Jobs as a Commercial Real Estate Appraiser Suck?
I want to preface this by saying that I'm not trying to be a dick to appraisers, so just correct me if I'm way off here because honestly this is just what I know from what limited sources I've heard from:
The vast majority of what I've seen and heard of CRE Appraisers is that it's a much different game than say someone who is doing valuation work for REPE acquisitions or even work at a brokerage. It seems that most people characterize the work as a formality that's not at all deeply analytical. It seems like more of a role as a monkey whose job it is to go grab the different required pieces to do a required appraisal, like just finding out what market cap rates are -- piecing together Costar comps data, etc. I've also seen a lot of people in appraisal work with very soft resumes.
Is this accurate? Is this only accurate for some and not others? Correct me if I'm wrong. I'm being very harsh to these guys perhaps, but this is just what the gist of what I've heard from people...
My first year or so (I say "or so" because, well, it's an odd story) I worked in commercial appraisal. It was a very difficult job--every appraisal requires a ton--A TON--of research. Yeah, your 120-page appraisal template is already created so you're just modifying the information, but you're still talking about 120 Word Document pages of material. The amount of research is enormous. I had to make hours of phone calls for each appraisal, had to modify and manipulate, well, 120 pages of information--maps, graphs, spreadsheets, paragraphs, pictures, etc. You've got to be a very competent writer--you literally have to have college degree level writing abilities. If you're doing national work, on every appraisal you have to actively discover where to find tax rules, assessment rules, zoning information, economic information, etc. for each freaking locality.
The job paid $35,000 per year plus OT/bonus. I made about $42,000 for that year. I've never worked so hard for so little in my entire life. I HATED the job, but looking back it was amazing experience. If you're really passionate about hands on real estate (not the bullsh*t real estate of Wall Street where people manipulate securities, but legit ground level real estate) there is literally no better experience than spending 12 months learning about CRE zoning, taxes, revenue streams, source information, traditional financing, county governance, LEED standards, etc. that one learns as an analyst working with CRE appraisals. I would absolutely not choose it as a full-time career path, but for a new college grad who wants to actually learn more about real estate than how to value a mortgage-backed security then it's probably the single best experience one could get.
Now, you've got your big real estate firms that may work more like a production shop--spit out junk as fast as possible. Those are probably the guys you have been talking to. However, the group I worked with was a 100-person, 5-office national boutique that took its job deadly seriously. No garbage was being spit out. If we charged $5,000 for an appraisal then by God it was going to be quality.
I did find out later when I moved to Freddie Mac Multiamily's underwriting group that yes, appraisals are a formality and are essentially un-reviewed other than looking at page 1 with the value. It was extremely disheartening to learn how hard I worked was really for naught.
People absolutely can make good money in appraisal, but it really narrows at the top--the guys making $350,000 are the ones who have all the contacts. They are fundamentally salesmen--they are extroverted (typically), very experienced and very well connected. You don't make top dollar by actually doing the work.
I had a very brief stint in appraisal, and what I found was that to make good money in the model it requires "sweatshop" type arrangements and managing enormous turnover. The guys at the bottom of the ladder are basically the lowest wrung sweatshop employees—they work their asses off for very little pay. It’s all about production, production, production—the firm’s income is based on how much work can be spit out in the shortest amount of time, so employees are constantly measured on their production.
Most of these sweatshop employees leave within the first 2 years and the owner/managers’ job is to constantly hire and re-hire these positions. The people who remain climb the ladder up into the low-to-mid 6 figure range, but they also continue to work in sweatshop type conditions, working 55-60 hours/week, with production being the absolute and most critical thing. I remember entire workdays where the office was nearly dead silent the entire day as people worked feverishly to spit out more and more work. There simply was not time to chat with a co-worker or to go to lunch with a friend.
Unless you can break into the “upper classes” of appraisal where you are the one bringing in business, the rest of your career will be a constant rush of spitting out work. Even my manager—who was making probably $100,000 with a solid 8 years of experience and 3 employees doing his grunt work—was constantly pushing and reading and pushing and inspecting. I found early on that the career was 30-40 years of constant stress unless I became a salesman.
Figured I'd share my experience for more recent grads seeing how a couple of the posts relate to entry-level experience from a few years ago. As just about everyone else has mentioned, you definitely have to pay your dues when you first start out in commercial appraisals. It's not a post-college job for those looking for instant salary gratification, but for those willing to wait - even just a year, in my particular case - the upside can be compelling. Sure, you'll never make as much money as REIB or REPE, but quality of life IMO is far superior and if you play your cards right, you can be making relatively good money within 2-3 years.
I'm at a smaller but well-regarded firm covering NYC and Long Island. Fees are typically $3,000 to $7,500; anything $5k and up is generally fairly complex or has an extensive scope (proposed renovations/conversions, rent-regulation, etc.). Our Certified General's are in the $125-$160k range, with our MAI president/owner at about $400k. (Should note that he's been doing it for 30+ years in the same market and has an enormous client/contact list, which undoubtedly helps get us the amount of business we do)
I came into this in having a couple of RE internships and a heavily RE-focused degree from a highly regarded school. Had ARGUS and various valuation experience from my coursework as well. This helped me bargain a little in terms of starting salary, but still was only at $35k to start. Pretty much began as a supporting analyst of sorts; I would assist in various aspects of the appraisals, i.e. verifying comps, getting all the basic property info (zoning, taxes, etc), direct caps, so forth and so on. It sucked at the time, but, as mentioned throughout this thread, it really does give you invaluable experience at the individual asset level due to the sheer amount of research it takes.
After about 6 months of busting my ass, I was able to do reports on my own and renegotiate some in terms of compensation, up to about $55k. The way I would describe the learning curve is this: the first six months, you're just getting the general lay-of-the-land. This is when you find where to get your data, what data sources work well for what, which brokers to call, how to most effectively structure your reports, and how to approach various types of appraisal problems. The second 6 months is more of a refinement period: you learn how to approach more complex situations and how to more effectively manage the time you spend on each report. In my personal experience, I progressed by far the most during this period and it gave me a good skill set for going forward. My ARGUS certainly got better after a couple of large Class B office buildings in Midtown Manhattan.
By the end of my first year, I was doing $15-18k a month in fees billed, which allowed me to again renegotiate my compensation once more. Ended up getting salary/split equivalent to just over 40% and on track to do $210-220k in billings this year. Also get a 5% (of total compensation) profit-sharing 401k bonus. AS A DISCLAIMER: this is probably not typical for start of 2nd year, especially outside of the largest US metro markets. That being said, if you can get into a progressive firm that is willing to let its talent learn and thrive, you can certainly make good money, learn a ton about individual asset-level CRE, and limit your weekly work exposure to 55-65 hours.
TL,DR: You'll absolutely have to pay your dues starting out in commercial appraisal, but if you want invaluable experience at the individual-asset level, it is a great way to go. Money won't be great starting out, but with hard work and a drive to improve your valuation skills, you can be making six figures+ within 2-3 years in a larger market with good quality of life benefits (less stress/hours). Skills are transferable to a good range of CRE niches, because at the end of the day it all boils down to "how much money is this asset going to make us, and what is a good price to buy/sell it for," which are all rooted in valuation. Wholeheartedly agree that it is not the best long-term option for most people who would be reading WSO in the first place, but it provides a solid foundation.
Overall, appraising real estate is a bad career choice. I started as a residential appraiser when it was actually a respected profession (early 1990's). I expanded my skill-set through the Appraisal Institute, learned how to appraise commercial property, and learned quite a bit. However, fees are low, even if you're an MAI. At least in the Chicago area they are. With all the stress of the classes (which they've revamped since I've gone through the program), and the stress of splitting the fee in half working for an MAI, getting up at 4:00 a.m. to drive comps and meet your deadline, and pull all-nighters to meet a delivery date, yeah...it's not worth the money. Brokering homes and small commercial property is, by far, a better way to make six figures. With all the training and rigorous coursework, earnings around the $200,000 mark should be easy...should be a five day work week, maybe 9-10 hour days. But, that's not the case. Most appraisers / MAI's that are sole proprietors bill around $12,000 to $17,000 a month, provided there is actually business out there to be had. And I can assure you, $150,000 as an MAI in Chicago doesn't go far. If you have a personality, brokering homes will bring you $150,000 without all the ridiculous federal regulation (and it's getting way, way, way out of control...with every financial downturn appraisers get slammed with more regulation, all while bankers, loan officers run wild without any licensing or regulation), USPAP, bad fees, ridiculous turn times, all for writing term papers the rest of your life. It's purgatory. And it's actually hell if you aren't an MAI because you work your behind off to make $65,000-$70,000, and you lose a lot of sleep. Be an actuary if you like numbers, not an appraiser. And if you like real estate that much, go take the classes at CCIM or sell houses. Much more fun, exciting, and potential to make more than $100,000-$150,000. Statistics and regression analysis is rendering the old judgment call almost meaningless. Appraising is a profession that is slowly going away, and it probably should. A good broker can give you a value in less time. They aren't regulated like appraisers, but they aren't any worse at providing market value. I'm a review appraiser, and I read fiction all day long. Garbage from very articulate, educated appraisers with degrees from excellent colleges. But if the number is wrong...well...it's wrong.