LiveValuation Magazine: Neutral Valuation

The September issue of LiveValuation Magazine was released online yesterday. There are several articles, but the most worthwhile is a piece written by Jonathan Miller, author of the Matrix blog.

In his opinion piece, Neutral Valuation, Miller summarizes the ordeals we have all experienced as appraisers, and makes the case for appraiser neutrality. There is much to like in this article, but I have a couple of favorite sections:

Over the past decade the global credit boom ultimately forced most experienced appraisers to choose between feeding their families or changing their business models and even their careers. The refrain “always hit the number” would get you more work. After the credit crunch, the refrain was modified to “occasionally hit the number” and you get more work. The sheer critical mass of the moral flexibility of many in our profession during the go-go credit era nurtured a whole new class of appraiser: the form filler that dominates the profession to this day. They work well with the gum-chewing 19-year-old appraisal processors who call every day on the status of an assignment, having no idea what an appraiser actually does and only cares when the report will be delivered.

and...

Following the credit crunch, the valuation bias is now in the opposite direction. In fact many of the morally flexible appraisers that were biased toward higher valuations for mortgage brokers during the boom, are the same appraisers biased toward lower valuations for appraisal management companies the in post-boom world. These appraisers are rewarded for performing high-volume work at low fees and conservative values. And these values aren’t just low by a few percentage points. We have observed values from a nationally well-known appraisal management company as much as 50 percent below current market value for a property with multiple bidders, largely because the appraisers they use have no local market knowledge.

and....

Since the beginning of my career, I’ve always held out hope that most of my clients actually wanted me to provide “the number” that represented market value. Some clearly did.

I’ve found the concept of neutral valuation to be intoxicating and powerful in my business. As a result of shifting our practice toward clients that actually want to know “the number,” we have remained at our most profitable level in our 25-year history.

Fire your retail banking clients and stop burning calories for clients that don’t want your expertise and will only pay for a form filler. If you don’t they are going to fire you eventually and your practice will die a slow death.

It is better to serve and expand on clients that actually want to know what “the number” really is. You’ll be surprised at how your quality of life improves and how much more business you are able to get.

Great work, Jonathan!

Read the whole thing.