The Good, The Bad, And The Ugly
While county-level analysis may seem to be the most relevant to the fees you charge on a day to day basis, there’s no denying the fact that your business doesn’t operate in a vacuum. Statewide, regional, and even national statistics have a direct and measurable gravitational effect on you too. So, moving past the micro county level and looking at the macro, find yourself in the map below.
If you’re in Census Division 3, East North Central (Illinois, Indiana, Michigan, Ohio, and Wisconsin), you’re ranked at the very bottom of the nine divisions nationally, with a median fee of $300.
If you’re in the Pacific area, Census Division 9 (with California, Washington, Oregon, Alaska, and Hawaii, plus we added Guam), then you’re in the highest median fee zone, at a very healthy $400.
Clearly, there’s a fundamental difference in the two areas. Note that the 50 most expensive locations were dominated by counties in Alaska, Hawaii, and Wyoming. And of the locations with the lowest fees, appraisers in Ohio were represented disproportionately, with 18 of the bottom 50 slots being taken by counties in the state. Four nearby states — Pennsylvania, Kentucky, Illinois, and Wisconsin — also had three to four counties each in the bottom 50.
Why Is The East North Central So Bad?
The fact that the entire region is so low would seem to indicate that cost of living or oversupply of appraisers is causing the problem. But that’s not borne out by the facts. Many areas with lower costs of living, notably in the South, enjoy higher fees, for example.
And when judging potential oversupply conditions, it is true that the counties in the East North Central division have an appraiser coverage count (the number of appraisers who indicate that they cover a given county) of 41, which is 15% above the national average coverage count of 35 per county. But, that doesn’t explain why, of the 50 best counties in terms of orders per appraiser, seven of them are in this region — and yet six of the seven with the highest number of orders per person are also significantly below the national median appraisal fee, and none are above. Two of the seven with the most orders per person actually rank among the 50 worst counties in the nation in terms of median fee. So, appraiser oversupply is obviously not the cause of low fees.
The AFR doesn’t have the data to say definitively, but it isn’t beyond speculation that — since it’s essentially the backyard of the “birthplace of AMCs” and the historical home of the software vendors who touted AMC connections as their raison d’être (ACI and the former Day One, now part of ACI) — it’s quite possible that appraisers in the area have simply come to accept low fees as a way of life. Fees may over time come in line with national norms now that it’s apparent that there’s a supply/demand anomaly there, if appraisers take action.
It’s also worth noting that, in Figure 2 (PDF), the relative standard deviation (RSD%) in the East North Central is the second lowest of all divisions. So the fees aren’t just low, they’re uniformly low. (High RSD% means high variation, and lower RSD% means consistency.)
Standard Deviation Ranges By State
Now look at Figure 3, (PDF) with average (not median) fees per state. Showing the average is necessary because, in Figure 4, (PDF) we add and subtract one standard deviation from the average in order to determine the likely range of the most common fees.
In Figure 4, the dividing line between the red and green bars is the same as the endpoint of the blue bars in Figure 3, meaning that the dividing line in Figure 4, is the average. The red and the green are one standard deviation below and above the average. So anything between the low and high range of the red and green bars is generally encountered about two thirds of the time.
You can instantly see that some states have a high range and some a very low range. New York stands out as a very “inconsistent” state. The urban versus rural dichotomy in New York doesn’t fully explain the variation, since similar urban/rural states like California have a variation approximately half as pronounced. So, in New York you can deviate pretty widely from the mean either way and not be out of the norm, whereas expectations would be narrower in California. And don’t even think about stepping out of line in Alaska.
In the end, it’s obvious that you need to understand your county, state, and region, so you know what latitude you have to push the boundaries of your fees — and what urgency you may have to do it.