AMC Exposed… Getting the Value Needed

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Inflate Property Values - AMC Exposed

Are AMC appraisers pressured to inflate property values?

We stumbled upon this article yesterday from WSB Atlanta and thought it was worth sharing. Jim Stickland, a Channel 2 Consumer Investigator with Atlanta TV News, covers the story of a lender colluding with an AMC to inflate property values. Stickland reports that John Laymac, a new homeowner was denied a mortgage on his $390,000 home when the appraisal came at $365,000. Consequently, the builder, SR Homes, had Laymac apply with its preferred lender, Brand Mortgage, claiming that they will get the value needed to close the deal. In an email to Laymac, the builder writes: “I want you to go with my preferred lender, Brand Mortgage. They’ve never had a problem getting the value needed.” Brand Mortgage orders an appraisal through its partially owned Appraisal Management Company, Valuation Management Group (VMG). VMG brings in a different appraiser and voila! The AMC appraiser comes back with a value $25,000 higher than the original appraisal. The same as the sales price.

Appraisers have complained bitterly for years about AMC pressure to inflate numbers under the threat of denying future assignments. An inherent conflict exists when those that originate or securitize mortgages are still allowed to own or control the selection of the appraiser. Today many AMCs are directly or partially owned by mortgage wholesalers and large national banks. They hide behind the firewall of an independent company. But if they own that company, either in whole or a piece, it is like the fox guarding the hen house.

Excerpt from the article:

Valuation Management Group and the two appraisers wouldn’t talk to Strickland.

So Strickland called 30-year veteran appraiser Beryl Tylar to look at each appraisal.

She noticed the square footage and more.

“The reason, in my opinion, that there is such a big variation in the two bottom lines is because of the comp selection, and that is a biggie in appraising,” Tylar said.

The higher appraisal uses a comp sale of a home that costs $80,000 more than Laymac’s.

“Personally, I would not have used it,” Tylar told Strickland.

She said there was an entire subdivision of more appropriate comps.

Image credit flickr - David, Bergin, Emmett and Elliott
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37 Responses

  1. Diana N. says:

    I thought the whole idea of AMCs was so the lenders didn’t put pressure on the appraisers to make the value. Yea right!!!! Same game, different name.

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  2. Donna Taylor says:

    This isn’t news!! This is nothing new.  HVCC which morphed into Dodd/Frank has changed nothing.  If you don’t make the value the AMC often keeps ordering new appraisals until they get the value they need.  I had one AMC tell me that if I didn’t make the value they would lose the lender as a client and they couldn’t afford that.  I told them that was their problem.  When is everyone going to wake up and smell the coffee.  AMC’s have not improved the lending process or lessened the pressure on appraisers.  AMC’s are just the most recent SCAM to hit the mortgage industry.  In all fairness, there may be one or two decent AMCs out there, mainly the more established ones.  However since HVCC and Dodd/Frank AMCs are just anther hand in the pie and the consumer is just getting screwed out of more of their hard earned money.

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  3. Denise says:

    Just because the buyer is willing to pay does not make the home worth that amount. I explain it this way. OPM. Other Peoples Money. So unless you have cash, you are using OPM and they need to know that their money is safe.

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  4. Chris says:

    These Problems have been around forever, give us what WE need and you will get more work. What profession works that way….

    If engineers worked that way, building would fall down.

    We need to re write everything again.

    How van WE make this happen is the question.

    Who do I talk to?

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  5. Gary S says:

    All 80,000 appraisers should get together and file a class action lawsuit against Dodd-Frank. At least it might get media attention.

    Utilizing AMCs is nothing more than a trade restraint, What other industry is there in the United States that doesn’t allow a legal business owner to have its own clients. I don’t see attorney management, doctor management or Realtor management companies.

    I lost a major account to an AMC that I had for almost 25 years. Even the credit line business.

    Not once did they try and influence my valuation.

    I was told they were basically threatened by the federal auditors to use an AMC or they could face fines and lawsuits. Still have the email from my client that states this.

    I don’t want to get political here, but just remember, who started this garbage. Andrew Cuomo, Chris Dodd and Barney Frank.

    Guess which party they belong to…See you in November.

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    • koma says:

      Please Gary and Bush with the Repub’s cause the crash…so on and so on.. They ALL are the ones fudging up the system so it works for them and their rich friends. We hear this politics crap everywhere else can we keep it out of here.

      Just my opinion not saying you can’t have yours.

      Thanks

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      • Gary S says:

        As you say, you have your opinion and I have mine. It was Andrew Cuomo who started the ball rolling with HVCC. It then morphed under the current administration into Dodd-Frank.

        And No. If it’s politics screwing up our industry, why bury your head in the sand.

        Get over it and fight for what you believe in.

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      • Tom D says:

        you obviously don’t know who the senators from new york were, and to what party they belonged.  you obviously don’t know know who the chairman of that committee was, and to what party she belonged. and the biggest fraud of dodd-frank was that fun loving barney frank.

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    • Retired Appraiser Retired Appraiser says:

      The NAMB filed a lawsuit on behalf of appraisers before the chameleon morphed into Dodd Frank. They attempted to get appraisers to participate in their own lawsuit but they couldn’t locate more than 5 who agreed on anything. At any rate the lawsuit was shot down….no thanks to appraisers.

      The slaughter continues

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      • Gary S says:

        Not that it would make any difference, but wish I had known about it. I believe there are 80k appraisers left in the US. If we all just chipped in $50.00 a piece, maybe it would have gone somewhere.

        Thanks for the update.

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    • Annemieke Roell says:

      Dodd Frank does not specify that only AMCs can be used.

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  6. Jman says:

    Appraisers need to charge more and do a MUCH BETTER job. Regardless of comp selection (that’s another issue) I can guarantee that one of the two appraisers if not both had no idea the upgrades in the subject (broken down with builder charges) and the upgrades in the comps – The dirty little secret of new home appraising – the appraisers are clueless and guessing.  With 33 years as an appraiser and 20 years doing exclusively new home construction in a non-disclosure state – I can speak with experience.

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  7. Baggins Baggins says:

    Locational preference matters, and builders drive the price via itemized details.  As long as builders use itemized approaches and fixed base fees, there is equality in value, despite varied pricing points.  Builders can raise the base price or offer varied levels of options whenever they want.  Only when they stop selling, have they outpriced the market.  Detailing adjusts through itemization is a necessary development approach to proof the price.   Increased quantities of customizable options is an increasingly common selling point.  The appraisers focus should be on equality of value from one sale to the next in the exact same area, via itemized equivalence.  You must have itemized print outs with item costs shown, if the builder is offering scaling pricing semi customs. MLS data is usually insufficient to make informed judgements in areas where most builder sales brand new do not get reported in MLS.  / Per the independence side of the argument, I ran across this very interesting document the other day…  http://www.appraisalinstitute.org/assets/1/7/vet_affairs.pdf

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  8. Retired Appraiser Retired Appraiser says:

    Mark is correct, the preferred tactic that AMCs use is to send you tons of more comps “to evaluate”.  If you say no to them they will next state they will be forced to withhold your payment for the assignment you’ve already completed.

    Does this ring a bell PCV Murcor?  Those chumps tried this more than once until I reported them for coercion.  Believe it or not I received a phone from them yesterday wanting to send me an assignment although I have cursed them many times over the past 7 years and told them I quit the business.  They can’t even figure out how to remove an appraiser from their list after 7 years of being told off time and time again.

    Cheers to you PCV Murcor…the most clueless and desperate AMC in existence today.

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  9. Tom D says:

    i think you can have several appraisers with several values.  of course there was, and is, pressure by some.  of course bad appraisers work with bad amc-s.  just had a group of doctors arrested for writing too many prescriptions without a real office visit.  the funny thing about the bad appraisers is that they pay the bad amc to be able to do bad appraisals.  it was so simple to say “no” long ago, and to say “no” today.  the appraisers who complained that wamu was pressuring them could have just said no.  that group brought us hvcc, and the current mico management. they can all burn in h.ll with the current amc system.

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  10. Virginia Appraiser says:

    I completed an Appraisal in January. (Subject built in 2014 for a Refinance – Homeowner is an Accountant with Appraiser classes) Needless to say I did not give them the number they wanted due to the next series of events.

    4 weeks later the AMC requested me to consider 5 properties. All 5 properties were 16 – 29 months old. I can only assume they were from the original appraisal. I stated that they were not comparable and quoted FNMA that the lender is suppose to complete a due diligence to make sure they are viable sales that can be used as comps. This is not a rural area, there are many, many sales that could be considered comps due to I drive over 30 properties to find the best comps.

    The AMC was not happy due to I would not update the Report for them to send to the lender. (They do not have a way to communicate with their lender except via reports.)

    3 1/2 weeks later the lender orders another appraisal and the AMC sends it to me. lol I deleted it.

    6 weeks later the AMC sends me a request on discrepancies between the two reports asking me and the other Appraiser to comment on the discrepancies. I read the request, updated my report (I was missing a check in a box). I would not comment on the “Discrepancies” since they were not in my report. I told them that it was a Review Appraisal. They said don’t you want to DEFEND your Report!

    The AMC and I have gone back and forth so many times about this appraisal I finally stated Dodd Frank about coercion, intimidation, instructs, induces, colludes and about sales that would make a difference in the report. And now I am the Bitch because I would not give them their number. None of the requests were for the following reasons: appropriate property information, including the consideration of additional comparable properties to make or support an appraisal: to Provide further detail, substantiation, or explanation for the Appraiser’s value conclusion or to correct errors in a report. It was to comment on discrepancies.

    AMC’s are worse than banks since they have several banks and mortgage companies as their clients that the AMC now has to make happy or the banks and mortgage company will drop them (the way they used to do Appraiser’s) and go some place else until they get the numbers they want and not the truth.

    Dodd Frank has NOT helped the Appraising Community it has created a free pass for Banks and Mortgage Companies to hire henchmen to twist, coercion, intimidation, instructs, induces and colludes Appraisers arms just to inflate the value.

    THIS IS HORRIBLE because the AMC has many banks and mortgage companies as clients and now that Appraiser has gone into cyber space of rotation land never to be sent another order again.

    All in the name to INFLATE value and a lousy $245.00 for the report! Yes, I accepted the assignment for a lousy $245.00 so they can be turned into the state for violating DPOR C&R Fees.

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    • Baggins - Live long and prosper Baggins - Live long and prosper says:

      It’s your own fault for accepting unacceptable assignment conditions. The VA rule is flawed, severely. You undercut and provided the financial incentive for such behavior. Deal with it. Just because some bureaucrat said you should undercut, does not mean you have to. It is unethical to state the appraiser must accept unacceptable assignment conditions, before the state fulfills it’s mandate of enforcement. What a load of bs that ‘rule’ is. Anyone can anonymously complain on an appraiser, but an appraiser must accept unacceptable assignment conditions before they can complain? The state should not be allowed to place conditions upon other parties, as a prerequisite for the state fulfilling the enforcement authority it is tasked with in the first place. Sounds like a lenders special to me, clearly another duck out to effective regulation. Now that you’ve completed that report and filed a complaint, it will be your report being reviewed for violations first. They’ll find something and your complaint about violations of AIR will go nowhere. Amc’s, the long arm of the lender. Stop capitalizing amc because it is not a proper or specific. There is no greater objection than absence. By providing fulfillment to the amc, you perpetuate their position regardless of the fee. Work with the good and ethical ones, drop the rest. Keep soliciting. I solicited at least 2 new clients daily for years. Use paper and the manila folder system for easy management of volume solicitation. I keep about 2 dozen clipboards in some sort of current or long to do business cycle. You have to go through 100 of them, to find a handful whom play fair. But they’re out there. Find them and promote them instead. By working with an amc, the appraiser is promoting that amc, no two ways about it. I’ve had good luck in keeping away from pointless revisions via a higher standard up front fee. You see, they can’t afford to waste that much time on a slim budget. Fees are key to a healthy appraisal business setting. Low fees have so many unintended consequences that come with them. Logic dictates that if you’re doing all the work, you should get the majority of the compensation. Abandon emotion. Seek logic.

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  11. Retired Appraiser Retired Appraiser says:

    Dustin Harris appears to have sprouted a twin (author) on AppraisalBuzz.com today.  Another appraisers preaching that you simply need to hire assistants to do all of your meaningless work.  He doesn’t bother explaining how you’re supposed to afford those assistants when you’re generating the same fees you were earning in 1996.

    He should at least go to the effort of telling appraisers to do one of the following to support their foolish hobby (appraising):

    Marry into wealth

    Inherit a fortune

    Sell crack on the side

    Win the lottery

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    • Gary S says:

      You forgot.  Get a government job.

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    • Bill Johnson says:

      I agree RA. He also doesn’t mention the fact that the appraiser must certify “I” did XY and Z in the appraisal. Its alarming that I can speak to a nurse on the phone, have a different nurse check my vitals, yet a different person give me a shot, and then finally get to a doctor who has had NO SUPERVISION OF THE PREVIOUS ACTIONS. Yet the appraiser is required “I” to drive a two hour round trip to take a picture of a carbon monoxide detector.

      Under the above curcumstances do I get a report breaking down what significant assistance the doctor received? Or better yet, does each nurse and the doctor provide me with a copy of their license and E&O insurance at check out?

      We’re paid less than the union janitor at the hospital but supervised more than the brain surgeon.

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  12. Wayne says:

    I suppose that I march to a different drummer. When I started in the appraisal world there was no license/certification. I was a real estate broker, builder, etc. I was accepted to the FHA panel and we completed a one page “appraisal”. There were no AMC’s…. we did not need them then and we damn sure do not need them now!

    As a broker way back then I remember folks trying to sell us a franchise to be Century 21 or ReMax, etc. The view was there is NIT WIT Realtor and with a few thousand dollars as payment they became Century 21- Nit Wit Realtor! I guess I was wrong as those Nit Wits came into the favor of the public and were successful.

    Way back then there were a few Appraisal Management Companies. At first they were extremely nice and worked with appraisers just fine. Over time they became a pain in the AZZ with their “appraiser to do this and appraiser to do that”. We dropped them like a bad habit! Most of you know the rest of the history that has caused these parasites to be sucking their profits from our fees!

    We have a whole generation of blood sucking folks wanting to feed off of our efforts. There are the national appraisal companies that are constantly seeking additional fools. Of course the AMC’s, the coaches, newletters and the silly EXPOS where AMC gurus tell us how we should be doing appraisals although they have never done one. We have our appraisal organizations….. many… many, why do we need all of these? Well someone is making a buck… guess who is paying for that? If you attend a university and receive a degree…. it is yours! Great! if you earn a designation from a silly appraisal organization you loose your ABC designation the day that you stop paying dues. Really?

    I have observed that our industry is very strange. We range from chumps to champions! Many of us are the old timers. Why are AMCs a problem? Without appraisers they are OUT OF BUSINESS! If I ever accept an assignment from an AMC I will post the info. FHA? I am not an inspector and since the new handbook…I turn all of them down. I was on the FHA panel in the 1970’s. As a general certified appraiser with 35 years of experience there must be many more appraisers available who are better qualified to do the FHA foolishness! LOL…. You are really going to crawl under a house or thru an attic? You are going to hang around while a dishwasher goes thru its cycles. NO you are not… you are lying and you, I and FHA know you are lying. Your lack of honesty and professionalism hurts all of us!

    I know this is a rant and it is from the heart. I hope some of my fellow appraisers will join with me and make this a profession that we can be proud of. There are so many people involved and so many different views. There seems to be no way that all of us can come together. As long as the folks that seem to want to put us together want to earn a FEE by doing so…makes it silly. How about an appraisal organization without dues…. ABSOLUTELY no damn designations? You have earned your license or certification… come on down you have paid your dues!

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  13. Diana N. says:

    Wow, Wayne, I thought I was the only one, you sound like a carbon copy of my history.  We paid out dues, and are damn good appraisers even if the AMC software can’t read our reports or understand our comments. Give me the old days when the reports were read by real people who understood what we were saying.

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  14. Wayne says:

    Today I received an email from a XBOX newsletter with an announcement that Pitiful Home Mortgage an XBOX partner requires that appraisers who accept their orders, must have a Chumpcheck completed thru theBox. The appraiser must submit E&O, complete a residential exam, background check, provide samples, dance to the tango, mortgage their children under the age of five, be able to pour pizz out of a boot, etc. etc. (Seems that they will only steal fees from the most qualified of the clowns in our business)

    If you are unable to walk this tightrope….you will not be allowed to supply income to Pitiful Home Mortgage! They will use another chump to skim their fees. You should hurry to sign up with this company….(appraiser must have a college degree, state certification, etc. etc.) and be the most stupid person on this planet! Yep…go sign up!

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  15. Gary S says:

    Tell them to go pound sand.

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  16. PortlanderPDX says:

    It’s fantastic how the tables have turned in some states. In Oregon, appraisers have great fees, power, and long timelines to finish work.

    I have nothing to complain about, sorry.

    Oh, and working on mortgage loan appraisals stinks. Get a website, get lawyers, realtors, CPAs begging you to prioritize their $750-$1500 appraisals.

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