Do you know where you were when your commercial appraisal career turned commodity?  It was July 21, 2010. The day the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed.  Sure, improving accountability and transparency in the financial system is a great thing especially considering easy residential credit and Wall Street's chain-sawing of our economic structural foundation aided by complicit rating agencies.  However, the Chris and Barney duo (as in Senator Dodd and Representative Frank) I believe inadvertently created the "Wal-Martization of Commercial Appraising Act of 2010". 

The competent ethical commercial appraisers find themselves in a bidding frenzy with much less experienced appraisers.  The Act accidentally established a minimum that has become the new standard, short-sighted trend to focus on the immediate and not the long-term. Not all appraisers are the same.  Just being on an "approved" list is overly-simplistic.

The current bidding volume in most markets in the United States is up notably but the fees have plummeted.  Why is that?  Some say the new law creates an environment in which first-class appraisals are just too expensive.  The new business model rewards the low fee, quick turnaround via blind bid.  Lost are the long-term relationships and nuances of a particular property in a particular market. 

Playing devil's advocate, this relationship morbidity allows newer younger appraisers into a largely "locked" market for the first time.  Some call them "bottom feeders", but others just see them as more competitive and entrepreneurial.  Let's face it, the average age of commercial appraisers is not getting younger.  So your recent uptick in competitiveness is either older established appraisers scrambling to take up their game (i.e. working much harder) or other new entrants to the field that are largely not designated but state-licensed - the "new norm". 

I think competition is a good thing.  It's a bad thing if you are unwilling to change.  "If you don't like change you're going to like irrelevance even less", wise words from retired U.S. Army General Eric K. Shinseki.  You can also see it on a national scale.  Since WWII, the United States was a global rock star but we have been coasting ever since.  I think this coasting is not a result of reaching a plateau but it is that other countries finally caught up with us.

Some recognize the regulatory burden as an opportunity.  Microsoft's Paul Allen decided to ditch his bank charter in favor of common sense approach to lending.  Mr. Allen recognizes the growing resentment and frustration of small business's arduous access to capital due to the unintended consequences of Dodd-Frank.

A recent movement by a long time MAI to create a national AMC-of sorts, banding together a group of high-quality designated members is evidence of very good appraisers trying break the "Wal-Mart" chains of low cost providers or at least start the conversation.

We presented the issue of commoditization of services to a local CEO Council roundtable discussion, who concluded once you are a commodity, that's it.  You're done.  Commodity is death.  
The solution?  Two-fold:

First:  It's time to get back to work again - create, innovate, design, implement and execute.  Retain strong enthusiasm and positive attitude toward your profession.  Maintain and expand your working relationships despite the Act's attempt to snuff it out.  You cannot regulate ethics.  High quality appraisals require talking with real people not "tweet-like" spurts of limited communication between appraisers and administrative assistants.  And without an ounce of self-serving promotion, I know you can no longer ignore software solutions to facilitate your work production and overall efficiency.  Our newest commercial report writing product in the testing phase, Edge version 3.0, is in my opinion, a game changer.

Second: Don't let this law create a permanent condition of high production low margin.  I look to the Appraisal Institute's leadership, its members and passionate commercial appraisers nationwide to lobby for a revised Dodd-Frank Version 2.0.

If you would like to join a discussion about this topic or Appraisal Best Practices contact Jeff Hicks