Real Estate Thoughts

Volume of assignments has declined by about 80% since 2005.

Survival mode has been in place since 2007.

It has been my goal to survive until the needs of the industry return. As I review our company history it was important to me over the past 15 years to have diversification of revenue streams in place at all times. Diversifications of revenue streams were defined by me as to not allowing any one client to be more than 20% of my annual revenue. The clientele categories have included a few attorneys, a few consumers, a few REO clients along with a few banks and mortgage brokers.

Unfortunately I did not foresee the collapse of the mortgage segment, which was the majority of the types of assignments that kept us busy with 60 – 70 hours a week. In hindsight (error), diversification should have meant to me; that I did not rely upon the volume level of assignments coming from the mortgage segment of our industry and I should have diversified our lines of assignment types. So as this small company of five became a company of one, the difficulty to obtain a sufficient level of a diversified clientele, may arrive too late.

I would strongly advice all residential appraisers, to diversify their clientele with associating themselves with a commercial appraiser, machinery appraiser of some other discipline of the appraisal industry. It is beyond the time period to stop thinking of your self only as a residential appraiser. Even if the needs of the industry return, the revenue will not be the same and the likelihood of another collapse is now reasonable. It is beyond the time period to take the blinders off and review other ways to generate revenue other than waiting by the computer for a mass broadcast of an order assignment.

The residential appraiser may not experience the “American Dream” of operating a small business in the future, without some diversification of clientele types. Learn another discipline or learn another trade. Without a form or unionization by appraisers, the only way for the appraisers of the future to survive an impact as such, is to be less dependent upon the assignments from the mortgage segment of the industry (or any one segment). If the mortgage industry needs increase again (which they will), every appraiser should not forget the implications of this time period placed upon them by the lending institutions and governmental intervention. It is going to take some time to either decrease the number of appraisers or to have an increase in the demand for assignments within the mortgage industry.

Because so many people owe more than their home is worth, they can not move. The demand will not increase until we stimulate other consumer segments to buy a home. Time alone will generate new buyers as young adults prepare for a home of their own. Unless the loan requirements change and restrictions upon down payments increase, a new generation may be our stimulus for the residential industry. So, unless you can continue along the same revenue path of the past 24 months, you need to begin to consider alternative revenue options for the future.