Can I be my own boss?
As an appraiser, you can be your own boss. Even a beginner can technically be his own
boss. As previously discussed, some
appraisal firms acquire all of their appraisers as “subcontractors”. Any person who holds status as an appraiser,
including trainees/registered appraisers, may act as a subcontractor.
This means that the appraiser is
not technically an employee. When an
appraiser acts as a subcontractor, he is supposed to dictate certain things for
himself. The company he is performing
work for is not supposed to tell the appraiser how to do his job. The
appraiser is simply providing his professional service to the firm.
In reality, however, there is
often no viable difference in the duties of an employee appraiser, and an appraiser
who is acting as an independent subcontractor.
This is particularly true when the appraiser is at the beginning level
of a trainee appraiser. The appraisal
firm that he is working for manages almost everything he does. For technical purposes, however, the
appraiser can say, by rights, that he is his own boss.
When a firm pays an appraiser as
a subcontractor, the firm does not make deductions to the appraiser’s
paycheck. Instead, he pays the
appraiser the entire amount, or gross
amount, of the appraiser’s earnings. At
the end of the year, the appraisal firm will provide the appraiser with tax
form 1099. This form states the entire
sum of money that the firm paid to the appraiser for the calendar year. It is up to the appraiser to report these
earnings and pay the consequent taxes.
Appraisal firms like to employ
appraisers on a contractor basis for the simple reason that they do not have to
pay taxes on the appraiser. Employee taxes may include, at a minimum, social
security tax, unemployment tax, and workers compensation. By using contract appraisers, they avoid
employee taxes. In this aspect, it is
cheaper, many times over, for an appraisal firm to acquire you as a
subcontractor, rather than hire you as an employee.
While the appraiser may
appreciate his status as an independent subcontractor, he may more appreciate
status as an employee, where he may earn such benefits as vacation pay, health
insurance, and retirement.
Summary
Part of the beauty of real estate
appraising is that, under favorable circumstances, you can be your own boss in
a short amount of time. The lure of
self-employment attracts thousands to the industry each year.
Different Scenario – Same Result
Here’s a second scenario. The mortgage lender faxes an order to an appraisal
firm. The loan could be for a sale or
for the refinance of a home. The order
includes an estimated value, a loan amount, or a sales price placed on the order by the loan officer.
Based on an understanding between
the lender and the appraiser, the appraiser is expected to reach this value.
Once again, instead of inspecting the property and selecting comparable
sales according to the condition, characteristics, and location most similar to
the subject property, the appraiser selects comparable sales that will support
the value necessary to accommodate the loan amount. This is called backing into
value.
When an appraiser backs into
value, or works towards a predetermined value, he has converted his disposition
from an appraiser rendering his professional opinion, to an overpaid data entry
robot. There are many overpaid data entry robots in the appraisal industry, and the
number is ever increasing.
The Fantasy
An example of a correct scenario
would be as follows. The lender gets a
lead on a home equity loan. He orders
an appraisal from a firm. The appraiser
receives the order, schedules the inspection with the homeowner, and proceeds
to complete the assignment. He renders
his professional opinion, objectivity intact.
The lender receives the appraisal and works up his loan according to the
actual value estimate on the
appraisal. Most of the time, this is a fantasy.
Lender Demand
Why would appraisers be
practicing adverse to the code that they are legally required to abide by? After all, noncompliance with USPAP gives
state appraisal board officials, grounds to suspend or even revoke an
appraiser’s license.
The reason is simple. The industry that appraisers serve, that is,
the mortgage lending industry, demands it.
The faster a mortgage company can close a loan, the more money they
make. They can’t work up a loan without
a value for the home. They are not
willing to wait for an appraiser to do his job, first. They work up the loan based on the amount of
the pre-comp, or they place their own value on the appraisal order form, and
expect the apprai