Free Enterprise an Appraisal Myth?

Michael Ford

Michael Ford

General Certified Real Estate Appraiser at Michael F. Ford Appraisal
Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory
Michael Ford

Free Enterprise an Appraisal Myth

Is THAT free enterprise?

I’m surprised anyone in the business today sees any minimum pricing proposal as being anti-free enterprise. Contrary to popular belief we have not had free enterprise in the GSE appraisal process since HVCC first reared its ugly head. AMCs ‘telling’ us to pick a number from $250 to $350, or that ‘THEY pay’ $325 per 1004 is NOT free enterprise.

I’m an old timer (1986) that was brought up on what used to be AIREA (now the AI) & SREA (now gone) positions that free enterprise and the Sherman Anti-Trust Act prohibited us from ‘even discussing’ fees. It’s taken almost thirty years, and HVCC for me to realize how foolish THAT was on its very face. It was no secret in the industry that in SoCal in 1986 the typical fee was $250. We always charged 10% more and made no secret about it. Same when fees were $275 by 1990-91. We were all under the illusion that this was free enterprise at work, because we COULD vary our fees based on competency and experience. We COULD negotiate directly with the COMPETENT person placing the order from the banks or S&Ls as well as home owners. We COULD challenge & refute negative reviews. We COULD explain to a homeowner why his or her property was more complex, an appraisal challenge warranting a higher fee. MOST understood and accepted this. For many, it was a sign or reassurance that they were getting appraisers that actually understood the unique nuances between certain property types.

Then, in or around 1991, major title companies got into Limited Liability Policies related to HELOCs, and also wanted to include 704 Drive Bys in their marketing ‘packages’ to major banks. Cost of a 704 drive by back then WAS around $200. They only wanted to charge $210 TOTAL for the title policy and appraisal. Title policy base was set at $110. Guess how much the “free market” price for the 704 became? From that time to the present, they have been involved in appraisal processing in one form or another. Some do it as a genuine convenience for their clients, only seeking to break even. Others do it as a separate profit center and do whatever it takes to maximize THEIR investor returns. That includes behind the scenes lobbying. When HVCC was first proposed as a settlement by Andrew Cuomo with Countrywide and WAMU, some posted that the result was an effort by Cuomo &/or his former law firms to create and direct a new industry to his Title Insurance Company clients. I assume that was never able to be proven adequately, or no one ever challenged it legally. It WAS a common rumor of the period. Let’s assume it was a false one. The end result was the same either way.

It was a shock when each GSE started adopting THAT single states (New York) legal settlement as THE model to be followed on ALL GSE appraisals. The nation’s collective real estate appraisers had ZERO input in that decision. IF any associations views were sought, that information never made its way to individual appraisers outside of those organizations. That would be the bulk of appraisers in the country.

At THAT point, ANY pretense of the free market – free enterprise system being at work went out the window completely. Your only choice at THAT stage was to accept fees offered by AMCs or not work. Even THAT was unnecessarily painful since the illusion was still being superficially maintained by some. You had to keep lowering your bids from your customary fees until you were successful. With Ocwen it meant starting at around $300 originally, but by the time they were forced to change their name due to bad PR, it had gotten as low as $225.

FINALLY Dodd-Frank (DF) and C&R happened. One can argue about DFs other provisions, but C&R SHOULD have been a blessing to appraisers. It required by law that all GSE appraisals had to be based on CUSTOMARY and REASONABLE fees for the area, and the nature and character of the assignment. Enter the Lenders & AMCs and their advocacy groups. THEY wanted C&R to be the inadequate fees they were already paying. DF said no, go get independent studies. It got slightly better, but ONLY due to regulatory threats – not the appraisal profession’s illusory vision of a free enterprise system.

THEN AMCs and the GSEs themselves started piling on new work requirements (Scope creep). No longer was a  license adequate for many of  them. They wanted certified appraisers. Ostensibly for “enhanced” quality assurance. In practice it was so they could exert pressure and make the appraiser convert the FNMA appraisal to an FHA appraisal after the inspection was already done and report turned in – can’t do THAT anymore, thank goodness! Add in 1004MC, one of the most useless forms ever created. Then let’s toss in UAD, a system to “clarify” appraisals that now requires a two page glossary of mandatory terms. What used to be reasonably clear to all in the grid now required much greater written text explanations. Much more work required for USPAP compliance. No extra money to be paid for this by the way. Take it or leave it. In 2015 it is STILL common to hear of fees of LESS THAN $200, to (most) around $300~$350 from AMCs.

Never mind that costs of doing business have steadily increased far beyond these amounts. “Reasonable” has given way to a subjective and manipulated interpretation of “customary”.

I’ve followed all these events fairly closely since HVCC. Collateral Underwriter (CU) has significant additional burdens for appraisers (even those that always play by the rules). Despite licensing restriction prohibiting it (without specific review requirements), many appraisers continue to report having up to 20 “potential alternate comps” submitted after the fact that they must “provide detailed responses to why these were not used”. Never mind that they are census tract based, could be several years old and bear no relationship to the subject, nor even be open market transactions. PS – You are then GRADED on your report using a data base that FNMA itself has admitted is built on unreliable data.

Now we have TRID (pronounced turd for good reason). Under TRID all lenders are required to advise borrowers of the FIXED costs that they have NO ABILITY TO NEGOTIATE in the initial disclosure documents that replace the Good Faith Estimate of old (GFE). This new Cost Estimate document of CE must be exact, OR a borrowers signatures on new a disclosure document must be obtained not less than three days before closing. There can be NO variance in the appraisal fee quoted by the bank to the consumer absent “Changed conditions” which have been left as intentionally ambiguous as C&R were!

The bank or loan officer decides what YOUR fee will be by the amount they quote to the borrower during the application process! Of COURSE you can ask for more because it is a complicated assignment, or transaction amount exceeds license levels. SURE you can! All the online banks, or those where applications are submitted electronically and customer loyalty is still at risk, will I’m sure fall all over themselves explaining WHY a higher fee is required to the borrower, and will rewrite CE documents for you.

…Or they could just keep shopping until they find an appraiser willing to work for much less than what is REASONABLE for the assignment.

THAT is why I drafted the proposal for FAIR Reasonable Fees on non-complex GSE work.

Oddly enough I’m told in just the past week several banks and AMCs are asking appraisers to provide a FIXED rate AVERAGE Fee for ALL TRID related work. Any bets THAT uninformed “survey” will produce a proposed fee that is the same or nominally higher than what is charged now?

Lenders prefer to pay National AMCs a fixed rate not significantly above $495 now INCLUDING the AMC fee. Are we supposed to be happy with $525 minus the $150 to $250 AMC fee? Is THAT free enterprise?

Let’s DUMP the pretense that the current system in any way reflects free Enterprise. My proposal substitutes that feel good euphemism with a much more pragmatic and PROVEN reasonable fee structure based on Federal Appraisal Salaries paid to federal appraisers for essentially similar work.

“Customary” never worked. It’s time to try REASONABLE. AMCs ARE here to stay. Let THEM charge banks on a cost plus basis, and if Congress needs to except appraisal fees from the CEs time frames, OR alternatively have lenders AMCs provide borrowers a list of appraisers that they can negotiate (and pay) directly, then do so.

I’d like you to join with me in promoting this. Please take another look at what REASONABLE fees would look either nationally or regionally if the federal model were followed. I think you will agree once you review it objectively.

We’d also like to invite you to join us at the American Guild of Appraisers (AGA) to promote this, and to address other concerns of appraisers today ranging from inadequate turnaround time being allowed, continued undue pressure with respect to both values or negative comments, and blacklisting-delisting-declination to list as approved. ALL our Guild officers (President) and State Chapter leaders are UNPAID volunteers. Our parent unions have waived their traditional up line shares of union dues to help us grow. AGA is NOT your stereotypical 1940’s or 1950’s union. OPEIU is a professional’s union. We seek win-win solutions. Even in this issue.

If interested, please call me direct at (714) 366 9404; or contact JanBellas@appraisersguild.org (301) 220-4100.

The full proposal as originally drafted may be viewed here. Its only a draft proposal. Of COURSE there is room to include additional suggestions.

Proposal: http://mfford.com/html/c___r_fees.htm.

Again, thank you for taking the time to read and respond.

Cordially,
Mike Ford
National Appraisers Peer
Review Committee Chairman,
American Guild of Appraisers (AGA)
OPEIU/AFL-CIO.

Photo Credit flickr - Funky Tee
Michael Ford

Michael Ford

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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40 Responses

  1. Koma says:

    Mike, I appreciate the time and effort you put into this article. Especially the history, yeah I’m a history nerd..lol The one point you have made throughout is everything in this appraisal industry process is done without the actual field appraisers input. It seems everyone but us can have these discussions.

    I’m still on the fence with the minimum, because when you put out a minimum “they” are going to make it “The Fee”. For example; in one of my areas they started sending out REO appraisals at $250 for a full (told them my fee and some bottom feeder took it, that’s OK cause I have plenty of other work) and less than a month later that is what their contract/refi full appraisals started come in at. Yeah I know REO’s are not covered under the customary and reasonable..blah, blah, blah. No one tells me what my time is worth! I tell everyone to diversify, have multiple clients from as many areas as you can. These AMC’s can’t find enough CR appraisers in my areas. VA work is sitting at 7 weeks, yes I said 7 weeks, out and it’s only going to get tougher for them all. The days of 48hr turn time are gone in my areas. All of this put’s me in a better advantage of getting MY fees.

    Thanks again,

    Tom

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    • Koma, IF they started letting appraisers with under three years experience appraise (they won’t); at $515 would that be bad?

      Five or more years experience for $585? Or, those that only allow residential certified-$685 and $750 (rounded) for FHA. These are not the fees they pay the AMC. They are fees the appraiser must be paid. So, lets say they DO go with the minimum -of $585. How is that worse than the current HIGHEST of $350 to $450?

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  2. Ray says:

    let’s all get real, the AMC business model is NO friend of the appraisers doing appraisals for lending purposes. The AMC business model was formulated, designed and implemented by and for lenders and lender interest groups. The AMC business model accommodates the lenders ultimate goal to control the lending appraisal process and those that work in it. The AMC model has little to do with improving loan risk management or improving appraisal quality. Its ALL about controlling the appraisal process and justified by using USPAP as the reason for all the unreasonable and irrelevant demands placed on appraisers. How can the lending appraisal process be objective, impartial and unbais, when the appraisers have no or little say in the fees, tat, comp selection, comp adjustment and other reporting elements. lets all get real for a minute. Lenders do not want or seek our input or influence. They just want the appraiser’s total compliance, regardless, and it looks like, they currently have it or at least most of it.

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    • Ray, what’s your point? Just accept it? Or, do you want to fight back? There HAVE been successes all over the country by appraisers that have chosen to fight back. Louisiana; North Carolina, even California. Everything you said is true. The only issue is whether you accept it, or demand change?

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      • ray says:

        mike, my point is that in order to fight this, we all need to fully realize what we are up against. Yes, I support fighting this amc business model, that is becoming more entrenched every day and will be even harder to fight. Its good that appraisers have won some individual battles at the state level, but the war to regain some control and influence by appraisers is moving slowly.  Marion’s last comment on the AMCs, hits the nail on the head and should be used by the appraisal profession to justify and describe how the appraisal process has been hijacked by lenders and non-appraisal groups.

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      • Its a valid point-just not my particular battle today. I have to assume barring dramatic changes, that AMCs are here to stay. I don’t like it, but I do need to pick my battles.

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      • ray says:

        mike, yes as you state “I do need to pick my battles”. But it should not be just “your” battles. Its honorable, but this battle needs to be raged by a great majority of  appraisers, more appraisal organizations, more leadership personnel within the larger profession appraisal organizations. Herein in lies the issue, IMO. There is no cohesive or unified voice that speaks for appraisers performing appraisal for lending purposes.  Yes, there has been some victories at the state levels, but ultimately appraisers need to do battle at a higher level to make the professional changes that we all know need to be made.

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      • Hi Ray (this is only place I could respond).

        Ray concur that the battles are far more widespread than merely “mine”. THAT is WHY I joined AGA. Before reading your post, I had just drafted a letter for our Guild President to the Six Members of the FFIEC re TRID. Im urging him (us) to sign on to a big industry-wide call for delays in implementation of TRID (turd); and direction re issues of concern. NOT because the letter has ANYthing more than a passing reference to appraisers, but because we should have common cause and be supporting of some of the letters signers (NOT all by the way, but some). Such as AI (that you guys often see me disagree with); NAR, NAHB and possibly NSAO if they sign on. There are reasons for appraisers to try to build better relations with ALL these groups. We need their future support or good will. At a minimum we may need their neutrality down the road.  Whether they are interested in us at this time or not is another matter.

        MORE importantly, there is/was an opportunity in our own letter, to raise the issue(s) of loan officers setting our initial fees under TRID; embedding of those fees in the disclosure document AND the widespread abuse of C&R!

        Ray, many of us know exactly how difficult this is and we ARE attempting to form a national unified voice. Why do you think I am doing by promoting AGA membership in the first place? YOU can join by emailing Jan Bellas at janbellas@appraisersguild.org by the way.

        NSAO will likely be signing on to the underlying FFIEC letter I noted above-at least some of their own members have asked them to do so. That’s a group of the 22 state coalitions. I have nothing to do with organizing that. The actual organizer doesn’t know if he’ll get signatures from all 22 coalitions or not, because each has different procedures for getting approvals, even for something as simple as a letter of support. All we know is that he will try. Just as he spurred US to get on board, he’s spurring others.

        THAT IS SPECIFICALLY WHY I realized we need a single large national group. Some issues are too time sensitive to take one or two weeks to get approvals. A union with thirteen million members; retirees, and their families has FAR more pull and ability to address issues in a timely manner than 20 to 30 separately lead state appraisal groups do; or peer groups like AI can. Not to mention that some have their own undisclosed separate agendas such as “commoditization” of appraisals (AI).

        Ray, ON top of everything else, unless you have specific regulators ears like the ABA does, to get an appraiser fee issue considered requires a strong consumer benefit. In addition to core ideas that may or may not benefit taxpayers,we go in right out of the gate speaking on behalf of over thirteen million ‘consumers’.

        Will anything happen on our specific issues from this letter? Doubtful, but it DOES set up groundwork for the next step which is the proposal I’ve distributed for comment. POSSIBLY, tagging our issues on a letter of support for other broader banker concerns makes it more difficult to keep shoving appraisal issues under the carpet.

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  3. Erik says:

    Why do AMC’s exist at all?

    The banks could use Appraisal Port (or the equivalent). I pay Appraisal Port $10/order. I don’t know what the banks that use them now pay them. But whatever they pay them is a small fraction of what the AMC leaches net.

    The banks would be responsible for reviewing the appraisals (they could hire all the unemployed AMC appraisers).

    So the total cost of the appraisal, less their Appraisal Port fee, less the cost for doing their own reviews, would leave the field appraiser with a much higher fee than what he/she is getting now.

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    • Erik, the AMC model is NOT going away. 1. It gives banks “plausible deniability”. That doesn’t protect them, but in their Boards minds, it’s enough. 2. It removes the entire labor costs and benefits of having high paid appraisal department staff. 3. It allows them to tack on ‘administrative’ fees BEFORE the AMC fee and actually make a profit from the appraisal rather than having it as a expense.4. It allows them the pretense with consumers, that they have ‘no control’ over low appraisals; even where their own policies result in selection of appraisers that are (to put it nicely) ‘conservative’. I don’t like it either, but we work in the environment we have unless we can reasonably change it to one that is better.

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  4. Wayne says:

    First I want to say that Mike Ford has done a tremendous job of posting information concerning basic fees for appraisers. Thank you Mike!

    I have come to realize that the appraisal business is so different from one area to another. It seems that in some markets an appraiser would slap his mother if an AMC told him to do so. In another market that same AMC would have their email deleted without any response.

    I am one of those that dislike AMCs with a passion. If every appraiser treated AMCs like I do, there would be no AMCs. Many appraisers say ” you have to work with AMCs”. They could be correct as far as their market is concerned.

    Recently there was a post on a forum about being stood up for an inspection and should we charge. The usual ..”.this is a good client,” and all of that crap. I look at it as a loss of opportunity and I could have set another appointment in place of this one. Yep, if it was a confirmed appointment my client is charged $100.00. (I charge $150. for a final inspection and a missed appointment should be more that $100. but I have competition).

    It is not my business what you charge for any of your appraisal products. As your fellow appraiser I cannot help but ask why are you seeking the low end of the fee range? I suggest that all of us take out a tablet and pencil and start writing down ALL of the sources of appraisal work that is available in our market. I really think you would be surprised at the tremendous amount of appraisal work that you have not even considered. Just a few ideas, Federal Government and all of their branches, State Government and all of their branches, County, City, etc. What about municipal water districts? School Districts? Then there is the court system….gee, divorce, estate, and on and on. Bail bondsmen need appraisers. Tax arbitration, someone wanting to know what price to ask for their home. There are a “few” corporations and businesses that need to know property value for many reasons. Plenty of business!

    Just the typical day here. One AMC broadcast assignment for an FHA in my area. Delete. One request from the VA to do an appraisal outside my area but they will pay mileage and give me extra time. Delete. A request thru Mercury from a local bank for an appraisal in BFE …This was offered at $600.00. It is about noon here and I am not in the mood to work much. Oh well. I have no choice, I have to get back to work! All of us are in a different market!

    I am just human…and can only do so many of these appraisals. Many of you know that I take no AMC work, No mortgage broker work, NO large banks like Bank of the Universe, etc. That is just my personal choice, yours will differ. All I suggest is that you take another close look at your business plan and profile. If you are working for AMCs for chump change….you can do better! Best of luck to all!

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    • Bill johnson says:

      Wayne, I agree with you that the appraisal business is very different from area to area, however hears in part my issue. As appraising runs in the family and many of my closest friends are appraisers, I can tell you that in my area the trees have been shook and there are limited opportunities outside of residential. This is not just my opinion but the opinions of many. I’ve stood on my roof and yelled, went door to door to lending institutions, etc. and after diversifying as much I can, 50% of my business still comes from the residential side. This 50 % is extremely competitive and for those who compete for it, a complete change in business model is required. Turn times from issuance of the order should take no more than 4 days and should really be in the 2 to 3 day time frame to be competitive. With no more than 1 to 1.5 typical/average assignments being completed in a day, I can thus never have more than 4 to 5 appraisals in the pipeline at a time otherwise they will be late.

      One other myth I would like to debunk, and again maybe its area specific, but based on the saturation of appraisers seeking non-residential work, the work that is available has been pushed down to reflect similar known AMC fees. From a business standpoint, do I chase the individual civil use clients that may pay similar to what my residential client’s pay (AMC’s included)? Or do I spend the energy and try to become a preferred appraiser for a lender who uses an AMC (increase volume)? The answer it seems depends on what area you service.

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      • Wayne says:

        Thanks for your comments. Our office is a bit different as if the AMC wants this or that…does not matter, as we do not even chat or consider what a AMC wants. That is a fact if you are an AMC we will not work with you. That is the end of the discussion!

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      • Bill Johnson says:

        Wayne, I respect your decision to not work with AMC’s, but I have taken the opposite approach. As a business that does appraising, I find that my business instincts demand that I disect the inner workings of the AMC business model to see how they operate. What I have found is that to be competitive, these AMC’s need to offer the full service product (Traditional AMC product – 50% to the appraiser) and more of a software as a service (SAS) to their lender clients. My target goal is to end up on the preferred panels of those lenders that just use the SOS type of service that the AMC offers. Without the full service but the use of the AMC’s software, these lenders generally pay 85 to 100% of what I would call typical for my area. I like to think the AMC’s are a necessary stepping stone in order to get to these types of clients. When I get onto these preferred lists, I generally stop working for the AMC’s general panel at the reduced split fees.

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      • Mike Ford Mike Ford says:

        There is no chance in HELL that I would give  50% of MY fee to an AMC unless they are ALSO going to perform 50% of the appraisal!

        As for a 10% or 15% ‘portion’, I’d be fine with that IF it was 10% or 15% of a REASONABLE fee to begin with. At $805 (MY $685 TRID fee and their 15%+-), they get $120 (rounded) at 15%. I get $685. They get $120. Marketing; coordinating, document forwarding (contracts, CC&Rs etc.) & even at least a superficial review of my own work is worth that much to me. Payment due in 15 day s of course, or a 5% late fee assessed. 10% if not paid in 30, and I file a non payment complaint with CFPB and my state.

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      • JH JH says:

        Mike, fixed rake percentage split could work as an alternative to cost plus, but the industry is already too varied in it’s scaling implementation of what duties an amc should perform and should not, that it’s probably too far gone to save a fixed percentage approach.  But if a fixed percentage cap rule was implemented in the co mingled amc and appraiser fee scenario, such an action would immediately cause the amc to constantly advocate for higher fees for appraisers, in order to get higher fees themselves.  That’s the up side of that idea. / But I don’t argue that any more very often, because the idea of co mingled fees for distinctly separate services is a fallacy to begin with.  Lobbyists had a heavy hand in ruining this industry with actions like lobbying to not have appraiser and amc fees reported separately on closing forms.  Marion kept many appraisers aware of that issue previously, as well as persons on this board, which was the most recent push.  Something like a thousand letters on the last day of the open writing period, if you recall from earlier this year on apprsrsblogs. My position on that matter is that if it’s legal, why do they need to conceal the fee splits on closing forms?

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      • Wayne says:

        Bill,

        Let’s say that you are a cardiovascular surgeon and that your wife is a general certified appraiser. The census indicates that Loving County, TX has a population count of 25. You could move there and have very little competition. I suspect very little income also!

        The silly point that I am trying to make is that some areas have an oversupply of appraisers. Should an ambitious appraiser stay in that area and fight for a scrap of work or move somewhere that will have plenty of work? That decision is up to the individual. I know that if I were the surgeon mentioned above, I would move somewhere and make a ton of money. Research is supposed to be a skill necessary for appraisers. Why not use it and move your own cheese (so-to-speak)?

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  5. bubba jay / Retired Appraiser II bubba jay / Retired Appraiser II says:

    here is my question and concern about TURD.

    TURD gives lenders a max 72 hours (mandatory) to provide a cost to the borrower, and then unless there are circumstances that no one was aware of, that fee cannot be changed. AMC’s are asking appraisers to give their quotes in 24 hours.

    1. How can an appraiser give a quote for an assignment before they even see or start working on the property?

    2. What about FHA re-inspection fees? if an appraiser has given an FHA appraisal quote, then has to later do one or two re-inspections, what happens to those costs? are re-inspections now free because they exceeded the quote given?

    the bleeding continues . . . . .

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    • Bill Johnson says:

      Its very easy bubba jay, the lender does not take your paragraph describing the complexities of the property and provide a rebuttal to either agree or disagree with you, but they simply keep shopping until someone agrees to their set fees. As long as the 4th or the 10th appraiser they try agrees to the set fees (non-complex, then the assignment is not complex. With TRID, this illusion that lenders will consider complexity fees will be replaced with an above board take it or leave it set fee. I was just turned down for an order ($75) as the lender did not consider a property that faces a freeway (lot fronts it) has GLA, Br, Ba, converted garage issues and was a recent investor flip a complex assignment.

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      • Mike Ford Mike Ford says:

        Bill, that is the EXACT reason why we need to set (MINIMUM) ‘reasonable’ fees! At $685 I’d bet you’d have taken it and said, OK, I’ll deal with the extra work professionally and competently. As it is, they’ll get someone incompetently dealing with it since that person is not competent to recognize a complex property, OR honest enough to acknowledge it. (Presuming they still contend its non complex).

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  6. Clint says:

    this is a great article. I think TURD may be a problem with rural properties with significant acreage due to low density and few recent sales. I just got an email from one of my AMC clients stating that they would be telling their clients (banks) to ask the borrower ahead of time whether the property to be appraised has any complexities, which they define as follows

    any water influence

    any outbuildings

    size over 4,000 square feet

    5 acres or greater

    log, berm or dome home

    Any loan officer with half a brain should be doing this in the first place, but this suggests they will be looping all assignments which meet that criteria together with the same fee.  There will be a standard non-complex fee and a standard complex fee. I will not agree to the same fee for a farmette on 30 acres as a lakefront property on a standard site with 50 feet of frontage. It takes much longer for a rural property in most cases due to driving all over the county to take comp photos. So if other appraisers are like me there will be few appraisers accepting assignments for rural properties and more cherry picking assignments. I predict they will end up with Fannie Mae not making loans on rural properties eventually because they won’t be able to find any appraisers.  Of course they could simply change the dumb rule that you have to drive to each comp and take photos, even when you can’t see anything from the street.

    What is the point of taking an exterior photo from the street anyway?  You get MLS photos for most comps, which let you see most rooms and give a better idea of what the house looks like. You have access to aerial views to check for any locational aspects.  This rule needs to be changed if they expect appraisers to appraise these types of properties. This is why they need the appraisers input. They just keep burning bridges every time another regulation changes things.  More and more appraisers are leaving, and the license renewal period is December 14th.  We will see another large decrease in renewals this time around.

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  7. Marion says:

    Uhmmm,

    I can’t speak to the ancient history in the industry, but at least since 1997, there wasn’t any “free market” for appraisers.  There was a just a larger pool of potential clients, who, would also ask for fees, and turn times, and who might consider the quality of your work, and your past work experience with them before awarding you or not, with an assignment.

    The difference today is that there is a much smaller pool of potential clients, and while the regulations and optional laws allow clients to consider the quality of your work, and your past work experience with them, before awarding you or not with an assignment, they don’t have too and have instead chosen to focus only on the fee and TAT.

    This smaller pool of potential clients know you all are not going anywhere.  If you want to work, you have to come to them and meet them on their terms.  They face little to no competition from other potential clients of yours, and experience has shown them that this industry will did little more than just complain, and even has gone so far as to justify the egregious behavior of clients, because, we know which side of our bread is buttered.

    So Free Market?  No, not for decades.  And, it’s not within the current, or even the past laws that appraisal products are/were to be considered as free market products to be leveraged as inelastic against supply/demand and overall economics..

    Let’s give up the fantasy of what we thought/think pre2008 was, and address the reality of what it really was, against what it currently is, then, we can address and fix the problems…but only if, appraisers ever become bold enough to challenge their clients, because, therein lies the crux of the problem.

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    • bubba jay / Retired Appraiser II bubba jay / Retired Appraiser II says:

      i have to disagree with you on your comments Marion.

      let me speak about ancient history because i was there – before AMC’s, there WAS a free market. back then I DECIDED what my fees were, based on my expenses. i was free to turn in an invoice with any fee i wanted. about every two years, i raised my fees $25 to cover my costs and cost of living increases like any business should be able to do. all that is gone. today, we have to call the AMC and ask (beg) for our fees to be raised (and told no) because we are going broke and cant afford work for $20/hr with more costs on rise. that is NOT a free market.

      furthermore, if you look at the statistics, appraisers ARE going somewhere. they are leaving the business in large numbers. in the last statistic i saw, we had 120,000 appraisers, and now we are down to somewhere near 70,000. how old that statistic is i dont know, but i know that number is currently even lower because i was another one who quit this year. the industry is doing a lot more than just complaining. the bread that you speak of that is getting “buttered” by AMC’s is burnt to a crisp and tastes awful, and appraisers are realizing it, and ARE doing something about it. take my word for it – it isnt hard AT ALL to find to find a different piece bread that isnt burnt and tastes oh so much better.

      with comments like yours – any chance you are an AMC? one has to wonder.

      the bleeding continues . . . . .

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      • By the way folks, please click the blue word “here” in last paragraph to see the specifics of what’s being proposed. If you concur (even conditionally) please let us know via email to myself at mike@mfford.com or janbellas@aprpiasersguild.org .

        Bubba, Marion is not an AMC. She is and has been a sole and dissenting voice from another blog forum. Actually several others. She is a “warrior” that testified before Congress for Dodd Frank, trying to fight the influences of AMCs back as far as 2009. You guys probably forgot since I haven’t been mentioning it in every single post lately, but AGA IS recruiting new (and older/former) members with a willingness to “do” as well as to type. We are trying to convince Marion to join. She’s been in this fight longer than I have.

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      • bubba jay / Retired Appraiser II bubba jay / Retired Appraiser II says:

        fair enough and my apologies to Marion.

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  8. Marion says:

    RESPA (Reg X if you can’t remember) Title 12 ? Chapter X ? Part 1024 ? Subpart B ? §1024.14
    says:

    (b) No referral fees. No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person. Any referral of a settlement service is not a compensable service, except as set forth in §1024.14(g)(1). A company may not pay any other company or the employees of any other company for the referral of settlement service business.

    (c) No split of charges except for actual services performed. No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section. The source of the payment does not determine whether or not a service is compensable. Nor may the prohibitions of this part be avoided by creating an arrangement wherein the purchaser of services splits the fee.

    HOLY COW BATMAN! ARE ALL AMC ORDERS IN VIOLATION OF RESPA???

    Discounts are a “thing of value” and a RESPA issue if you have to give up a thing of value to get an assignment.

    You can not violate RESPA when doing GSE work, as RESPA is part of the laws and regulations that pertain to GSE lending work, see AO 30 in your USPAP along with the Competency and Ethics Rules in USPAP

    §1024.14 Prohibition against kickbacks and unearned fees

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    • JH JH says:

      Nice post Marion.  Would it fit the definition of irony, that amc’s whom are imposed into the process in order to bolster compliance with ethical and regulatory rules, actually broke a very important rule from the start, and continue to do so?  How can ethical appraisers and lenders alike place faith in a company whos core business models may revolve around a constant disregard for valid and long established business model prohibitions?  Amc’s who do not bill separately for their services, as well as direct distributors whom have co mingled billing, all claim unfair advantage through unethical business structure, because the cost savings discount of lower priced appraisal services is not returned to the consumer.  This results in a constant industry wide assignment pattern where the least worthy appraiser, is given the highest volume of assignments.  Also promoting unethical appraisers who would claim unfair business advantage over their peers, by enticing assignment companies to send them more assignments with a thing of value, never demanding separation of the billing.  Instead this surplus which would otherwise and is already legally identified as a junk fee or unearned fee, is held as a variable opportunistic profit gained by selecting the appraiser based on fee, instead of more important appraiser selection factors.  The result is an industry wide suppression of appraisers fees.  Amc’s have a lot of great things to say about their success and growth, while appraisers often understand such growth resulted in direct losses to appraisers.  There is no sales pitch or solicitation method or even track record of professionalism, or accreditation which can trump the financial incentive to drive down appraisal fees for variable opportunistic profit.  Only a rare few amc’s have cost plus billing, and even for those who do, the market standards for regular appraiser compensation have been stifled so severely by most amc’s and direct distributors whom do not have cost plus billing, the entire industry has lost sense of what a fair appraisal fee should be.  So like a substantial real property valuation question where current data is unreliable, the answer to the question of what is a fair appraisal fee, is answered through historical data with adjustments for time and economy.  If the standard fee was $400 20 years ago, it stands to reason that $600-$800 or more should be the current fee to the appraiser.  Actually that is a common current fee range to consumers.  The problem is that middle managers keep the difference, what ever that may be.

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    • What about the portion of the lender to AMC “appraisal fee” (paid 100% by the borrower) that is being paid as a commission to the person that goes out and arranges for the lender to use a specific AMC? $25 ~ $35 per appraisal. Where’s that disclosure to the borrower? We’ve had posters here that had family members that did this kind of marketing. I also have knowledge that it takes place.

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      • JH JH says:

        Interestingly enough, the rapid expansion of amc business presence has caused for them to compete with each other, for both clients and appraisers.  Because of this almost instantaneous proliferation of many smaller amc’s, the strangle hold many big box amcs claimed, did subside to some degree.  They all occasionally have a tough time fulfilling all the promises of service.  These micro managed processes bring a touch of irony for market professionals like appraisers, whom provide professional analysis of real property markets, based primarily on the principals of substitution. You know, I don’t care who I work for, as long as they don’t waste my time, and are willing to pay a good rate up front, without asking me to bid and compete with other appraisers in an infinite struggle of futile micro management.  Good solutions to some of the other posters statements and questions might include constantly bidding high in the first place.  No need to surprise the lender, and there is a need for consistency.  So if an appraiser constantly bids high, everyone wins.  And now and then the job is more tough than expected, but you just tough it out same fee, because the presence of consistent assignments at good fees, is what keeps appraisers in business.  This is the primary argument against fee bidding competition applied towards appraisers.  Without an equal share of work with reliable clientelle, and consistent patronage by assignment companies, appraisal offices can fold pretty quickly, willing or not.  Amc’s are their own worst enemy that way, in that they drive out their own cash cow, by overly micro managing the process.

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      • Mike Ford Mike Ford says:

        I think we are saying essentially the same thing JH. When I talk about ‘minimum’ fees, anyone that read the proposal I drafted can see they are significantly higher than “typical” AMC fees today. I had a discussion with an AMC today that asked me specifically what amount it will take for me to start doing SFR work again. $685 (to me-not  them), and to $750 for FHA. THEY suggested I use a trainee. I said “fine” as long as you don’t expect me to also inspect on an interior basis. Probably something in the $550-$600 range then (assuming I still have to drive by). Does THAT mean my TRID rate would be $550?

        No my TRID rate is $685 MINIMUM because I KNOW most are not easy conforming limit non complex FNMA. For $685 I’ll deal with analysis and impact of unpermitted additions, externalities, functional inadequacies and quirks of zoning or site characteristics…within ‘reason’. Probably up to ten hours total estimated time for that fee-and not over a million,

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      • JH JH says:

        Yep.  My rebuttal to that ‘get some help’ suggestion is this;  I need to get 750 minimum per standard order, to even begin to consider affording an employee or an apprentice.  It is certainly a resounding admission of improper process and misinformed management, for an amc to suggest that an appraiser needs to hire someone, in order to be able to work for less compensation.  An amc asked me to give a financial discount on this 500 rvrs fha I fielded last week, and regrettably went an entire 2 weeks late on.  My response was absolutely not, and it’s illogical to presume that because I’m in high demand, that my services should be worth less.  I don’t have to be an apologist because I ran late in the hottest market in the union, or even the slowest market for that matter. The appraisers own ability to negotiate is what dictates the result.  It is a criminal offense to use runners and lie on a FNMA report regarding actual inspection and meaningful assistance, and it’s time for the entire industry to clean house, and expel every appraiser who operates like that, permanently.  Especially now that trainees have to take the mentor class, and know for absolutely sure they’re breaking the rules, they should also be barred for life from all real estate licensing.  Things end where they begin, and unethical behavior is not tolerable as a normal routine course of business practice.  The regulatory structure surrounding this industry is one big illusion.  A never ending series of process compliance corrections and alterations hoisted upon the appraiser, and never a whisper about simple compliance follow up actions to curb unethical engagement.  If state offices ever made a pro active outbound phone call to assure compliance was properly implemented, instead of waiting for brave complainers, I’d fall off my chair in surprise. FYI to another poster, if you do take less, in this day and age of automation and data retention, you have just made a lasting admission through digital records that you will work for less.  Lately I just bid $X + any fees.  I’m not playing that game any more either.  In these days of permanent data retention capability digitally, it’s vital for appraisers to set the stage for a minimum fee up front, and never ever go below that.  Make it or break it.  Go big or go home.  Settling for less is for the other guys.  Nobody makes appraisers accept work orders.  Love it or leave it.  If you can’t position yourself properly to get a fair fee, step aside so others can. Life is too short to constantly get shorted. Learn to sell, or learn to apply elsewhere.

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  9. ray says:

    Just a historical tidbit. I did my first URAR basic residential independent fee appraisal for a lender in 1985. Fee: $275 paid at the door. Turn time: 10-14 days. No appraisal license, no e and o insurance, no downloading fees, no client SOW, no requests for additional comps or comments, 3 exterior subject photos, 3 comp photos and no appraisal U/W demands. In 1985, I, as a sole proprietor, averaged about around 7-10 requests a weeks.  fast forward to today, I do very little lender work, although I still receive email appraisal requests for $200-250 and 2-3 day turn time.

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  10. Marion says:

    I would just like to correct something.

    I did not speak to “congress” I worked with my Congressman who was chair of the House Finance Committee at the time. I don’t want you all to think I’m super special, because I’m not.  I just was ticked off about HVCC and went to Washington to do something about it.  If you think that can’t happen, well, here I am.  Living proof it can be done, and I have the pictures, historic blog posts, emails and people who will verify that.

    There are a lot of hard truths practitioners in this industry have to face, and own up to.

    1st.  This is not now, nor was ever intended to be a “free market”.  We sell a highly specialized product to a highly specialized industry that is highly regulated.  We are highly regulated.  If you still want to believe this is a “free market” tell me how you can open franchises full of trainees across the country or even in different countries, and grow your business.

    2nd.  If you produce the same quality of work at $200 as at $400 and at $600, why do you deserve $600?  Because of regulation (just in case the answer was slipping your mind)

    3rd  Other than being lied too, what is the detriment to borrowers if you are being paid $200 or $600 for the same quality of work?

    4th  If you point fingers at “the other guy” is the low quality one, remember that someone else is also pointing a finger at you, and is why you are being managed.

    5th  If we as an industry, don’t start identifying why there is a difference between a $200 report and a $600 we’ll all be sitting around waiting for work above the de minus loan amount of $1million, or the high risk borrowers, FHA, VA and USDA because those are the last laws requiring your services.

    6th Somebody decide for me.  Is the better path one that shows how deserving we are, or the path that shows the financial service industry, yet again, taking from borrowers without full disclosure or enforcement of the borrower protection rules in place?  Somebody decide that, because of RESPA, appraisers are on both sides of that coin.

    These are the hard truths we have to face, own up to, and answer for.  As Mike said, I have been at this a long time.  Hopefully, I have been at it long enough, and have memorized or quoted enough of the laws, rules, regulations and assorted garbage to see where the loopholes lie and how best to address some of our issues.  But the one thing I do know for sure, is that without large numbers of people behind an organization, nothing gets done.  Nothing.  We are easily dismissed and have a long history of our organizations being dismissed.  Three main reasons for that are; on our own, we lack sufficient numbers in any particular geographic area for politicians to get excited about.  Second we lack the financial incentives to excite them. And lastly, lobby laws have been changed.  On a state by state basis, the lobby laws are so varied that just on it’s own, trying to speak to each other or politicians becomes a minefield requiring a herd of attorneys.  If you surf up, “Mowing Down the Grass Roots” by the Department of Justice, it’s a bit dated now, but will give you an understanding of the difficulties the AGA and other appraiser organizations face to work for appraisers interests.

    Keep up the Good work Mike.  I have to run.

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    • Mike Ford Mike Ford says:

      I think Marions right in many areas, though I don’t know ANYONE doing USPAP compliant at the low end of the fee range. Guess it may be a geographic thing too. I know a FEW appraisers who when they do take on a low fee, bite the bullet and do the same good quality they normally do. They have ethics.

      Im more concerned about those that have made a routine of doing low fee work. Like a SF appraiser that sends a trainee out, and who then pretends that she inspected the property. She’s not unique. Fee was $450. Issue was not low fee. Issue was lack of personal integrity which gets lost in the jungle of poor quality these days.

      There are appraisers all across the country that either use inexperienced trainees or completely unlicensed appraisers to do their legwork and just write up or correct the reports non appraisers write up. Rote adjustments of course! I’m also concerned about appraisers that COULD do good work, but who choose to do the minimal amount required by the lender, which is FAR LESS than that which is required under USPAP. “They aren’t paid enough” to take the time it takes to write a fully compliant appraisal report, and no one seems to care. In their minds “Why should they?”

      Recently, the President of the AI said that appraisals have become commoditized. I disagree with him. He is TRYING to make them that way, but it has not fully happened yet, nor should it. He’s clearly pandering to his 21,000 US AND FOREIGN members. Im only concerned with American Appraisers, consumer & taxpayers. THATS who OUR appraisal laws are written for. Foreign interests can learn OUR rules. We do NOT have to bend to accommodate theirs.

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  11. Retired Appraiser Retired Appraiser says:

    That was a great article but due to it’s timing (six years too late). You are simply spitting in the wind.  I am however amazed that you can organize a group of over 2 appraisers that still passionate enough to expose the crime of the century.

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  12. Marion says:

    TRID negates it’s entire purpose of being.

    If the purpose of TRID, truly is to provide valid closing cost estimates and transparency to borrowers………

    Then what is the purpose of hiding the appraisal fee?

    When all lenders and their agents are mandated to pay the appraiser C&R to appraisers, and,

    third parties are only allowed to charge bona fide fees for services actually performed……….

    Across all lenders the appraisal fee should be similar, when no AMC is used, and should be higher when an AMC is used.

    Combining the appraiser and AMC fees, hides…………\

    A. The true cost of the appraisal from a qualified appraiser, and,

    B. RESPA violations for discounts, affiliated businesses relationships, over charges for fees that are not bona fide for actual work performed, and,

    C. Qualifications of the actual appraiser that will perform the service.

    Pretty darn sad.

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    • Mike Ford Mike Ford says:

      Banking & Real Estate Industry letter was sent to FFIEC in September asking for delays in implementation of TRID until banking concerns are addressed. They did at least use the word “appraisers’ once, then ignored us. Additional correspondence is being  drafted by AGA dealing with us not quoting our own fees; embedded and undisclosed fees & consumer issues related to appraisals.

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  13. Baggins - What's 1.2billion among friends? Baggins - What's 1.2billion among friends? says:

    Hey there Mr Ford. Here is your update….. BOA 1.2b penalty thrown out by court of appeals.

    http://www.reuters.com/article/bank-of-america-fraud-idUSL2N18K101

    Well, this is not surprising, but yet still very disconcerting and disheartening event. So this is the event which changed the face of the appraisal industry for a hundred thousand professionally licensed persons?

    The beat skips on.

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  14. I have initial mixed feeling about this. As an official of the AGA, I have promised all that we are a different type of union. One that strives to treat others as fairly as we ourselves expect our members to be treated. This applies to the traditional scapegoats for America’s financial woes.

    B of A was coerced into buying Countrywide in the first place. Its not an uncommon practice that when a federally regulated lender or credit union fails that it’s regulatory agency will ‘encourage’ a stronger similarly regulated institution to take it over. When I worked for Navy Federal Credit Union back in the 1970’s, we frequently absorbed failed credit unions.

    Morally, it is wrong (in my opinion) to then pursue fraud complaints against the new owner for the actions of the old operators that lead to the collapse in the first place. I understand the legal concept, but the moral aspect is still wrong. Should ‘someone’ pay or be held accountable? Certainly! But how did B of A do anything wrong except to buy the toxic Countrywide, when asked to do so by the Feds? Better to put the culprits that actually engaged in the deception, in jail. Unfortunately, that is not how our justice department normally operates. To them, recompense is sought after more than individuals punishment. As if taking the profits of unrelated and non involved investors for the bad actions of other investors, somehow balances the scales of justice. It does not. If people committed fraud THEN PUT THEIR ASSES IN JAIL!

    This brings up the next issue. HOW can the Justice Department be so inept as to fail to meet the  required standards under Federal Law for a successful prosecution? I can understand if it went to a jury and emotional reactions  overshadowed actual evidence, and cost them the case but this was just the opposite.

    Apparently they were able to push the right emotional buttons of the jurors and obtain the illusion of a victory. Did the prosecutors not KNOW that it would not be sustained on appeal? Are they truly THAT incompetent?

    Baggins, I don’t see this as failing to correct past appraisal issues. Its only peripherally related and deals with technical rules of evidence. Perhaps the government needs to retry the case against the individual(s) responsible, and not go after the deep pockets that makes the federal ‘scorecard’ look better.

     

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    • Baggins - Consumers asked for it. They got it. Baggins - Consumers asked for it. They got it. says:

      Sure, that is one line of thinking.  I for one, am not buying it.  This is one big contrived shell game.  As most of the upper level persons are likely complicit, there should be no rest for the wicked.  If appraisers don’t understand how this works already…  These people write their own laws and control the regulation of their own companies.  Nothing happens by accident.  The notation of steep penalties was apparently just bread for the masses until the winds of time put some dust over the issue.  They never had any intention of levying those fines in the first place, and that is apparent by the end result.  More fraud.  More complicity.  More skating without charges for high level billion dollar fraud.  They really are above the law and that is shameful.  More reasons to not vote for candidates whom accept money from major lenders, if you can even find any.  I know of one popular candidate though whom as not done so… Did you know the opposition spends over 65% on dump trump campaigns, rather than promoting their own positions?  Yes sir.  Given their untenable indefensible positions, they’re counting on tricking the voters into division and being hateful, so they won’t be held accountable.  Don’t expect much from a justice department that is admittedly more concerned with stripping us of the 2nd, rather than defending the 1st.

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