Webmaster’s Note: This is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation.
Disclosure: John is a partner of mine in our commercial real estate valuation concern [Miller Cicero, LLC](http://www.millercicero.com) and he is usually one of the smartest guys I know. _Jonathan Miller_
Yesterday I had the honor of meeting with a high level delegation from Korea. This group was comprised of economists, professors, government officials and appraisers, and was sent by the government to study the appraisal fee system in the United States. In Korea, the government is the largest buyer of appraisal services, and fees are set by the government. Fee are, essentially, a function of the property value. Low fee assignments are very low and are done by the appraisal firms at a loss, with the high fee assignment making up for them. Overall, though, the appraisal community seems satisfied with the current system and their compensation.
However, the government is contemplating a free market, competitive fee system such as we have here in the US. We discussed our system at great length. They were fascinated by the email solicitations for fee quotes, and the on-line bidding systems such as RIMS used by most major lending institutions. They were equally intrigued that, in the vast majority of cases, the appraisal assignment is awarded to those that are, in essence, simply willing to sell their labor cheapest; not who is the most qualified for the assignment. (In an attempt to be fair, I explained that many lenders would not agree with this point. The typical lender response is that “all appraisers on my approved list are competent, so why not select the lowest fee.”)
In Korea, the appraisal profession is highly respected, and they explained that the process of entering the profession is not unlike becoming a lawyer. So when I showed the group that New York State licenses appraisers together with beauticians and notary publics, they seemed genuinely horrified. (I couldn’t understand what they were saying amongst themselves, but it sounded heated!)
The delegation will be reporting their recommendations to their government later this year. I am anxious to see if they can come up with a better system than we have in the US.