Do you want to start an appraisal management business? If YES, here is a complete guide to starting an appraisal management business with NO money and no experience.
No matter your field of study or career path, there is always a business that you can start and make huge money from. If you are in the real estate industry, one of the businesses that you can comfortably start that won’t require much stress from you is an Appraisal Management Company.
An appraisal management company is a company that offers professional services in the real estate industry on behalf of their clients who are known as lenders. They administer a network of independent appraisers who deliver real estate appraisal assignments on behalf of lenders.
Appraisal management companies are expected to submit comprehensive reports to their clients (lender) after they must have concluded their assignments. The industry is highly regulated in the united states of America by the National Association of Realtors (NAR).
Starting an appraisal management company requires moderate startup capital. Aside from the money required to rent an office facility and to acquire office furniture, appraisal software and equipment, you are not expected to spend much on other things.
Your personal and company profile are what will attract business deals for your organization. So, you must ensure that you take out time to acquire all the certifications and experience needed to successfully launch your own appraisal management company.
It is important to state that if you are not careful with this kind of business, you might land yourself in trouble and get sued; this is why you must follow due process when carrying out appraisal of properties for your clients.
If you have been pondering on starting your own appraisal management company but do not know how to go about it, then you should consider going through this article; it will give you the needed guide and direction.
Steps to Starting an Appraisal Management Company
1. Understand the Industry
Appraisal management companies belong to the Real Estate Appraisal Industry and firms in this industry specialize in estimating the fair market value of real estate.
Appraisal management companies carry out research on a property or development to determine its market value. In practice, valuations for a property are carried out when the property is sold, mortgaged, taxed, insured or developed.
In a broad perspective, property appraisals and valuations are carried out in other to determine the sale, purchase, lease or rental price of the property in question. Appraisal of properties is done for specific reasons which include investment evaluations, rental determinations, litigation and compulsory acquisitions, property development feasibility, and taxation concerns.
The Real Estate Appraisal industry that appraisal management companies are part of is indeed a major sector of the economy of the United States of America which generates well over $7 billion annually from more than 46,121 registered and licensed real estate appraisal firms (appraisal management companies inclusive) scattered all around the United States of America.
The industry is responsible for the employment of over 67,236 people. Experts project the real estate appraisal industry to grow at a -0.4 percent annual rate. The establishment in this industry that has a dominant market share in the United States of America is CBRE.
Going by happenings in recent time, you will notice that the Real Estate Appraisal industry has oscillated alongside improving real estate and construction markets, contracting and adjusting to demand in a post – recessionary atmosphere.
With opportunity to credit and typical cost of credit improved, new residential construction increased and real estate appraisal professionals received an upsurge in the demand for their services.
In the nearest future, industry performance will be supported by a recovery in the downstream real estate markets and increases in development and investment activities. Though, innate trends within the industry will continue to result in falling employment.
The fact that appraisal management companies can easily be found in all the cities in the United States of America, does not in any way make the industry to be over saturated. The fact that there are people out there who want to sell or purchase properties and also those who would always need loans from time to time to sort out property related deals et al make the business evergreen.
Over and above, starting an appraisal management company requires professionalism and a good grasp of the construction and real estate market.
Besides, you would need to get the required certifications and license and also meet the standard expected for such business before you can be allowed to start an appraisal management company in the United States; the industry is heavily regulated to guard against fraud and criminality.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who require the services of an appraisal management company cut across corporate organizations, households, individuals, investors and business owners cum entrepreneurs who want to invest in the real estate business, properties and accommodation related issues.
3. Decide Which Niche to Concentrate On
Most appraisal management companies tend to operate general services that a standard appraisal management company is expected to offer, that is why it seems like there are no niche areas in the industry. But on the other hand, some appraisal management companies may decide to major in some key areas such as;
- Conducting residential real estate valuations
- Conducting nonresidential property valuations
- Conducting other property-related research and analysis
The Level of Competition in the Industry
The level of competition in the real estate appraisal industry depends largely on how big and organized your appraisal management company is.
As a newbie in this line of business, you need not be scared because the truth is that no matter the level of competition in an industry, if you have branded and promoted your products or services appropriately, you will always make headway in the industry.
You just have to ensure that you have access to a highly skilled workforce, you have what it takes to properly and accurately carry out appraisals on properties and you know how to reach out to your target market.
4. Know Your Major Competitors in the Industry
In every industry, there are always brands that perform better or are better regarded by customers and the general public than others. Some of these brands are those that have been in the industry for a long time, while others are best known for how they conduct their businesses and the results they have achieved over the years.
These are some of the leading appraisal management companies in the United States of America and also in the globe;
- Appraisal Management Services of America Inc
- Appraisal Management Solutions, LLC
- Niemi Appraisal Placement Company
- Valuation Management Group
- American Appraisal Service
- American Appraisal Associates
- American Appraisal Canada Inc
- Nadlan Valuation
- Dart Appraisal: Appraisal Management Company
- Golden Bell Appraisal Management Company
- Great Lakes Appraisal Management Company
- Alexander McCabe Appraisal Management Company
- AmCorp Appraisal Management Services
- Innovative Appraisal Network LLC
- Lincoln Appraisal & Settlement Services
- Springhouse Appraisal & Review Services
- United Appraisal Valuations & Asset Management Corp.
- Westside Appraisal, LLC
When it comes to starting an appraisal management company, you just have got to get your feasibility studies and market research accurate before venturing into the business. It is good to mention that appraisal management business is not for rookies; it is for professionals who have gathered the required experience and expertise to handle such business. But an aspiring entrepreneur can learn ropes on the job.
Opening this kind of business entails that you get the required certifications and business license and also build good working relationship with players in the construction and real estate industry.
To be on the safe side, it will pay you to hire the services of experts that will help you with a comprehensive economic and cost analysis and the profitability of the business within the location that you intend launching the business. If you get your economic and cost analysis right before launching the business, you may not have to stay the long before you breakeven.
5. Decide Whether to Buy a Franchise or Start from Scratch
When it comes to starting a business of this nature, you will have to start from the scratch because there are no known appraisal management companies in the United States that are into franchising.
6. Know the Possible Threats and Challenges You Will Face
If you decide to start your own appraisal management company today, one of the major challenges you are likely going to face is the presence of well – established appraisal management companies and also other related businesses in the real estate industry who are also offering same services that you intend offering. The only way to avoid this challenge is to create your own market.
Other threats that you are likely going to face as an appraisal management company operating in the United States are unfavorable government policies, the arrival of a competitor within your location of operation and global economic downturn which may affect the construction and real estate industry. There is hardly anything you can do as regards these threats other than to be optimistic that things will continue to work for your good.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
If you are starting on a small scale, you may opt for the sole proprietorship legal entity. If you are however looking at going the bigger way, you have the options of either choosing a general partnership, or Limited Liability Company which is commonly called a LLC for an appraisal Management Company.
Ordinarily, general partnership should have been the ideal business structure for a small – scale appraisal Management Company especially if you are just starting out with a moderate start – up capital and covering a small community.
8. Choose a Catchy Business Name
When it comes to choosing a name for a business, it is expected that you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
If you are considering starting your own appraisal management company, here are some catchy names that you can choose from;
- Silos Beta® Appraisal Management Company, LLC
- House Checkers® Real Estate Appraisal Company, Inc.
- Fury Clarkson® Appraisal Management Company, LLC
- Kent Polaris® Real Estate Appraisal Company, Inc.
- Mo Gilbert & Co® Real Estate Appraisal Company, LLC
- Team Excel® Appraisal Management Group
- Property Trust® Appraisal Management Company, LLC
- Grace Ville® Appraisal Management Company, Inc.
- Sam Jones® Appraisal Management Company, Inc.
- Goofy Brown® Appraisal Management Company, Inc.
- Jeff Newman & Co® Appraisal Management Company, LLP
- Cape Nova® Appraisal Management Company, Inc.
9. Discuss with an Agent to Know the Best Insurance Policies for You
In the United States of America and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is imperative to create a budget for insurance policy covers and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your appraisal management company.
Here are some of the basic insurance policy covers that you should consider purchasing if you want to start your own appraisal management company in the United States of America;
- General insurance
- Health insurance (for you and your staff members)
- Liability insurance
- Workers Compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
If you are considering starting your own appraisal management company, usually you may not have any need to file for intellectual property protection/trademark. This is so because the nature of the business makes it possible for you to successfully it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for an intellectual property protection.
11. Get the Necessary Professional Certification
Aside from the results you produce as it relates to properly carrying out appraisal of properties for your clients, professional certification is one of the main reasons why most appraisal management companies stand out. If you want to make an impact in the real estate appraisal industry, you should work towards acquiring all the needed certifications in your area of specialization.
Certification validates your competency and shows that you are highly skilled, committed to your career, and up-to-date in the competitive market. These are some of the certifications you can work towards achieving if you want to run your own appraisal management company;
- USPAP Certified Appraisers
- The Certified General Appraiser
- The Certified Residential Appraiser
- Certified Real Estate Appraisers
- Degree in Quantity Survey and Real Estate Related Courses
Please note that you cannot successfully run an appraisal management company in the United States and in most countries of the world without acquiring professional certifications and business license even if you have adequate experience cum background in the financial services industry.
12. Get the Necessary Legal Documents You Need to Operate
The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized. It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, the law would always catch up with you.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own appraisal management company in the United States of America;
- Certificate of Incorporation
- Federal Tax Payer’s ID
- State Permit
- Business License and Certification
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Consulting contract documents
- Apostille (for those who intend operating beyond the United States of America)
- Company Bylaws
- Insurance Policy
- Memorandum of Understanding (MoU)
13. Raise the Needed Startup Capital
Starting an appraisal management company requires that you pool cash together to secure a standard office in a good business district, equip the office and pay your employees. These are part of what will consume a large chunk of your startup capital.
Here are some of the options you can explore when sourcing for startup capital for your appraisal management company;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Applying for Loan from your Bank
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends
14. Choose a Suitable Location for your Business
Appraisal management companies and most consulting services based type of businesses require that you see physically with your clients hence it must be located in a good location; a location that is prone to both human and vehicular traffic and a location that is at the epicenter of a business district if indeed you want to attend to loads of clients and maximize profit from the business.
The fact that you can operate your appraisal management company from any part of the world does not mean that location has little influence on the success of the business. If you have taken your time to study the appraisal management industry, you will realize that appraisal management companies and related businesses pay expensive rents in order to stay in a busy business district; a place where business activities and real estate cum construction activities are at its peak.
The location you chose to open your appraisal management company is key to the success of the business; hence entrepreneurs are willing to rent or lease a facility in a visible location; a location where the demography consists of people with the required purchasing power and lifestyle. If you make the mistake of renting or leasing a facility for your appraisal management company in a not too visible or hidden location simply because it is cheap, then you must be prepared to spend more in promoting the business.
It is important to note that a business facility in a good location does not come cheap hence you should be able to allocate enough fund for leasing/renting in your budget. If you are not knowledgeable about choosing a location for the business, then you should feel free to talk to a business consultant or a realtor who has full grasp of the city and perhaps country you intend starting your appraisal management company.
15. Hire Employees for your Technical and Manpower Needs
On the average, there are no special equipment needed to run this type of business except for customized appraisal management software and other real estate related software apps. You will also need computers, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves).
When it comes to choosing between renting and leasing an office space, the size of the appraisal management company you want to build, and your entire budget for the business should influence your choice. If you have enough capital to run a standard appraisal management company then you should consider the option of leasing a facility for your office.
As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision. Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Appraiser Officers/Consultants, Accountant, Business Development Executive and Customer Service Officer.
Over and above, you would need a minimum of 5 to 10 key staff to effectively run a medium scale but standard appraisal management company.
The Service Delivery Process of the Business
The way appraisal Management Companies work varies from one agency to another, but ideally, an appraisal management company is expected to first and foremost build a robust company profile before sourcing for appraisal contracts from clients.
When clients engage the services of an appraisal management company, they sign a contract and the appraisal management company goes all out to carry out research on the property or development project in question to determine its market value.
Appraisal of properties are done for specific reasons as requested by the clients, it could be for investment evaluations, rental determinations, litigation and compulsory acquisitions, property development feasibility and taxation concerns, or a combination of all of the stated concerns. After the appraisal has been carried out, the appraisal management company will then submit a comprehensive report to their clients (lender).
An appraisal management company may decide to improvise or adopt any business process and structure that will guarantee them good return on investment (ROI), efficiency and flexibility; the above stated business services process is not cast on stone.
16. Write a Marketing Plan Packed with ideas & Strategies
As an appraisal management company owner, you would have to prove your worth over and over again before attracting clients. So, if you have plans to start your own appraisal management company, it will pay you to first build a successful career in the real estate appraisal industry.
People and organizations will only hire your services if they know that they are going to get good value for their money.
So, when you are drafting marketing plans for your appraisal management company, make sure that you create a compelling personal and company profile. Aside from your qualifications and experience, it is important to clearly state in practical terms what you have been able to achieve in time past as it relates to the real estate appraisal industry and the organizations you have worked for. This will help boost your chances in the market place when sourcing for clients.
Here are some of the platforms you can utilize to market your appraisal management company;
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, households, startups, real estate investors, small and medium scale businesses in the location you intend operating your business
- Advertise your business in relevant financial and real estate magazines, radio and TV stations (make yourself available for real estate appraisal management related talk shows and interactive sessions on TV and Radio)
- List your business on local directories
- Attend real estate investment expos, seminars and business fairs
- Create different packages for different category of clients in order to work with them
- Leverage on the internet to promote your business
- Join local chambers of commerce and industries around you with the main aim of networking and marketing your services; you are likely going to get referrals from such networks
- Engage the services of marketing executives and business developers to carry out direct marketing for your business
17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
If your intention of starting an appraisal management company is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on promotion and advertisement of your brand.
In promoting your brand and corporate identity, you should leverage on both print and electronic media and also the social media (the internet). As a matter of fact, it is cost effective to use the internet and social media platforms to promote your brand, besides it is pretty much effective and wide reaching.
Below are the platforms you can leverage on to boost your brand and promote and advertise your appraisal management company;
- Place adverts on financial and real estate related magazines and newspapers, radio and TV stations
- Encourage the use of word of mouth publicity from your loyal customers
- Leverage on the internet and social media platforms like YouTube, Instagram, Facebook, Twitter, LinkedIn, Google+ and other platforms to promote your business
- Ensure that you position your banners and billboards in strategic positions all around your city
- Distribute your fliers and handbills in targeted areas in and around our neighborhood
- Contact corporate organizations, households, startups, real estate investors, small and medium scale business community in the United States et al by calling them up and informing them of your organization and the services you offer
- Advertise your business in your official website and employ strategies that will help you pull traffic to the site
- Brand all your official cars and ensure that all your staff members and management staff wear our branded shirt or cap at regular intervals.