The valuation profession is stalled. It’s at a tipping point. We’re stuck. We love what we do, but we’re struggling to see the positives. So how do we pivot our industry so we don’t grow to hate it?
The wake-up call is getting our valuation industry unstuck. The discussions are the same and mostly negative, appraiser bias, declining number of appraisers and few young professionals even vaguely interested in our valuation art.
Engage in high value work
Let’s change the conversation. Let’s be optimistic, productive and energetic. Let’s get unstuck. Let’s engage in high value work that brings us energy and elevates our industry.
At our next FIVA (Financial Institution Valuation Advisors) Zoom meeting on April 27, I’m presenting Tech Resistance and the Decline of Appraisal Quality: A Wake-Up Call. The goal isn’t to throw shade on appraisers, but the opposite.
Let’s experience a mindset change and become the best equipped valuation professionals in the market.
The discussion won’t just be about ChatGPT, Bard and the explosion of AI tools, but rather our attitude to these tools. Appraisal quality suffers because many fee appraisers are fatigued creating reports manually.
The old mindset is still prevalent for fee appraisers. You typically have the firm owner, usually a MAI, a few appraisers and maybe some support staff. The internal workflow is very transactional. Here’s an appraisal, do the appraisal, I’ll review the appraisal and then we’ll send the appraisal. Rinse. Repeat.
The org chart is old school pyramid with the owner at the top. Valuation professional 2.0 would reflect a very flat org chart with lines drawn out for some outsourced work. The explosion of AI apps makes it much more feasible to have near-shore admin support with much improved quality.
3 hurdles for change
- Always rushing
- Penny pinching
No. 1 isn’t really a problem right now since appraisal volume is way down. The problem is few are taking this great opportunity to improve.
No. 2 Costs a lot of money by not spending money. Counterintuitively, the lack of investment significantly pushes down the hourly wages of your appraisers, discourages attracting new appraisers and ultimately causes burnout.
No. 3 Usually this is due to lack of documentation. The firm owner is the keeper of all knowledge. Create playbooks to communicate your expectations and valuation nuances. Perhaps create an internal Master Class with videos for your existing appraisers and future ones.
Enshrine the past or move forward
If you’re starting over as valuation professional 2.0, I suggest make your tech and education budget 5% of your gross revenue. Let’s say you have two appraisers producing $25,000 per month gross, $600,000 per year, then your spend should be $30,000 per year or $2,500 per month.
This investment is not just for the obvious tools like DataComp Suite (comp database, report writing and workflow), but rather software, coaching and entrepreneurial education for leadership, operations, finance, sales and marketing. A more progressive mindset would be create a tech firm that happens to offer appraisal services.
Be competitive and protect collateral
Valuation professional 2.0 for chief appraisers is to focus on making your bank much more competitive while protecting collateral. Appraisal management platforms like YouConnect set the stage for competitiveness.
The platform provides transparency, collateral awareness while delivering productivity. Communicate your metrics through service level agreements (SLAs), create meaningful reports to the C-Suite and manage your appraisers through automated vendor management with grading.
The new mindset for chief appraisers would include expectations of their appraiser vendors. This might include asking your fee panel, “What’s your annual spend on technology and process?” If it’s nominal, then the lack of investment will likely show up as long turn-around times, late reports, typos and valuation review issues.
Failure to adopt technology can put your bank at a significant disadvantage. View digital transformation (DT) through a competitive lens providing job security. DT has less to do with technology and more about automating business process.
Take the time to change how you work day-to-day to create repeatable processes. Create metrics and KPIs for your department.
“Alarms don’t wake you up, your responsibilities do.” Nitya Prakash
Let’s wake up.