CoesterVMS Flat Fee Appraisal Structure Controversy
Lately, there has been some controversy surrounding the announcement of CoesterVMS implementation of a flat fee appraisal structure which went into effect on January 1.
The announcement appeared on CoesterVMS Blog on January 7:
CoesterVMS, a nationwide appraisal management company, has implemented the appraisal industry’s first ever flat fee model for residential appraisals. Under the flat fee model, which took effect on January 1, 2013, all conventional appraisals for mortgage lenders are priced at $450 while FHA appraisals are $475*.
Customarily, appraisal management companies utilize a tiered fee structure, whereby prices are determined based on the property type or the state in which the property is located. CoesterVMS is the first appraisal management company to implement a 100% flat fee structure, regardless of the type or location of a property.
In an article published in National Mortgage News, Marc Savitt, president of the National Association of Independent Housing Professionals (NAIHP), critiqued the move stating it validates his organization’s position on the appraiser independence rule:
“It appears this new fee structure is a continuation of appraiser selection based on fee, instead of knowledge and experience. How much will appraisers receive out of the $450? Most qualified appraisers can’t afford to accept an assignment for less than $450. In some areas of the country appraisers receive $500 to $600, based on the assignment.
“I would also caution Coester to consider the provision of Dodd-Frank that concerns customary and reasonable fees. It’s not one size fits all. It’s meant to compensate appraisers based on local markets. I also question a flat fee model that exempts ‘negotiated contractual arrangements,’” Savitt said.
AppraisalScoop recently published an article by guest Author Woody Fincham, SRA designated member of the Appraisal Institute and Deputy Assessor with the City of Suffolk Real Estate Department, titled “Virginia Is for Lovers: All But AMCs“. In this great read, Woody gives a little background about Brian Coester, CEO of CoesterVMS:
Brian Coester (CEO of CoesterVMS) who was at one time an appraiser in Virginia should know better than anyone that every appraisal is a custom job. An appraiser cannot simply place a flat fee on every report that is done. Yet, that’s the model that he uses when his company “manages” appraisers.
It should be noted that Coester allowed his license in Virginia to lapse after he was party to a report that he assisted in inspecting and preparing that was found to be poorly prepared by the state board in Virginia. His father was the one sanctioned as he was the supervising appraiser. The supervising appraising, his father, was sanctioned by the board and fined. Virginia does not sanction assistants. Alex Uminski, SRA, a well-respected Richmond area appraiser, was asked by Fannie Mae to do a review of the property appraisal report that was ultimately the issue for the complaint. Once, Uminski had finished the review and discovered that the report was inflated and that the Coesters were not from the local market area, he turned them in to the State Board. It should be noted that the property subsequently sold for much less than it was appraised for, after the inflated property value supported loan defaulted. Uminski added that the low sale price was after the foreclosure transactions and a rehab, for an arms-length sale.
The Coesters traveled from the Gaithersburg, MD area to Richmond, VA to appraise the property. This is a distance of approximately two hours without traffic. Sometime thereafter he decided it was a better deal to run an AMC. This should be a concern for anyone engaging this company to manage appraisers. If professional ethics have been worked around as an actual appraiser, how then does this same person start “managing” appraisers?