A real estate appraisal company's specialty is appraising land and buildings. In other words, an appraiser makes an independent assessment and estimates the value of real estate property or commercial buildings for purchase or sale. Real estate appraisals are used when people buy a home or business, apply for a new mortgage or to refinance an existing one, need information for insurance reasons, and settle estates after divorce or death.
Appraisers prepare a written description of the property, draw up diagrams, and then estimate the value. They also verify legal descriptions of property with city or county records. Fair value is determined by property condition, values of homes in close proximity to the home being valued (called a "comp"), building replacement costs, and valuations based on professional valuation manuals and cost estimators.
Learn how to start your own Real Estate Appraisal Business and whether it is the right fit for you.
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Start a real estate appraisal business by following these 10 steps:
- Plan your Real Estate Appraisal Business
- Form your Real Estate Appraisal Business into a Legal Entity
- Register your Real Estate Appraisal Business for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Real Estate Appraisal Business
- Get the Necessary Permits & Licenses for your Real Estate Appraisal Business
- Get Real Estate Appraisal Business Insurance
- Define your Real Estate Appraisal Business Brand
- Create your Real Estate Appraisal Business Website
- Set up your Business Phone System
We have put together this simple guide to starting your real estate appraisal business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Exploring your options? Check out other small business ideas.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What will you name your business?
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
Luckily we have done a lot of this research for you.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Real Estate Appraisal Business Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
What are the costs involved in opening a real estate appraisal business?
After you have your license and legal stuff out of the way, startup costs are very low. You can usually start with just a laptop and a professional suit — less than $1,000.
What are the ongoing expenses for a real estate appraisal business?
Virtually none. However, you must maintain your own computer equipment software to conduct appraisals. This should not set you back more than a few hundred dollars per year.
Who is the target market?
Clients are usually homeowners, but may also be other businesses.
How does a real estate appraisal business make money?
Appraisers make money by charging a fee for appraisals. This fee is usually a flat fee, but may also be a per-hour fee.
How much can you charge customers?
In general, you can charge between $300 and $400 for a two hour inspection. For complex inspections, or inspections that take several hours or days, you can charge $1,000 to $3,000.
The fee largely depends on where you live. In larger cities, you can command higher fees because rents are higher and home prices more expensive. People expect to pay more for appraisals in New York City, for example. They expect to pay less in a small rural town.
How much profit can a real estate appraisal business make?
A real estate appraisal business can earn between $30,000 and $200,000 per year, per real estate appraiser. Wide variation in income and revenue exists because of the inherent volatility across real estate markets. Some areas are more expensive and thus command higher fees. Other areas are cheaper and thus command lower fees.
There's also the fact that inexperienced appraisers earn less because of their lack of experience, education, or both. More experienced appraisers tend to charge more for their expertise.
How can you make your business more profitable?
Making an appraisal business more profitable can be done in one of several ways. You can consider staging homes that you appraise, assist in the sale and purchasing of homes, and do more in-depth inspections for individuals who want them.
Want a more guided approach? Access TRUiC's free Small Business Startup Guide - a step-by-step course for turning your business idea into reality. Get started today!
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your real estate appraisal business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business' expenses all in one place.
- Build your company's credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from BILL and build your business credit quickly.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Real estate appraisal businesses should consider requiring clients to sign a service agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example service agreement.
Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your real estate appraisal business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
FInd out what types of insurance your Real Estate Appraisal Business needs and how much it will cost you by reading our guide Business Insurance for Real Estate Appraisal Business.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a real estate appraisal business
Set up a website, hand out business cards, and make contacts at networking events. You should consider networking with real estate agents, mortgage brokers, life insurance agents, financial planners, and local business leaders.
How to keep customers coming back
Provide excellent and honest service. Most of the people that get into this industry are selling their services as a commodity. The one way you can attract customers and keep them coming back is to sell your personality and stay competitive on price points. You can also attract more customers by doing a thorough job on the appraisal. For example, be objective, but also tell people how they can negotiate the price of the home and save themselves some money. Maybe the roof needs repair. These are objective facts you can convey to your customer, without being biased. At the same time, you're making sure that you are accurately representing the real value of the property.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
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Is this Business Right For You?
This business is ideal for individuals who are detail-oriented, good with numbers, like having a flexible work schedule and are highly motivated.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a real estate appraisal business?
Real estate appraisers gather and verify data on residential and commercial properties. They measure structures, physically inspect the exterior and interior of buildings, photograph property, and analyze market sales, the architectural quality, and the intended use of the property.
They also perform in-house appraisals and valuations for individuals, stay on top of the current real estate market conditions, assist in the construction of financial models for the real estate industry, gather data on recent sales, pending sales, and current listings. Real estate appraisers also maintain property records, indicating changes in local property values over time. They may also prepare and defend clients in formal appeal proceedings with help from senior appraisers or other companies.
What are some skills and experiences that will help you build a successful real estate appraisal business?
You will need good people skills. You'll also need a license to appraise real estate, along with a minimum of required hours of courses and training. Check with your state for specific requirements and examinations for different types of appraiser licenses. An example for an real estate appraisal license requirements in Michigan can be found here.
What is the growth potential for a real estate appraisal business?
Growth potential is usually small. An appraisal business is usually owner-operated, but may be grown into a larger company if there is enough demand. Some larger firms include the Tri County Appraisal Group; A Quality Appraisal, LLC; and Dugger, Canaday, Grafe, Inc.
Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a real estate appraisal business?
Consider mentoring under a senior appraiser. This can be a hard business to break into, so it may be helpful to work under others for a set period of time.
How and when to build a team
You won't ever need a team of people unless you decide to grow your business. If you do decide to grow, grow organically as prospects and leads grow. When work gets to be too much for you to handle alone, consider hiring an assistant appraiser and train them to do your job.