Jeff Hicks, MAI President  Dohring Group RealWired!

If you do bank work you have inevitably gotten this e-mail. You know what it means. You lost. It's likely that someone undercut your bid and possibly had a quicker turnaround time.  Many blame the commoditization trend of our profession on state certification.  If you receive volumes of these emails should you get mad, frustrated or find a new career?  On the contrary.  You should be motivated.  It's a wake-up call and you still have time to alter course.

Appraisal vendor automation is not a bad thing.  The vertical of commercial real estate has been lagging in the tech sector for many years.  Automation of administrative workflow functions such as bid notification, distribution and data collection makes perfect sense, so much so that our firm currently offers an enterprise-class competing product to RIMs called YouConnect  that many banks currently use.

I was at an appraisal course recently in which the instructor was asked, "what it will take for commercial appraisal fees to increase to levels where appraisers can make a good living again?" He said "The Grim Reaper will help."  Though that the comment was met with laughter from the room, waiting for appraisers to retire or go to heaven is a defeatist viewpoint.  The time is now to respond to changes in our industry.

Some of the negative factors in the commercial appraisal are structural, thank you Dodd-Frank.  Many argue that the law is terrible, a political response rather than a pragmatic solution to the financial crisis.  As it relates to our industry, it certainly has eliminated the human element and has a direct correlation to declining appraisal fees and in many instances, report quality. 

I attend many "lunch and learn" seminars sponsored by other industries similarly affected, such as engineers that are taking the offensive and actually talking to their customers.  I try to educate the banks that after the appraiser has been selected, the lender can communicate with the appraiser.  Sadly, some internal bank policies interpret the law to mean that the appraiser can never ever talk to loan officers.  The Law has the unintended consequence of relegating appraisers as Gollum, a small slimy creature from the Hobbit - pushing appraisers to the dark fringes of the business world.

I often get asked, when will our industry "go back to normal."  Short answer - it won't.  All industries are getting pressure to be more competitive.  You can sit back and get mad about the bids you're losing or do something about it.  Here are a few suggestions.

1. Raise your fees.  Yes, this sounds obvious but there can only be one price leader in any market.  Seek customers that are willing to pay more for a proper analysis.  Monitor bid/acceptance ratios and fee tracking by client with our Manager app. 
2. Evaluate your team.  Do you have all "A" players including your fee appraisers and support staff?
3. Be prepared for the opportunity.  The lending climate is turning around (albeit at a glacial pace) and at some point, the appraisal product will again be viewed as an integral part to sound underwriting, not just an added cost with little perceived benefit besides regulatory.
4. Improve your office systems.  Evaluate and implement comp management, report automation and appraisal workflow applications into your office.
5. Communicate more.  This includes loan officers, credit folks, AMCs and outside reviewers.  Talk with everyone.
6. Increase pride at your office.  Pride, not boastfulness, is the emotion reflecting an increase in stature.  When pride is present at work, your team is inspired to achieve more, communicate better and even build upon each other's skills. Believe it or not, authentic pride in yourself and others is the basis for trusting the people and the processes you use.

Commercial real estate is about access to reliable information and sound interpretation of that information to make prudent decisions.  This takes conversations which ultimately builds trust.  Commercial real estate appraisers have temporarily lost their mojo.  It's time to come out of our dark cave into the sunshine.  Change your expectations and reality in 2013.  Go ahead and pick up the phone.  Take a lender to lunch, maybe even drinks.  Feel the freedom.