The best description I have heard for the current appraisal market is that it is complicated. I cannot say that it is a difficult market because that depends on where you are and what you are doing. I cannot say that it is a down market for the same reasons. But the dynamics are changing, and the post-COVID appraisal world has a much different look.
I am not going to complain about bank work in this post. Ok that is not entirely true, but let’s just say it is not the point of this post. As John Watt, MAI, Gary Ray, MAI, and Anthony Mulé, MAI, CCIM, astutely pointed out to me last week, the new appraisal market is all about diversification of income streams. I have seen appraisers fall into some incredible niches that made and still make me envious. I have seen appraisers become “the guy” on a national level for certain property types, and I have seen others pioneer valuation techniques, creating niches in areas previously considered unavailable to appraisers. This is fantastic, but at the end of the day, being one dimensional comes with risks. Niches can disappear as fast as they appear, and a one trick pony has nothing to fall back upon when and if the bottom ever drops out.
Anyone dependent on financed transactions in 2022 took it on the chin in 2023 to the tune of about 50%. I am of course talking about appraisers, but this was also the case with other professions such as real estate agents, title attorneys, and inspectors, just to name a few. Appraisers without diversified income streams are still struggling. This is compounded by the ever downward trending bank-related appraisal fees. In a complicated market, developing income streams is difficult and does not happen overnight, so you need to be entrenched and well positioned in as many sectors of the industry as possible for when your market busts again.
What’s the answer? Diversify your income stream when times are good and the money is easy, because you can’t do it when the market is down, difficult, or complicated. Develop your right of way book, succession book, litigation book, and private client book when the real estate market is booming and most appraisers are distracted trying to do volume with bank work. If your firm is multi-dimensional, you are insulated from risk to a large extent.
Don’t be left holding the bag like Stephen.
Special thanks to Mosaic Valuations appraiser Stephen Schiff for the picture.
