch of a button, regression analysis with a few mouse clicks, market data with a few mouse clicks, better MLS data, and a whole host of business innovations that allow us to operate our offices more efficiently, remotely if we want, from the cloud if we want, and on and on it goes. I can produce more reports in less time with more support and market data than I could in 2001. I have much quicker access to far more data than I had in 2001. Does a client not know that? Of course they do! They’re utilizing technology to make things easier as well! It’s been one of the great points of leverage in my business since starting it. My ability to optimize and create efficiencies in data gathering, report production, mobile inspection tools, invoicing and collection, accounting, and a host of other modernizations we’ve experienced means I can produce more in less time with no loss in quality whatsoever. In fact, as I’ve said before, our reports are better today than they were in 2001, 2005, and even 2015 because of our data, our processes, our increased education (thanks to technology, by the way) our increased experience, and all of the innovations that have entered our world.  
  
Do I want to take less money? Certainly not! And fortunately we don’t. But do we expect a raise simply because its 2018 and I’ve been doing this since 2001? Absolutely not! It’s about value and building equity. Any time people ask for increases in compensation without a commensurate increase in value add or offering, they are exhibiting the worst form of greed known. They want something for nothing and they are asking for an unfair exchange in the market. The very thing that we are in business to speak on when it comes to a piece of real estate; Is the buyer paying more for that piece of real estate than what the market says its worth?  
  
Of course, time on the job matters. I know, probably like you, I’ve grown since those first few years in appraising. In fact, I know I’m getting better every year as I study, I read, I have more experience in the market, I learn from all of you and the sharing that occurs thanks to technology. But what I don’t expect is I don’t expect a fee increase, or in other words, a pay increase simply because I’ve been an appraiser for 18 years. All that means to the market is that I have been doing the same thing as I did in year one repeated 18 times.  For many appraisers, they bring 1 to 3 years experience repeated over a 10, 20, or 30 year span of time. They’re not bringing 20 or 30 years of experience to the table, they're bringing 1-3 years of experience repeated for 20 years. And just like a homeowner expects a home to have a roof or a furnace or windows, trying to market those items as big selling points of a home would be futile. Demanding that the market pay you more because you’ve been doing the same thing for 20 years is a losing battle, especially if you’re not that good at marketing your experience and value add to your clients and potential clients.  
 
Most of the market does not give a damn how many years you’ve been appraising. We all have clients who appreciate our experience. But they appreciate the EXPERIENCE and the value that our years in the business allow us to add when it comes to crafting reports that don’t need revisions, or the conversations we might have to have with realtors when things aren’t coming in as expected. Our years on the job needs to translate to something that is a real benefit for our clients before you should ever expect them to pay you more for what they perceive to be the same thing as the guy down the street. And if your clients don’t know what it is that you really do and why your 20 years in the business matters…that’s your failing, not theirs. It’s not their obligation to put you on a pedestal and give you more money.  
  
Now I get cost of living increases, increases in expenses associated with our businesses, and just a natural desire to see things increase over time. But that’s not how the market works when it doesn’t perceive value. This is not a fee problem, this is a people and marketing problem. We’re not in the appraisal business, that’s just the medium through which we touch our clients and market. We are always in the people business and almost every issue comes down to a people issue and how the questions are perceived, the answers are framed, or marketed to our clients and general public. Until we, as an industry, figure out how to truly add more value to the process than what the market perceives our value is, the market will continue to eat away at our fees. They’ll continue to find new and innovative ways to remove us from the process. And they’ll find new and cheaper ways to get done what they perceive to be a low value, albeit necessary, function of the loan process.  
  
My encouragement then, is simply to look at things with fresh eyes. Step outside of our industry for a little bit and look in at what we do and how we do it from their perspective. Look at what they think we do and don’t do and try to consider ways that appraisers can add more value, solve more problems, touch more people in the process, and then market those solutions to the public. Until then, the facebook water coolers will grow with more and more appraisers yelling into a black hole of people who cant help them. We’re not in the appraisal business, we’re in the people business and the marketing business. Every one of you is a brand, a broadcaster, a marketer, and either a value add in the process or simply a line item cost that gets passed on to the borrower. Fortunately, you get to decide which one you are. There’s still time and there’s lots of hope for those of you that can see things a little differently. Those of you who have come from different industries, like I have, I encourage you to draw from your experiences outside of the appraisal industry and see how other businesses add value for their clients, customers, and colleagues.  
  
Thank you for spending your most valuable currency with me my friends, your time! I hope I’ve been able to add a little return for the time spent or will, at least, add some return over time. 
  
Thanks again for listening to the Real Value Podcast and we’ll talk again next week. 
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