Real Estate Appraiser Specializing in Commercial Industrial Residential Income Land & Single Family Residential Properties Existing or Proposed Construction Estate & Gift Tax Conservation Easements Partial Values Fractional Interests Former Senior Appraiser United States Treasury Department IRS Large Business and International Division California General Certified Real Estate Appraiser FHA Approved

Michael F. Ford #AG002512

 

2015

American Guild of Appraisers
Office of the President, Peter Vidi
7727 Belle Point Drive Greenbelt, MD 20770
Phone 301-220-4100

Michael F. Ford, SCREA, AGA, GAA, RAA, Realtor®

Chairman National Appraiser Peer Review Committee

AGA-OPEIU / AFL-CIO : 1st Draft Exposure 09/22/2015

Draft Proposal for MINIMUM NATIONAL GSE APPRAISER FEES

An opportunity to correct inequities arising from less than reasonable appraisal fees nationally.

 

CHARTED CONCLUSIONS AT END OF REPORT

 

Presently there is no single standard that affected parties can point to in order to determine what a customary fee is, and what is a reasonable fee. In all fifty states plus affected territories, each regulatory agency is left to make (or carefully side step) this determination themselves. The single common factor that does exist is that studies to determine C& R fees must NOT include those below market fees introduced by appraisal management companies in the early days of HVCC; and that continue to the present.

The more proactive states have established rules by which these can be calculated. Unfortunately such states are few, and even their allowable methodologies do not produce uniform results. Enforcement is also (apparently) lax until a lawsuit is brought. The current preferred method appears to be so called unbiased university studies which when impartially applied attempt to quantify non AMC fees for various types of property. Their downfall is that they have very little or no consideration given to the complexities that can be found among ALL property types.

Additionally, such studies have (so far) failed to adequately measure the spill over impact of half a dozen years of near universal less than C&R fees in the marketplace by AMCs and GSEs, into non GSE work. They have effectively created a below market competitive environment based on consumers reasonable belief that an AMC appraisal should not be any different than a non AMC appraisal. Consumers have been exerting downward pressure as a result of anti-competitive AMC prices.

Lastly, there is the influence of less than impartial studies where funding is provided by the AMC Industry and its advocates. Universities that produce unfavorable results simply see themselves eliminated from future studies.

 

A few years ago certain AMCs introduced the concept of one size fits all single fee national pricing.

There has always been a concern about adequate attention being paid to the unique nature of all properties being appraised (non-complex versus complex) to assure the selection of properly qualified appraisers.

Prior to HVCC, there was usually discussion between specific appraisers and the appraisal department of the entity ordering an appraisal to insure (at least on the surface) that the assignment was within the appraisers competency level.

Ethical & competent appraisers usually did preliminary research before accepting assignments. They asked the client specific questions based on what the data indicated to resolve any apparent inconsistencies, or to discuss any apparent complexities. Both the client and the appraiser had a reasonable expectation of what the property appraisal challenges MIGHT be. Tentative commitments were made subject to the field inspections confirming or refuting the assignment complexities.

The appraiser then contacted the owners and interviewed them to find out if they had the address and property description right; whether size was right or if additions had been done, along with a host of other pre appointment screening questions. Based on the complexity at that point, the appraiser and property owner discussed and agreed to the fee. For complex properties owners were advised specifically why the fee was much higher than the lender lead them to believe. If it was too high, they and the appraiser could go back to the lender and discuss it further, or have the assignment reassigned with no hard feelings on anyones part. If all were in agreement with respect to the fee and turn times based on ALL parties needs and limitations, then the property inspection appointment was set up.

Most of these critically important steps disappeared with the introduction of AMCs, though in the early years some lip service as paid to complex assignments requiring higher fees among the more ethical AMCs; while less ethical AMCs merely shopped for less experienced appraisers that did not see the complexities.

The new single national fee business practice all but eliminated any pretense of lenders fulfilling THEIR obligation to insure the appraisers they, or their agents selected are properly qualified to perform the specific appraisal assignments they are given. Frankly all they cared about was that the fee they contracted with the AMC for (usually from $495 to $499) covered all contingencies. If added costs were apparent, the AMC was expected to keep shopping until they found an appraiser willing to work for the fees offered. Usually $300 to $350 though often even less-down to as low as $175- $180!

Even appraiser owned AMCs were unable to offer higher fees or obtain provisions for complex fees. They too are expected to absorb those costs in return for volume orders. No one was interested in a cost plus pricing model. Even after Collateral Underwriter (CU) imposed additional review burdens on the AMCs, Chief Appraisers at the Direct Endorsement lenders for the AMCs reported they expect the AMC to absorb those costs of compliance to FNMA Special License Requirements for lenders to use the CU system.

In the meantime scope creep runs rampant. More is asked of the appraiser, in less time, for lower compensation.

Customary & Reasonable fees have become mutually exclusive oxymorons.

WHAT IS THE ALTERNATIVE?

I think we need to start by eliminating the over used and usually abused phrase customary, and just deal with reasonable. What is the reasonable real cost of obtaining or providing USPAP compliant appraisal on a per assignment basis? Do we conduct more state by state studies and surveys? None of which have yet proven to be definitive, or do we seek another method?

Perhaps one that considers differences in geographic locations but which can still be calculated on a national basis? A system that is both reasonable for the appraiser performing the work, and for which the AMC or lender sitting across the country can still reasonably calculate the fee assuming it is a non-complex, conforming loan limit transaction?

 

IMPOSSIBLE?

No. Such a system already exists. It is also as unbiased as can be achieved today. It was implemented long before HVCC, so it is not skewed by absurdly low post HVCC AMC fees.

I am talking about the studies performed by and for the United States Office of Personnel Management (OPM) and the General Service (GS) federal pay scale. This is the SAME SCALE used to determine pay rates for other professionals such as attorneys, accountants, engineers, foresters and yes, real estate appraisers. More specifically the GS-1171 series for grades 9 through 14; though Id propose adding one to two more categories to allow for meaningful training of future appraisers (GS 5 & GS 7) which are currently below the listed qualification standards, but can be reasonably imputed.

For years we have all heard government official after government official state that they must pay at a rate competitive with private industry, or they would lose all their most qualified professionals to the private sector. IF this is in fact true, then the GS pay scale must be agreed upon as being representative of reasonable fees; salary and compensation. If it is NOT the most reasonable pay scale, then we need to open the conversation as to whether federal workers are being unreasonably overpaid.

Additionally, as a taxpayer I do not think any government worker should be paid more than their private sector counterparts. The OPM studies are predicated on the requirement to be competitive with private industry and to be reasonable compensation for comparable work.

Ive provided support for these specific proposals further in this document but in the interest of not boring every reader even more, lets cut to the conclusions derived from my analysis of the above GS Pay Scale and Qualifications Standards for calendar year 2015. The 1171 series compensation starts at grade 9. Ive added grades 5 & 7 for entry level and basic trainee purposes.

 

GS Grade & private Industry Equivalents:

GS 5: Non appraiser trainee. Appraisal clerical & administrative support staff learning property ID techniques; superficial potential comparable sales research via public records, etc.

GS 7: A licensed Appraiser Trainee operating under the direct supervision of a trained appraiser.

GS 9: A licensed but not certified appraiser; typically with less than three years experience. Limited to non-complex real estate appraisal of 1 to 4 units (The Non-Complex appraisal base fee level.

GS10: Interim grades are not normally used. This COULD be a transitional appraiser with 3 to 5 or even 10+ years experience but still not certified.

GS11: Certified Residential Real Estate appraiser. Unlimited 1 to 4 unit appraisals within competency skillset. Base Fee forComplex Appraisals

GS12: Apprentice to Journeyman commercial / industrial appraiser and or Certified Residential appraiser with over five years experience and completion of basic income property coursework; or extensive professional appraisal advisory experience similar to those categories for AGs in the GS 15 series. SMEs, Supervisory Appraisers, Appraisal teachers, etc...

GS13: Senior C&I appraisers generally unlimited except by specific assignment competency. Generally with over 10 to 15 years experience overall with over ten in C&I work.

GS14: Most complex C&I assignments. High rise offices, hospitals, feasibility studies for proposed phased new subdivisions, etc. Corporate Appraisal Policy Advisors

GS15: Same as GS 14 with corporate policy direction; authoring General Certified related texts and informational publications, National Appraisal Advisory Board participation (TAF; ASB, AQB, State or National Appraisal Coalition (active) policy development Participation; Recognized teachers of general certified level courses, etc.

Once we know the scope of work and skills required for each level of appraisal its fairly easy to convert that to a reasonable fee equivalent using the GS scale. Though federal employees are not compensated on a per assignment basis they DO work a predictable number of hours per year with paid holidays; sick leave and retirement; along with a host of other quantifiable benefits.

The basis for this analysis is the forty hour week federal work schedule No weekends or holiday appointments or work.

This authors contention is that for fully USPAP compliant work it takes from eight (8) to twelve (12) hours for most non-complex single family residential appraisal assignments. With up to two more hours for condominium and PUDs (10 to 14 hours). Two to four units are 16 to 30+- hours. Each is from start to finish with no professional or clerical assistance from anyone. This is from the time the order is proposed and researched, through delivery of the completed product and assumes NO REQUIRED follow up addendums; explanations, revisions or requests for reconsideration. Attorneys representing appraisers contend they have often been told the number is six (6) hours for non-complex. I will hold firm at the lower end of the 8 and 24 hour ranges noted above.

I also contend that not less than one full day a week on average is spent dealing with client inquiries; Collateral Underwriter (CU) responses, keeping informed on new regulatory or client special guidelines & appraisal policies, learning new software and techniques and averaging out continuing education courses; attending professional development seminars; mls Board meetings etc..

Personally I believe with all current requirements (1004MC; UAD, CU responses and special delivery requirements that only three start to Finish (StF) appraisals are reasonable. I would concede very well organized appraisers working in the same known tracts may well do four (4) a week, but I am unwilling to concede five (5) or more. Remember we are talking about a forty hour work week-not the usual sixty hour week so many appraisers currently work to survive.

Therefore four per week is 32 hours, with an additional 8 hours per week (or two hours per appraisal on average) for follow up, explanations, rebuttals, research of rebuttals, amendments, and other necessary administrative functions. The four assignments must compensate for 40 hours per week (plus office overhead, but well deal with that much further on). Please do not assume the following charted salaries are the final basis for calculating reasonable fees.

The following charts are BASE GS pay levels. In ALL cases, actual rates received are from 14% to 35% higher depending on location. PLUS benefits PLUS office overhead.

NOTE: ANY INDICATED HOURLY RATES ARE NOT INCLUDING THE MARKET EQUIVALENT OF FEDERAL BENEFITS AND TAXPAYER PAID OFFICE OVERHEAD.

CHART ONE:

Annual Base Rates by Grade and Step

Grade

Step 1

Step 2

Step 3

Step 4

Step 5

Step  6

Step  7

Step  8

Step  9

Step 1 0

WGI

1

18161

18768

19372

19973

20577

20931

21528

22130

22153

22712

VARIE S

2

20419

20905

21581

22153

22403

23062

23721

24380

25039

25698

VARIE S

3

22279

23022

23765

24508

25251

25994

26737

27480

28223

28966

743

4

25011

25845

26679

27513

28347

29181

30015

30849

31683

32517

834

5

27982

28915

29848

30781

31714

32647

33580

34513

35446

36379

933

6

31192

32232

33272

34312

35352

36392

37432

38472

39512

40552

1040

7

34662

35817

36972

38127

39282

40437

41592

42747

43902

45057

1155

8

38387

39667

40947

42227

43507

44787

46067

47347

48627

49907

1280

9

42399

43812

45225

46638

48051

49464

50877

52290

53703

55116

1413

10

46691

48247

49803

51359

52915

54471

56027

57583

59139

60695

1556

11

51298

53008

54718

56428

58138

59848

61558

63268

64978

66688

1710

12

61486

63536

65586

67636

69686

71736

73786

75836

77886

79936

2050

13

73115

75552

77989

80426

82863

85300

87737

90174

92611

95048

2437

14

86399

89279

92159

95039

97919

10079 9

10367 9

10655 9

10943 9

112319

2880

15

10163 0

10501 8

10840 6

11179 4

11518 2

11857 0

12195 8

12534 6

12873 4

132122

3388

 

Hourly Rates

CHART TWO

 

Hourly Basic (B) Rates by Grade and Step

Hourly Overtime (O) Rates by Grade and Step

Grade

B/ O

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Step 7

Step 8

Step 9

Step 10

1

B

8.70

8.99

9.28

9.57

9.86

10.03

10.32

10.60

10.61

10.88

O

13.05

13.49

13.92

14.36

14.79

15.05

15.48

15.90

15.92

16.32

2

B

9.78

10.02

10.34

10.61

10.73

11.05

11.37

11.68

12.00

12.31

O

14.67

15.03

15.51

15.92

16.10

16.58

17.06

17.52

18.00

18.47

3

B

10.68

11.03

11.39

11.74

12.10

12.46

12.81

13.17

13.52

13.88

O

16.02

16.55

17.09

17.61

18.15

18.69

19.22

19.76

20.28

20.82

4

B

11.98

12.38

12.78

13.18

13.58

13.98

14.38

14.78

15.18

15.58

O

17.97

18.57

19.17

19.77

20.37

20.97

21.57

22.17

22.77

23.37

5

B

13.41

13.85

14.30

14.75

15.20

15.64

16.09

16.54

16.98

17.43

O

20.12

20.78

21.45

22.13

22.80

23.46

24.14

24.81

25.47

26.15

6

B

14.95

15.44

15.94

16.44

16.94

17.44

17.94

18.43

18.93

19.43

O

22.43

23.16

23.91

24.66

25.41

26.16

26.91

27.65

28.40

29.15

7

B

16.61

17.16

17.72

18.27

18.82

19.38

19.93

20.48

21.04

21.59

O

24.92

25.74

26.58

27.41

28.23

29.07

29.90

30.72

31.56

32.39

8

B

18.39

19.01

19.62

20.23

20.85

21.46

22.07

22.69

23.30

23.91

O

27.59

28.52

29.43

30.35

31.28

32.19

33.11

33.56

33.56

33.56

9

B

20.32

20.99

21.67

22.35

23.02

23.70

24.38

25.06

25.73

26.41

O

30.48

31.49

32.51

33.53

33.56

33.56

33.56

33.56

33.56

33.56

10

B

22.37

23.12

23.86

24.61

25.35

26.10

26.85

27.59

28.34

29.08

O

33.56

33.56

33.56

33.56

33.56

33.56

33.56

33.56

33.56

33.56

11

B

24.58

25.40

26.22

27.04

27.86

28.68

29.50

30.32

31.13

31.95

O

33.56

33.56

33.56

33.56

33.56

33.56

33.56

33.56

33.56

33.56

12

B

29.46

30.44

31.43

32.41

33.39

34.37

35.36

36.34

37.32

38.30

O

33.56

33.56

33.56

33.56

33.56

34.37

35.36

36.34

37.32

38.30

13

B

35.03

36.20

37.37

38.54

39.70

40.87

42.04

43.21

44.38

45.54

O

35.03

36.20

37.37

38.54

39.70

40.87

42.04

43.21

44.38

45.54

14

B

41.40

42.78

44.16

45.54

46.92

48.30

49.68

51.06

52.44

53.82

O

41.40

42.78

44.16

45.54

46.92

48.30

49.68

51.06

52.44

53.82

15

B

48.70

50.32

51.94

53.57

55.19

56.81

58.44

60.06

61.68

63.31

O

48.70

50.32

51.94

53.57

55.19

56.81

58.44

60.06

61.68

63.31

 

NOTE: as a former GS 13 Step 1 my actual annual pay and location allowance was just under $92,000 nearly six years ago. NOT COUNTING OTHER BENEFITS.

 

SALARY TABLE 2015

CHART THREE

The following table represents the NON HIGH COST living areas across America. These areas receive a 14.16% premium ABOVE the base rates noted above.

For the Locality Pay Areas of Rest of U.S. (14.16% above base rates)

Annual Rates by Grade and Step

Grade

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Step 7

Step 8

Step 9

Step 10

1

20733

21426

22115

22801

23491

23895

24576

25264

25290

25928

2

23310

23865

24637

25290

25575

26328

27080

27832

28585

29337

3

25434

26282

27130

27978

28827

29675

30523

31371

32219

33068

4

28553

29505

30457

31409

32361

33313

34265

35217

36169

37121

5

31944

33009

34074

35140

36205

37270

38335

39400

40465

41530

6

35609

36796

37983

39171

40358

41545

42732

43920

45107

46294

7

39570

40889

42207

43526

44844

46163

47481

48800

50119

51437

8

43823

45284

46745

48206

49668

51129

52590

54051

55513

56974

9

48403

50016

51629

53242

54855

56468

58081

59694

61307

62920

10

53302

55079

56855

58631

60408

62184

63960

65737

67513

69289

11

58562

60514

62466

64418

66370

68322

70275

72227

74179

76131

12

70192

72533

74873

77213

79554

81894

84234

86574

88915

91255

13

83468

86250

89032

91814

94596

97378

10016 1

10294 3

10572 5

108507

14

98633

101921

105209

108497

11178 4

11507 2

11836 0

12164 8

12493 6

128223

15

116021

119889

123756

127624

13149 2

13536 0

13922 7

14309 5

14696 3

150830

General Schedule (GS) How it Works

General Schedule (GS) base pay varies from the GS-1 level at $18,160.81 per annum to $130,810 per annum at step 10 of the GS-15 grade, not including locality pay adjustments. The Senior Executive Service salary tops out at $179,700 per annum. The average annual salary for full-time non-postal employees has increased to just over $83,500 in 2014. Starting pay depends on the level of experience, education and complexity of the position applied for. You may also be able to negotiate your starting salary if your previous employer pay was greater than step 1 of the pay grade you are hired into.

Each GS grade has 10 pay steps. Currently, a GS-9 starts at $41,979 for step 1 and reaches $54,570 per year at step 10 (not including locality pay adjustments). At the GS-9 grade, each pay step adds $1,399 to the annual salary. Pay steps are earned based on time in service and the employees work performance. General Schedule employees are referred to as white-collar workers under the federal classification system. There are 36 locality pay areas.

Locality Payments

 

Locality pay adjustments basically level the playing field for all federal employees across the country. Essentially they provide a salary adjustment for those living in higher cost areas. The lowest adjustment to the basic rate schedule listed above is 14.16 % for the "Rest of the US." This group includes federal employees that do not reside in one of the 33 locality rate areas. The highest locality rate of 35.15% is for the San Jose, San-Francisco-Oakland California locality area.  You can determine what you salary would be at any location by using OPM's salary calculator that you will find under resources on this page. 

http://www.federaljobs.net/salarybase.htm#SALARY_TABLE_2015-GS

(look under Locality Pay Rate links)

What is the impact of locality adjustment: Lets pick a reasonable cost area above the base but by no means at or near the highest end.

 

CHART FOUR:

2015 GS Pay Table Washington Baltimore Northern Virginia, DC-MD-VA-WV-PA

Published: January 28, 2015
More in:
GS Locality Pay Tables

 

SALARY TABLE 2015-DCB

INCORPORATING THE 1% GENERAL SCHEDULE INCREASE AND A LOCALITY PAYMENT OF 24.22%

FOR THE LOCALITY PAY AREA OF WASHINGTON-BALTIMORE-NORTHERN VIRGINIA, DC-MD-VA-WV-PA

TOTAL INCREASE: 1%

EFFECTIVE JANUARY 2015

 

 

Annual Rates by Grade and Step

Grad e

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Step 7

Step 8

Step 9

Step 10

1

22560

23314

24064

24810

25561

26000

26742

27490

27518

28213

2

25364

25968

26808

27518

27829

28648

29466

30285

31103

31922

3

27675

28598

29521

30444

31367

32290

33213

34136

35059

35982

4

31069

32105

33141

34177

35213

36249

37285

38321

39357

40393

5

34759

35918

37077

38236

39395

40554

41713

42872

44031

45190

6

38747

40039

41330

42622

43914

45206

46498

47790

49082

50374

7

43057

44492

45927

47361

48796

50231

51666

53100

54535

55970

8

47684

49274

50864

52454

54044

55634

57224

58814

60404

61994

9

52668

54423

56178

57934

59689

61444

63199

64955

66710

68465

10

58000

59932

61865

63798

65731

67664

69597

71530

73462

75395

11

63722

65847

67971

70095

72219

74343

76467

78592

80716

82840

12

76378

78924

81471

84017

86564

89110

91657

94203

96750

99296

13

90823

93851

96878

99905

102932

105960

108987

112014

115041

118069

14

107325

110902

114480

118057

121635

125213

128790

132368

135945

139523

15

126245

130453

134662

138871

143079

147288

151496

155705

158700 *

158700 *

* Rate limited to the rate for level IV of the Executive Schedule (5 U.S.C. 5304 (g)(1)).
* Source: OPM

For Example: My own state and area is the Los Angeles-Long Beach-Riverside Census Region

CHART FIVE:

SALARY TABLE 2015-LA

INCORPORATING THE 1% GENERAL SCHEDULE INCREASE AND A LOCALITY PAYMENT OF 27.16%

FOR THE LOCALITY PAY AREA OF LOS ANGELES-LONG BEACH-RIVERSIDE, CA

TOTAL INCREASE: 1%

EFFECTIVE JANUARY 2015

Annual Rates by Grade and Step

Grad e

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Step 7

Step 8

Step 9

Step 10

1

23094

23865

24633

25398

26166

26616

27375

28141

28170

28881

2

25965

26583

27442

28170

28488

29326

30164

31002

31840

32678

3

28330

29275

30220

31164

32109

33054

33999

34944

35888

36833

4

31804

32865

33925

34986

36046

37107

38167

39228

40288

41349

5

35582

36768

37955

39141

40328

41514

42700

43887

45073

46260

6

39664

40986

42309

43631

44954

46276

47599

48921

50243

51566

7

44076

45545

47014

48482

49951

51420

52888

54357

55826

57294

8

48813

50441

52068

53696

55324

56951

58579

60206

61834

63462

9

53915

55711

57508

59305

61102

62898

64695

66492

68289

70086

10

59372

61351

63329

65308

67287

69265

71244

73223

75201

77180

11

65231

67405

69579

71754

73928

76103

78277

80452

82626

84800

12

78186

80792

83399

86006

88613

91219

93826

96433

99040

101647

13

92973

96072

99171

10227 0

10536 9

10846 7

11156 6

114665

117764

120863

14

10986 5

11352 7

11718 9

12085 2

12451 4

12817 6

13183 8

135500

139163

142825

15

12923 3

13354 1

13784 9

14215 7

14646 5

15077 4

15508 2

158700 *

158700 *

158700 *

* Rate limited to the rate for level IV of the Executive Schedule (5 U.S.C. 5304 (g)(1)).
* Source: OPM

 

The temptation at this stage is to say OK, lets select a chart level and convert it to weeks and then in turn convert that amount to the number of assignments reasonably completed per week postulated as FOUR per introductory comments.

1.   But we have not calculated OTHER benefits such as retirement, tax deferred savings contributions, and the employers contribution to social security.

2.   We have also not calculated office overhead and required professional fees, licenses, etc.

3.   The federal government provides office space,educational reimbursement, and license reimbursement

4.   There is no requirement for E&O insurance with federal employment. A savings of $700 to $800 for most.

 

The government pays 1/3 of basic Federal Employees Group Life Insurance (FEGLI).

You are entitled to flexible spending medical accounts where you contribute $2,000 of BEFORE TAX dollars reducing your liability by about 30% ($600). You get $2k insurance for a net cost of $1,400.

Included in your base plus locality pay are two to four weeks vacation (2 weeks for new to two years service; 3 for three years service and four for fifteen (?) or more years.

There is a complex formula for matching savings as part of the three legged retirement savings program, but bottom line if you maximize this it is 5% more ABOVE your base and locality pay ($100,000 pay and locality premium-saving the maximum allowable matching funds amounts you receive $105,000 of which $10,000 is tax deferred.

Retirement earned is 1% of five highest average years income x number of years. Example: a ten year employee highest five year average is $75,000 then they get $5,625 per year forever; ok just until death unless of course you opt in for survivors benefits. A thirty year employee with a five year high average of $100,000 will get 1% ($1,000) x 30 years = $30,000 PLUS social security, plus draw down on Thrift Saving Plan that allows you to compound interest on it as well (reinvest the interest).

Appraisers get reimbursed for mileage.

Federal appraisers ALSO get per diem and (high end) hotel costs covered when traveling overnight. Its about $200 a day depending on WHERE you are required to travel to. There ARE conditions where youre allowed to pocket up to half of that.

OK there are a lot of variables. What are all these benefits worth in annual dollars today? I wasnt able to find that specific data for federal benefits as a lump sum but what I did find was extractable comparable data percentages from the California Appraisal Regulators Annual Salaries which are similar. Surrogates have long been used by both appraisers and statisticians. This sourced data is found at:

http://transparentcalifornia.com/salaries/search/?q=SENIOR%20PROPERTY%20APPRAISER/INVESTIGATOR%20(OFFICE%20OF%20REAL%20ESTATE%20APPRAISERS)

 

Name

Job title

Regul ar pay

Overti me pay

Oth er pay

Total
benef its

Total pay &
benefi ts

Donald B Fruechtl

SENIOR PROPERTY APPRAISER/INVESTIGATOR (OFFICE OF REAL ESTATE APPRAISERS)
State of California, 2014

$80,341.88

$2,934.91

$30.00

$32,061.97

$115,368.76

Stephen R Simmons

SENIOR PROPERTY APPRAISER/INVESTIGATOR (OFFICE OF REAL ESTATE APPRAISERS)
State of California, 2014

$79,028.24

$0.00

$7.00

$35,709.97

$114,745.21

Paul W Ketchum

SENIOR PROPERTY APPRAISER/INVESTIGATOR (OFFICE OF REAL ESTATE APPRAISERS)
State of California, 2014

$78,554.00

$0.00

$0.00

$31,718.05

$110,272.05

John W Schmidt

SENIOR PROPERTY APPRAISER/INVESTIGATOR (OFFICE OF REAL ESTATE APPRAISERS)
State of California, 2014

$79,929.20

$0.00

$0.00

$25,244.17

$105,173.37

William J Drabick

SENIOR PROPERTY APPRAISER/INVESTIGATOR (OFFICE OF REAL ESTATE APPRAISERS)
State of California, 2014

$83,922.56

$0.00

$0.00

$20,343.85

$104,266.41

John K Hopp

SENIOR PROPERTY APPRAISER/INVESTIGATOR (OFFICE OF REAL ESTATE APPRAISERS)
State of California, 2014

$80,763.00

$0.00

$0.00

$19,609.83

$100,372.83

Randall K Woolley

SENIOR PROPERTY APPRAISER/INVESTIGATOR (OFFICE OF REAL ESTATE APPRAISERS)
State of California, 2014

$75,816.24

$0.00

$0.00

$24,204.83

$100,021.07

Cynthia L Souza

SENIOR PROPERTY APPRAISER/INVESTIGATOR (OFFICE OF REAL ESTATE APPRAISERS)
State of California, 2014

$71,364.75

$0.00

$0.00

$23,742.25

$95,107.00

Christina C Roberts Morlatt

SENIOR PROPERTY APPRAISER/INVESTIGATOR (OFFICE OF REAL ESTATE APPRAISERS)
State of California, 2014

$60,847.46

$0.00

$0.00

$28,622.06

$89,469.52

Barrett R Bates

SENIOR PROPERTY APPRAISER/INVESTIGATOR (OFFICE OF REAL ESTATE APPRAISERS)
State of California, 2014

$65,697.28

$0.00

$0.00

$12,760.80

$78,458.08

Stephen R Simmons

Senior Property Appraiser/Investigator (Office Of Real Estate Appraisers)
State of California, 2013

$74,620.90

$0.00

($1,059.35)

$35,189.09

$108,750.64

 

There are numerous reasons why total benefits for seemingly similar salaries will vary greatly. This may be related to both time on the job as well as conditional benefits such as educational reimbursement. My point in producing this is to provide a reasonable surrogate for percentage approximations of benefits above salaries, provided to government appraisers.

The least (lowest) benefits paid above regular pay was $12,761 (rounded) or 19.42% above regular pay.

The lowest regular pay benefits paid were actually higher, at $28,622. This was 47.04%!

The highest was $32,062, or 39.9% of that employees regular pay.

Most appear to be in the 25%+- to 30%+- range.

 

Conservatively the value of compensation / benefits received should be at least 25% over base and locality pay for similar grade federal workers.

 

The final item is office overhead. Whether and appraiser works from his or her home or a small office. Even when I worked in fee shops an office overhead contribution was almost always sought. Typically it was 10% for each appraiser. Operating on our own or from our houses, it is much higher because we bear all the burden of rent, utilities, telephone, cell phone, computers, software and software maintenance agreements, Internet Service Providers charges, web site maintenance, public records verification sources (recorded closed sales, etc.), MLS fees, CAR dues, NAR dues, Appraiser Guild dues, Commercial data services such as CoStar and Loopnet, digital cameras and peripherals to connect to computer, files, file storage (for five or more years), E&O insurance, License renewals every TWO years for State; and every four years for Federal; CE fees including USPAP twice every four years; USPAP books every two years, Professional Publications such as Appraisal of R.E., Dictionary of RE Appraisal, M&S or similar services and specialty publications to increase competency. Fees paid to trainees. The appraiser is responsible for paying 15% of adjusted gross income for social security (both the employers portion and the employees portion). .Again very conservatively the cost of maintaining either a very small outside office or a home office (room) is at least 25% of gross income.

In communicating with other appraisers online and across the country a consensus of +- 50% to 60% office overhead was developed for multi person offices staffed with one or more receptionists/admin assistants/ data researchers/ typists (form fillers). Volume potentially produced is increased as a rule, however a reasonable APPRAISERS compensation cannot be dependent on whether or not there is office staff support. This is due to several reasons. Not the least of which is inability to guarantee sufficient level work flow to cover this increased office overhead during slow periods.

 

Calculation of Reasonable Fee (CHART of CONCLUSIONS AT END OF REPORT).

Non-Complex SFR by licensed appraiser:

Many if not most AMCs today require residential certified appraisers,however the historic S&L model was that a trained appraiser with three or more years was generally acceptable. The requirement today is partly a marketing gimmick; and was partly due to the practice of certain AMCs paying for a single report that MAY have to have been converted after the inspection to an FHA appraisal. (I offer no comment on the propriety of that, except to state that under the new revised FHA rules this cannot take place at all in the future).

A licensed appraiser with three years prior experience appraising non-complex single family residential uses; as well condominiums, and two to four unit income property (with or without assistance) would typically equate to the GS9 step 4 pay grade level in the Federal General Service Pay Scale. This equates to $59,305 in the California higher cost living area (27.16% premium). ALL states have at least a 14% location premium. By contrast Washington DC, Baltimore, Virginia is 24.22%.

While the federal employee does not have to worry about the total number of productive working days per year in order to assure a fixed, predictable income; the independent appraiser does.  There are 104 week end days  per year, leaving 261 days. Each federal employee also receives 13 sick days per year. This does not count or include exchange banked sick days where other employees with high accrued days can donate paid sick days to fellow workers in times of catastrophic illness of themselves or a family member. Productive days are reduced to 248 days a year.  Additionally, all federal employees receive ten more paid days as off for federal holidays. Productive days remaining are 238. The next set of non-working days are variable based on longevity. ALL employees receive at least 13 paid personal holiday or vacation days until after they complete three years service. This reduces production days to 225.  Employees with 3 to 15 years longevity earn 20 paid vacation days and employees with over 15 years receive 26 days off leaving 218 and 212 working days respectively.

The impact of this is that the entire years annual income for the business of the appraiser must be earned in from 212 to 238 working days! Appraisers cannot rely on taxpayers to pay their salaries or expenses. It MUST be generated on a per report basis during the work year. I have calculated 40 hour work weeks with 8 hour days. NOT deducted are the two federally required breaks per day, or lunch. It is not reasonable that appraisers should be expected to work weekends, holidays and when they are sick; or that they should work more than eight (8) hours a day without paid overtime.

I calculated the pay as follows:

BASE rate GS9 Step 4 (approximating three completed years of experience) X 1.27.16% Location premium. Adjusted this is $59,305. Adding federal benefits OTHER than days off and paid holidays an additional 25% is required; or $59,305 x 1.25% = $74,131. An additional amount must be added to cover office and business overhead that the taxpayers pay for the federal worker. In a single person home office this is conservatively 25% though in multi person support staff offices it can routinely range from 50% to 60% +- I calculated only 25% or $74,131 x 1.25% = $92,664.

At 225 working days per year, there are only 1,800 hours of productivity per year or 45 work weeks per year. There is some dispute as to the number of properly completed, USPAP compliant real estate appraisals one appraiser can produce per day or week. Some contend it only takes six hours start to finish; while others contend it is more likely to be 8 to 10 hours. Additionally, there is follow up time required by underwriter inquiries; clarifications or borrower value rebuttals. I am concluding that the average non-complex report takes 8 hours start to finish. Obviously there are exceptions but the single person norm is 8 hours. This includes researching ownership interests, transaction histories; analyzing (not simply reporting) market data; highest and best use; investigating site anomalies, STUDYING the sub neighborhood; its general plan compliance as well as zoning and apparent permit issues and making calls and awaiting responses from involved parties to the transactions. Further; that only four days per week are available for appraising or report writing. A total of 8 more hours is allocated for ongoing education; communicating with clients to develop new business, administrative functions, accounting, collections, reviewing and studying regulatory changes, software changes, etc.. Federal employees are paid to do all these things on government time-not after hours or on holidays.

All the above results in a production limit of only 180 appraisals per year assuming maximum appraiser/client/borrower efficiencies and no slow down periods..

To achieve the required reasonable annual fee total of $92,664 each non-complex appraisal and report MUST be quoted and billed at $515 MINIMUM. That equates to an hourly cost of $64 per hour. Contrast that with an auto mechanic cost from $100 to $130 per hour; or a plumber at $100 an hour.

 

*I left out the traditional between grade level GS10 since most GS 9s promote directly to GS 11. Assuming a licensee with much greater experience but less than residential certification a minimum SFR fee of $585 and $73 per hour is not unreasonable.

 

Certified Appraiser Required by Client (NOT necessarily complex appraisal):

Starting at the GS 11 step 6 experience level since many if not most AMCs today are requiring certification either directly or by inference (ie; must be on FHA roster). A certified appraiser is assumed to have at least five years+ overall experience. Hence the step level 6. The base salary and California moderate cost locality factor total is $76,103 plus 25% benefits = $95,129. Add in office overhead of 25% = $118,911. The five year employee has fewer annual work days available due to higher number of allowed days off earned as a result of longevity in order to remain competitive with federal employees with similar experience. Total days worked are 218. Total hours are 1,744.  MINIMUM FEE required fee for parity or comparability to federal appraiser compensation, benefits and overhead is $682 for a one day assignment, or $85 per hour. . NOTE: FHA takes longer. Particularly under the new rules & guidelines (4000.1). Some contend two more hours; while others think it will be less. I concluded that at least one additional hour is required if for no other reason that cross checking the more than 500 pages of specific FHA guidelines; and increased level of observations and analyses. Say nine hours; or $767.

 

Condos are also one to two hours more or $682 + $85 = $767. NOTE: Why are condominiums longer to do? At a minimum the appraiser should be reading and analyzing the Articles of Association and CC&Rs to fully understand the ownership rights that exist; and to insure the comparables have truly similar ownership interests. Budgetary adequacy must also be ascertained; and all common areas inspected.

 

Two to Four Units:

I recognize many licensed appraisers do 2-4 units however the federal pay scale GS 9 does not include these therefore whether performed by a licensed appraiser or certified appraiser an assumption is made that knowledge nearly equal to that of a certified appraiser may be employed in the specific assignments.

A duplex or two on a lot is not merely an sfr with an extra dwelling! It should never be assumed or presumed that the only extra time needed is to measure a second (or third, or fourth) unit. Though measuring IS more work as a rule (particularly where net rentable area varies from pro rata share of the GBA overall due to laundry rooms, common halls or corridors). Rental agreements must be reviewed in light of local and state laws concerning tenant rights. The ability to achieve market rents must be considered; and if appropriate the leased fee interest that exists may need to be discounted to a fee interest being appraised. It is more complex than whether or not local rent control exists. Many states have laws concerning noticing and or vacating periods based on the longevity of tenant occupancy and or tenants ages and applicability of disability protections. An appraiser cannot simply assume a property is voluntarily vacated and that market rents can be achieved. The existence of leases as opposed to rental agreements can have further implications on ownership rights in existence. A seemingly simple thing like whether or not such a property is separately metered for water, gas and or electricity can have a substantial impact on value and marketability. An argument can be made that all income property is complex by definition, however traditional licensing recognizes that 2 to 4 units MAY be performed by a licensee rather than certified appraiser. An hourly range of from $64 to $73 would be appropriate at this level (from above GS9-GS10) explanations.

 

Im providing a two tiered recommendation below: One is for a truly non complex 2-4 and the other is for a more complicated 2 to 4 where a residential certified appraiser is required.

(Non-complex)

Duplex or two on lot =       $986 (10 to 16 hours) at $64 = $640 to $1,024. At $73 per hour it is $730 to $1,168

Triplex or three on lot=     $1,048 (11 to 17 hours) at $64 = $704 to $1,088. At $73 per hour it is $803 to $1,241

Fourplex or similar =         $1,110. (12 to 18 hours) at $64 = $768 to $1,152. At $73 per hour it is $876 to $1,314

These fees at the higher end may be higher than most AMCs are used to paying, however most are not receiving fully USPAP compliant, and properly analyzed leased fee to fee simple appraisals. Rights appraised are typically assumptive rather than actual. A fact all too well known by holders of the notes in due course when they attempt to take back their defaulted loan property. A duplex is not merely two houses. There is a variable ownership interest; and possibly two tenants interests affecting the actual ownership interest. A triplex has four probable interests to be considered (three tenants and the owner). A four plex has five. The existence of rent control can complicate each of these interests in ways unique to each and every jurisdiction.

The above analyses assume the transaction amount is less than $1,000,000 and that the assignments are somehow non complex where a residential certified appraiser is not required.

Where a residential certified appraiser IS required I think the $85 to $99 per hour rate is more applicable, but only up to a certain value range limitation. In most areas there is a very significant difference between a one million dollar property and a two million dollar property; just as there is between a one hundred thousand dollar property and a two hundred thousand dollar property. Each appraiser must determine for themselves where the complexity break occurs. I can only state that generically I am NOT appraising two or three million dollar properties for the same fee as I would charge for one million dollar properties. If nothing else, my exposure to liability is much greater.

The LOW end of the range for over a million dollars two to four units should in my opinion be between $850 and $1,530. For my area, the break to a higher fee would likely take place around $1.5 million plus.

 

Complex Residential Assignments Requiring General Certified Appraisers:

Example: Landmark Converted Water Tower SFR with 270 degree ocean and harbor view, located half block to beach on M1 zoned 30 x 30 site with commercial enterprise potential or where the potential highest and best use of the underlying land requires a general certified appraiser in order to analyze and determine highest and best use.

Starting Level GS 13 Step 6 (assumes minimum five years as a general certified appraiser & and an annual step increase)

$102,270 base with California High Cost area allowance of 27.16% included

$127,838 including 25% benefits equivalence.

$159,797 including 25% office/business overhead

Hourly equivalent is $115.

 

Discounts could reasonably be applicable for those clients that permit either trainees or lower license levels to inspect without mandatory interior inspection by the higher level licensed appraisers. Elimination of mandatory drive bys from the supervisory appraiser could result in further discounts. As one who has to cosign anothers report, I determine to what degree I must check behind them, and when. It is unannounced and frequent but not on every assignment. IF I am REQUIRED TO DO SO, then my fees apply rather than trainee fees.

Commercial rates are individually quoted. Ordinary C& I work is quoted at GS 13 equivalent experience rates plus benefits and office overhead. Usually $115+- to $130+- per hour for non-litigation work.

Unique or special purpose uses such as acute care hospitals; sub-acute care and mid-sized SNFs, ARFs and ACFs, or Boat Marinas (Business Valuation or leasehold), refineries, etc. are typically at GS 14 rates depending on complexity.

 

Expert witness fees are $300 to $350 per hour.

Deposition fees are usually $150+- per hour.

 

Concluded /Recommended Fees are on following page

 

Grade/Ste p

Work-Type

base w/27.16% Localit y

With 25% Benefits *

25% Ofc Overhea d

Workin g Days

Hours per year worke d

Work weeks per year

at 4 reports per week*

Min. "REAS ONAB LE" fee

FHA-Add 1-2 Hrs labor

Hourly Equivale nt

Excl Days

Per year

40 hrs each

(Say 1)

Off

Annual

Volume

GS9/4

Non comple x 1-4

59,305

74,131

92,664

225

1800

45

180

$515

NA

$64

GS10/4*

N/C 10-15 yrs exp

65,308

81,635

102,044

218

1744

43.6

174.4

$585

NA

$73

GS11/6

Cert.Res. 5+yrs exp

76,103

95,129

118,911

218

1744

43.6

174.4

$682

$767

85(9)

GS12/5

Cert.Res. 10 yrs exp

88,613

110,766

138,458

218

1744

43.6

174.4

$794

C&R/8 hrs

$99

GS13/4

Cert-Gen 10+ yrs

102,270

127,838

159,797

218

1744

43.6

174.4

$916

C&R/8 hrs

$115

GS14/3

Cert.Gen-Mngr

117,189

146,486

183,108

218

1744

43.6

174.4

$1,050

C&R/8 hrs

$131

Decrease by 6

*1 person

Days for over 15 yrs

office

Experience

Multi person

Offices increase overhead

to 50 % minimum

 

Please contact Mike Ford at (714) 366 9404 or mike@mfford.com if you have any questions or if you believe that errors have been identified.

Thank you,

Mike Ford

Chairman, National Appraiser

Peer Review Committee

American Guild of Appraisers (AGA)

OPEIU / AFL-CIO

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