One of the best things about working as a real property appraiser is that you can steer your career any way you choose.
Want to work for a lender or an appraisal company, hone your skillset, and enjoy steady hours (and pay)? You can do it.
Want to build your own business, choose assignments you love, live a flexible schedule, and have limitless income? You can do that, too.
We'll explore the latter choice in this blog. So, settle in and let’s go over your seven-step road map to starting a thriving appraisal business (once you’ve earned your real property appraiser license).
Step #1: Decide How You’ll Start Your Business
First question — how will you start your business? You have a couple of options. You can:
- Launch a new appraisal business, or
- Take over (or purchase) an existing appraisal business
There are benefits and drawbacks with each option and, ultimately, it comes down to the choice that fits your business goals.
Launching a New Appraisal Business
| Pros of Launching a New Appraisal Business | Cons of Launching a New Appraisal Business |
|---|---|
| A smaller investment is needed than if you purchased an existing business. | All the startup expenses are your responsibility. |
| You can invest in the growth of your business as your budget allows. | New business expenses can add up fast. |
| You have all the control, from choosing your assignments and systems, setting your fees, honing your processes, and more. | You might feel as if you have little guidance on the logistics as well as how to grow a successful appraisal business. |
| You can set your schedule and make it as flexible as you want. | You might work longer, more demanding hours in the early days of launch. |
| You’ll feel a sense of pride in owning your own business and creating a legacy. | Launching your own business can feel stressful and a fear of failure can be hard to overcome. |
| You can strategically brand yourself, your business, and your services however you’d like. | It may take a while to get the word out about your services and build a steady income. |
Explore more of the pros and cons of starting your own business.
Taking Over (or Purchasing) an Existing Appraisal Business
| Pros of Taking Over an Existing Appraisal Business | Cons of Taking Over an Existing Appraisal Business |
|---|---|
| A successful income stream is already in place. | There may be a larger investment up front with purchasing a thriving business. |
| The business structure, systems, and processes are already established. | You might not like the existing structure, systems, and processes. |
| There will likely be less branding and marketing work needed to promote the business. | You could be taking over a business with a less-than-stellar reputation. |
| Partnering with a soon-to-be-retired appraiser is one great way to find an appraisal business you can carry forward. | It can be hard to find a soon-to-be-retired appraiser willing to partner with you and teach you their business. |
| Less client lead generation is needed since clientele will already be established. | Existing clients may be resistant to a change in ownership and go elsewhere for appraisal work. |
Explore more of the pros and cons of buying an existing business.
Step #2: Legally Establish Your Business
Whether you’ve decided to start your own real property appraisal business or take over an existing one, your next step is to legally establish your business. This step guides your tax responsibility and protects your personal liability.
When launching (or taking over) a business, the U.S. Small Business Administration advises owners to:
Business structure options include Sole Proprietorships, Partnerships (LP or LLP), Limited Liability Companies (LLC), and Corporations.
Most solo, independent appraisers become sole proprietors, the easiest business structure to establish (and the one that requires the least amount of paperwork). As a sole proprietor, you’ll be an independent contractor doing business as (dba) yourself — or under a trade name — if you prefer.
Registering your business and getting federal and state ID numbers ensures your business is a legally established entity, which is necessary for your taxes.
Step #3: Set Up Errors & Omissions Insurance
Every independent appraiser should carry Errors & Omissions (E&O) insurance as well as general liability coverage. Both insurances protect you from claims made because of your work as an appraiser. Both insurances may also be required when working as a licensed appraiser in your state. Be sure to check these rules.
It’s also worth noting that if you plan to work with Appraisal Management Companies (AMCs) as clients, you may also be required to have E&O insurance.
A Deeper Look at E&O Insurance
Appraiser E&O insurance is a type of liability insurance that protects you from claims alleging:
- Negligence
- Inaccurate data
- Misrepresentation
- Breach of contract
- Failure to protect confidential information (and more)
For example, if a property measurement you take during an appraisal is incorrect and that measurement leads you to undervalue the property, your clients could make a claim against you. Your E&O policy will protect your financial interests in case of a lawsuit.
A Deeper Look at General Liability Insurance
General Liability (GL) insurance covers you from claims that bodily injury or property damage occurred as the result of your work. For example, suppose you knock over a client’s prized antique lamp by accident during your appraisal inspection. Your GL policy would reimburse your client for the cost to repair or replace the item and protect you from the expense.
Other Types of Insurance Appraisers Should Consider
You might also consider setting up commercial property insurance to cover any office space you might rent along with the equipment you use to do your work. Plus, cyber liability insurance can protect you in case of a major data breach or cyber-attack in your business that leaves client information vulnerable.
Step #4: Invest in Office Equipment & Technology
The technology and equipment you use to perform appraisals can mean the difference between money-saving efficiency and costly processes that lead to less income. Be intentional about investing in tools and technology for your appraisal business.
What Technology & Equipment Do Appraisers Need?
The best appraiser technology and office equipment are tools and systems that boost your efficiency on assignments and make your life easier on the job.
Get advice on the tools and technology you’ll need in these articles:
- 10 Tech Tools For Appraisers
- 8 Essential Tools For Real Estate Appraisers
- 10 Appraiser Tools Every Home Appraiser Needs
- 10 Mobile Apps For Appraisers
- New Appraiser Tool Recommendations
Among the favorites for field work: a good tablet, a laser distance measurer, a floor plan sketching app, and a powerful hotspot. Among the favorite tools and tech at the office: a Multiple Listings Service (MLS) subscription, appraisal report writing software, lightning-fast internet, multiple computer monitors, robust cloud storage, and a comfortable office chair.
On the business side of things, consider investing in accounting software to track income and expenses as well as a customer relationship management system (CRM) to help you manage leads and client work.
Remember, you can always invest in more technology and equipment once your business is off the ground and generating income. Start with the basics first.
Step #5: Market Your Business & Generate Leads
If you’re starting a new appraisal business, marketing it and generating leads are both necessary. If you’re taking over a business with an established client base, that’s great! But you’ll still need to market the business and generate new leads now that it’s under your leadership.
Read these blogs to learn all about generating leads for new appraisal clients as well as easy (and low budget!) ways to market your business:
Step #6: Become Active in Professional Appraisal Organizations
Participating in professional appraisal organizations keeps you informed about the industry, expands your sphere, and leads to new business. Plus, you’ll have a built-in network of colleagues to lean on when you have questions about running your business, appraisal work, and client service.
Consider becoming a member of these national appraisal organizations:
- National Association of Appraisers
- International Society of Appraisers
- Appraisal Institute
- Appraiser Association of America
A few more promising ideas? Join and become an active contributor to the National Appraisers Forum. Plus, join your local real estate association and local business groups.
Step #7: Be Strategic With Continuing Education
Appraiser Continuing Education (CE) isn’t just something to complete because you’re required to. It keeps you competitive in your business. Consider dedicating your CE electives to learn a new appraisal niche that has high demand in your community. You could become the go-to consultant for this niche and open a new, profitable line of income.
Get Licensed & Stay Fresh in Appraisal With The CE Shop
Considering a career in real property appraisal? It’s an exciting time to become one! The CE Shop’s Qualifying Education courses prepare you to gain experience in the field and earn your state appraiser license.
Been a seasoned appraiser for a while? Our refreshing and engaging USPAP courses (Uniform Standards of Professional Appraisal Practice) and appraiser CE keep you current, compliant, and competitive. When you’re ready to start, we’re ready for you!
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