Appraisers Under Siege & Cost of Appraisals

Dave Towne

Dave Towne

Certified Residential RE Appraiser at Towne Appraisals
AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003.
Dave Towne on e-AppraisersDirectory.com
Dave Towne

ppraisers Under Siege & Cost of Appraisals

Appraisals that were just $400 are now $550

This little ditty of a few hundred words is via Jonathan Miller’s Housing Notes blog on June 24, which I hope he, and Mr. Chrisman, won’t mind if I re-post. I added a bit more below:

Appraisers Remain Under Siege

Miller: The banks have won and the appraisal industry has lost. At least for now.

Here is a series of feedback from Rob Chrisman (Mortgage News Daily blog) in his must read newsletter on the mortgage industry. It is a heavily read source of in-the-trenches mortgage insights that I subscribe to. He gave me permission to share his recent content on the appraisal industry and will share more of it in the coming weeks. I inserted my thoughts following each quote:

Chrisman: And appraisals are always a hot topic. I received this note from an originator. “Our appraisal environment is out of control. Appraisals we used to get in 1-2 weeks have quickly gone to 3-4 weeks. Appraisals that were just $400 are now $550 and sometimes up to $1,100 for FHA and conventional appraisals. With the rules regulating appraisers on how to become an appraiser and how appraisers have to monitor everything an apprentice appraiser does, it is causing our homebuyers hardship. With the appraiser’s current workloads and the amount of appraisers we have lost in recent years, there is no motivation to bring apprentices on (due to those regulations), leaving the current appraisers working night and day to keep up with their workloads. That is also causing them to keep moving up the appraisal fees (basically rush fees to keep pushing who can pay the most up the line).

It’s called “market forces” and because the AMC movement has gutted the industry, there are much fewer competent appraisers left. And please lay off the “hardship” angle. It’s tired and worn out. Mortgage rates are at historic lows and with the Brexit they will likely stay that way for a while. As I have said before, there is not a shortage of appraisers, there is a shortage of appraisers willing to work for half the market rate.

I don’t say this to be negative against the appraisers; they are doing what they can to keep up but we are left with $700 appraisal fees for our 1st time homebuyers on top of the other closing fees that are steadily climbing. Something has to be done. Either make becoming an appraiser a stringent faster process or make it where current appraisers can bring people on to help without having to monitor every process. Any thoughts?

If you keep thinking of appraisals as a commodity rather than a profession, this will continue as the industry is gutted.

And this one. “The appraisers in my area are so buried, with turn times of 1+ months, they rarely consider training a new appraiser and eventual competitor. Are there ways we can start any program in our area to begin to train new appraisers without their help? Most real estate agents don’t care that LOs are struggling with this issue – they just want their transactions closed in a timely manner and rightly so. Borrowers, especially 1st time homebuyers, are struggling with the increasing appraisal costs. There should be discussion with Fannie Mae and Freddie Mac regarding going back to more appraisal waiver options from DU & LP approvals. We used to have more of those (800 credit score borrowers, 40% equity loan to values, rate/term non cash out refinances where we could get an exterior appraisal or even an appraisal waiver to get the loan completed) but now most automated approvals are requiring full interior/exterior appraisals. That is also burdening the system and the appraisers.”

With AMCs taking half the fee for appraisals, we can no longer mentor and train new appraisers. Established and reputable firms are going under and loan officers wonder why turnaround times in some markets are so slow. Look at the cause, not the effect.

The appraisal situation isn’t simple since a) nearly every home loan requires one, and b) the supply and demand of appraisals and appraisers is off-kilter in many areas of the U.S. I asked Michael Simmons, SVP of Axis AMC, a nationwide company. “Your reader raises several timely questions. Has the cost of appraisals risen? Yes, they have. Have the number of appraisers declined in the last 5-10 years? Again, yes they have. Have the rules governing the qualifications for becoming an appraiser changed? Not really – unless you count needing a 4-year college degree now to even be eligible to work toward certification – but then that’s part of the problem; we haven’t adapted qualifying criteria to the times.

As Warren Buffet famously said “Never ask a barber if you need a haircut.” The decline in appraisers is due to the influx of AMCs taking half of their fees. It’s an economics principle commonly known as “supply and demand” and since AMCs do not bring any “value add” to the appraisal process, the extra fees being charged are not bringing in more expertise.

This isn’t communism or socialism. The banking industry has promoted the AMC system to cut costs. They forgot about the part where appraisers have to make a living and are not widgets on an assembly line. Appraisal fees cannot be pigeon-holded into a flat fee across the U.S. Does it cost me, an appraiser in Manhattan, New York, the same as someone operating in Manhattan, Kansas?

Let me add this: I’m constantly reading the wailing of bankers/lenders (above, and elsewhere) who tend to believe appraisal fees should never be raised. Their attitude tends to be “how dare you charge my customer more now than you used to a few years ago?” The simple answer to that is does milk cost the same now as 10 years ago? How about the auto service center hourly charge? Cost of insurance? Or the pre-made boxed pizza you get from your local grocer and bake for 18 minutes at home?

EVERYTHING costs more these days, for a whole bunch of reasons. So why is it, Mr. & Mrs. Lender, that appraisers can’t adjust their fees appropriately, especially since the regulatory and reporting burden – which you had a hand in causing – has massively increased over the prior decade? You need to inform your borrower customers that the cost of appraisals these days is appropriate for the amount of work an appraiser does.

Image credit flickr - Tinou Bao
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

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31 Responses

  1. George says:

    Axis Appraisal Management Company (AMC) pays only $330 per appraisal. This is less than we were paid TEN years ago, not even considering that the time it takes to do an appraisal has tripled. As Mr. Towne said, the problem isn’t a shortage of appraisers, it’s a shortage of appraisers willing to work for less than they made ten years ago. The problem with increasing fees isn’t due to an appraiser shortage, it’s due to AMC middlemen keeping upward of 50% of the fee for simply passing on orders.

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  2. Barry Noble says:

    AMCs – many still controlled by the lenders/banks, were to be a safety valve, for appraisers by keeping the lenders/banks from trying to influence values. Now AMCs have to survive by taking as much of the appraisers fees as they can. That is their primary effort. If the AMC decides a $500 fee is a typical fee for a particular property then the AMC decides it will try to get an appraiser to do the typical $500 appraisal for $225. (So the AMC can keep $275 for just basically being the portal to send the finished report to the lender/bank.)

    if the AMC is asked to “review” the report in the middle process, it often sends the confidential and detailed information about the subject property to a fly by night “reviewer” in Bombay or other town, in India. ( If that isn’t dangerous for the home owner or buyer, I don’t know what else is!) They promise a “review” for $15 or if you need them to look at the all important addendum, $25/30. What comes back is a time consuming list of 8 to 12 questions on items typically the “reviewer” misses mostly in the addendum, so the way under paid appraiser must spend an hour or more, responding to where this and that were already addressed in the report, and go through the lengthy resubmital process for the entire report again.

    And typically only very junior or newbie appraisers, or those on slow areas take on the cheap fee appraisals, so the good appraisers totally ignore the insulting offers for low fees. They reserve their highly technical skills for properly, not exorbitantly, paid fees.

    So the AMCs are, for the majority, useless fee grabbing entities that saw a chance to make easy money on the backs of appraisers.

    Appraisers should be paid fair fees for the tripled and quadrupled amount of work that has fallen on to them in recent years, and lenders should pay their own and often owned ( hidden control) AMCs and bill those services under loan fees, separated to show the costs. It is a very sad state of affairs. It will get worse until someone or some entity makes a ruling. Dodd Frank had a good idea but a lousy way of dealing with a problem.

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    • Baggins - The bridge is already burned. Baggins - The bridge is already burned. says:

      Barry, never miss a chance to refer to those rakes and surplus charges as what they are already supposed to be technically defined as: Junk fees.

      I like to illustrate one important point when detailing a great argument such as yours today.  (It’s an argument astute appraisers know all to well by this point.) When lenders used to service their own loans, the money for origination would be easily recovered from long term servicing. Now that packaging, repackaging, and selling the notes to investors is the primary avenue of regaining reserves, the traditional way of doing business has changed permanently. The appraisers fee is impacted by the slice of the pie argument, because origination to resale carries with it a limitation if distributable funds for servicing costs. Also important to shut down the lenders with any argument about buyer affordability. If the buyer cannot afford the appraisal service (which even if literally doubled from what it is now, is still irrefutably lower than a single monthly mortgage payment), the lender should not be so eager to place borrowers whom have no cash reserves, into long term mortgage loans. But why would they care, when they just sell that note right down the line. The problem properly defined is lenders play fast and loose with other peoples cash. The solution in turn is that lenders should either have more skin in the game, or demand borrowers have no more than 80% LTV’s. This whole train wreck is a direct consequence of the 98% LTV proliferation, and the industry continues to blame the appraisers instead of putting the blame where it more appropriately belongs, at their own feet. Now what’s next here, the cash out fha, the 60 page new construct itemized contract for a mere 450, or perhaps I’ll answer one of the amc requests from this foot high stack over here. Maybe I’ll finally brave up and see how many thousands I owe for taxes this year….  The beat skips on.

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  3. bill johnson says:

    Perhaps if you didn’t BLOCK ME from your I don’t want to hear the other side, or apparently not take my concerns seriously website (MND), then perhaps you could have been aware a lot sooner Rob Chrisman. Instead, you called it the “BILL JOHNSON SHOW” silenced my voice, prevented me from asking questions, and now you say the appraisal environment is out of control. Karma is a bitch.

    Here’s a thought for the industry Rob, why should I care that you want something back in 1 to 2 weeks and now it may take 3 to 4 week? Lenders advertise they can do things in days or weeks but as an independent business owner do not drag me into something you the lender can’t deliver. Let it take 3 to 4 months for what I care.

    Don’t give me this first time home owner crap either. Median prices in San Diego are nearing $500,000, so if you have a 20% down payment, then boo hoo if you need to pay the appraiser $1,000. If you can qualify with a just a high monthly income (3% down), then again why should I care that the borrower may need to work 10 hours to pay for my 10 hours?

    As an appraiser with no issues going into a mortgage website addressing the articles from my side of the fence, I dare you Mr. Chrisman or anybody from MND to show there face on this appraisal site.

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    • Baggins - The bridge is already burned. Baggins - The bridge is already burned. says:

      When I started in a multi appraiser office in the early 90’s, our direct lenders stacked out orders 6 weeks deep routinely, and all were something 350/450 minimum, and anything over mid 330k’s automatically were assigned in the 550+ range. Mansions, land, rural, always carried $1.25k base fees. Things were different then.

      I see you’ve been blocked on various forums for being an independent thinker. Welcome to the club. This industry is rife with censorship. Still crossing my fingers workingRE will stop allowing typist services advertisements on literally every other page of that publication.

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  4. Bob says:

    First, appraisal fees are not and should not include management fees collected by AMCs. Only when AMCs become a line item disclosed to consumers will anything change. Fast and cheap is not a sustainable economic model for a service industry requiring highly technical skills. So let’s make it mandatory to expose what AMCs charge. AMCs are NOT appraisers. AMCs do not add value to the process, especially when they seek fast and cheap while ignoring expertise, experience, education, ethics, and credibility necessary to recognize value.

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  5. Baggins - The bridge is already burned. Baggins - The bridge is already burned. says:

    It has never been, nor will it ever be, the appraisers responsibility to save the borrower a dollar or a day.  It is ironic to turn to amc’s to have questions about appraiser servicing answered.  For every new Axis employee, there is one if not more than one less new appraiser.  If the amc’s and lenders would care to redirect all the money they syphoned away from appraisal, back to appraisers, we could recover collectively in about a decade, which is how long the industry has dealt with amc’s in mass and experienced attrition.  Amc or not no longer matters, because all lenders have some sort of in house enterprise which borrowers pay surplus charges for.  Even in busy areas like CO where they can’t get servicing, and fees are constantly higher, the fees remain generally stagnant and lenders compete by the 25 dollar increments in terms of fee raises, amc’s often vainly try to compete in the 5 and 10 dollar increments in terms of besting competing fees.  If I’m grossing 50k at 60-70 hour weeks at 450/550 range standard fees, I will need a literal double of the fee in order to bring in a quality apprentice.  Lenders whom don’t understand simple math?  What’s new I guess….  Next!  If they were lending their own money, they would not be as eager for work around products or new lower qualifications for appraiser entry.  On a follow up note, I sure do miss 2075’s, drive by’s, and easy reviews.  Advent of automated systems has brought detriment in just about every aspect of assignment except one.  The only good thing to come from automation is proximity based assignment.  After that, all other actions pertaining to appraiser performance grading, amc tech, xml tech, software tech, it’s all just one big time drain.  No self respecting independent would join this field unless they were seeking to game the system and were strictly bottom line thinkers.  If anyone should be granted easier access to this industry though, those persons should be limited to licensed realty sales persons only.  On that same note, if they get access to appraisal with reduced requirements, appraisers in turn should be granted access to be realty professionals like managing brokers, with an equivalent reduction of qualification criteria.  I want out, I want out yesterday.  Nothing short of an $900 fee per standard order will cause me to be able to hire anyone.  The industry is suffering severe imbalance because 2 a day appraisers set the bar, which few except the most ignorant of the appraiser community dare follow.  I’m a 2 a week appraiser, and that’s often overtime.

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  6. Retired Appraiser Retired Appraiser says:

    Here is another cure:

    Raise interest rates 1% and see how fast business dries up and appraisers fight for $300 orders again. Unfortunately this is the only thing that will take place. AMCs won’t surrender a dime of their monthly plunder and the government is TOO G.D. STUPID to solve the problem themselves (HUD-1 fee transparency, C & R Fees, etc).

    After sitting back for 7 years watching appraisers engage in a circle jerk all I can do is laugh. It’s clear by now that appraisers will be the last ones to step forward to help themselves.

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    • Baggins Baggins says:

      Nope. Independence continues to regain position. It’s just that you never hear about it and such reclaiming of ground happens for that one single appraiser and the effects do not ripple out or provide any trickle down effect. If I presumed the ‘stated fees’ were non negotiable, I’d have left 30k or more on the table by now.

      The solution to too large of a government is less government. Reagan.

      The reason HUD1 did not itemize costs for appraisal, was to skirt the junk fee rules.

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  7. Wayne says:

    Just a small point I would like to make. If you are a cardiovascular surgeon living in Loving County, Texas (census says 25,000+/-) lowest population count in any US county….. you could probably earn more at the Dairy Queen. Why would you do that when with that type of knowledge and education you could move somewhere else and make big bucks? Are we allowing ourselves to be cheated out of great salaries if we only had the nerve to move? Check out the jobs with USA Jobs.com ….There are jobs offered each day that pay 75 -150 thousand each year for appraisers. REALLY…. why not take a chance and have an adventure. Move your family to Washington D.C. or Seattle, etc. They offer jobs all across the USA each day. If I were not retirement age I would jump at the adventure!

    To stay in an area and suffer AMCs at a silly fee is just not smart. I have no clue how these AMCs are going to survive once they run thru the existing supply of appraisers. I will take my marbles and go home before I put a dime into any of their pockets. But it is easy for me to say that as I am 65 and have not done an AMC report in a decade. I know some of you do and I can only say to market and market your services to everyone until you can rid yourself from that parasite. Wish all of you the best! (We do not have to allow it to be this way!)

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  8. Ralph says:

    I still don’t understand the purpose of what an AMC does.  I received an AMC request Friday July 1st w/a due date of July 5th, w/a little old holiday squeezed in between all for a $325 fee.  The order was very close by, but I won’t even respond and took the week off for vacation.  They remove the order a day later and go shopping again, meanwhile this is a sale and the only ones getting screwed are the borrower and appraiser who accepts the order.  How is this business model sustainable?  I’ve said it before and I’ll say it again, it all started 15 or so yrs ago w/Landsafe promising fee split companies oodles of work but insisted on 48 TAT.  All other AMC’s followed suite with this flawed approach and now it’s finally come back to bite, especially if you are in an area w/a shortage of appraiser’s.  Hopefully those of you who have to take AMC work to survive are counter offering the crap fees and insisting on pushing out the un-realistic due dates and getting what your worth!

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  9. TOM D says:

    for a bunch of very busy appraisers, some of you are getting to wordy. i can’t finish some of your comments, too long, after working 8 days a week.

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    • bill johnson says:

      A few paragraphs is nothing Tom D compared to the 15+ engagement letters that many lender clients have adopted today. Its always funny how clients go to great lengths to tell us where to put an update (example), but give us 3 pages breaking down what 49 other states and Puerto Rico require.

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    • Baggins Baggins says:

      Try getting off the mobile device and reading on full screen. That should help. You’ve got to skim through sometimes. Blogging is so open ended that way, something good for everyone.

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  10. JC says:

    The extra fees the consumer is being charged is because of AMCs. They bring no value and devour/steal half or more of the appraiser’s fee.

    You want to get rid of the rising cost of appraisals? Simple, get rid of AMCs.

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    • Retired Appraiser Retired Appraiser says:

      Not sure I agree with that statement either.  Subtract the AMC fees and you’ll still be left with a $300 appraisal fee (the same as you were getting paid 10 years ago).  Appraisal fees were well overdue for being raised (dramatically).  AMCs simply pulled it off and pocketed the profit with appraisers taking home just enough to cover their bills.  It’s undeniably a dead end business model either way with hundreds of different businesses out there that pay better.

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      • JC says:

        Pre HVCC I used to charge $550 for a cookie cutter conv. appraisal. Why $300?

        I received a copy of an appraisal last week from an agent and the fee stated in the AMC invoice was $650, appraiser got paid $325. Take out the AMC, pay the appraiser $600 and the consumer saves $50.

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      • Tom M says:

        RE: Dead end Business Model. The same can be said for Cab companies competing with UBER for business. The appraisal industry chances are will evaporate someday with a stroke of the pen or click of a button. The same can be said for UBER which is attempting to now replace realtors with a lower fee servive to sell homes. In the meantime, I will continue to be an appraiser and a real estate broker for as long as it is fun.

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  11. TOM D says:

    i can hear judy garland singing “somewhere, over the rainbow”. but jc be right.  i would prefer a slogan from the 70’s to cure this gangrene rotting of our business.

    “BURN BABY BURN”

    but then again, we may be already dead and don’t know it. a bunch of zombie appraisers blogging about the living days.

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  12. KenQ says:

    “AMC movement has gutted the industry”

    amcs have ruined the profession. Their biggest concern is turn time & they want to use Joe $200 so they can make more money. They inflate the cost of an appraisal to a consumer and keep a big portion of it for nothing more than pushing papers.

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    • Baggins Baggins says:

      And they paid a fortune for Washington lobbyists to make sure the updated HUD1 form did not include separation of management and appraiser fees. CFPB, friend of the big lender.

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  13. Baggins Baggins says:

    Crusading for faster turn times and lower fees with absolutely no ethic

    So cartoon satire also works and works well for activism. Just make a free account a meme generator, create a pic, click view picture only, hotlink the address bar to the blog tool picture icon, and magic; online unique picture displayed.

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  14. Baggins - Baggins - says:

    Amc in response to me telling them to stop emailing me blast orders and assign them directly instead, calling a high fee standard is needed. I also found their use of possessive when referring to appraisers to be another point worth highlighting.

    I don’t have you in our system to place you on vacation. ALL OF OUR APPRAISERS in this area are swamped and declining orders. My hope was to find an appraiser that would be able to accept this order and be able to provide it to our client by mid August. We DO pay our appraisers good fees. You would have been better off just not responding to this email and directing our office how to run an AMC. We’ve got it figured out, thank you!

    Yeah, they’ve got it figured out eh? Is that why they’re shotgunning orders all over town, failed to state the supposedly good fee, and did not even bother signing a name to their rude response? Just another day in the life of an appraiser whom is harassed by amc’s day and night. Accsrd.

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  15. Baggins Baggins says:

    The majority of the amc’s are so rude lately. They’re behaving like telemarketers, never stop calling, never stop emailing. Xfinity Comcast refused to let their emails stay in the spam box, when I click them to spam. The amc’s refuse to stop calling, and I never signed up with them in the first place. They refuse to respect my demands to not be sent broadcast orders or individual order placement phone calls. I write management and they make veiled threats it would have been better for me to stay silent. The phone workers get testy and hang up the phone on me, then I write letters to management saying don’t call me just to be rude to me for not going with your inefficient time wasting program. This is like legal harassment. In any other business the police could be called if you repeatedly called and emailed someone whom has repeatedly and specifically denied you service and told you to stop calling.

    Correct me if I’m wrong but that’s professional misconduct.

    What can be done?

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    • Wayne says:

      Baggins, you ask what can be done? I think it is already being done. First: You and I both refuse to work with them. The more hassle they give appraisers the better. In other words make other appraisers so mad that they join us and also refuse to work with them. Second: Approximately 200 appraisers are dropping out of this profession each month. If that trend continues each of us will have more work than we can handle coming from decent clients that pay and treat us well.

      I have always said that Appraisal Management Companies cannot manage appraisals if they do not have any appraisers. Good luck to all!

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  16. John Pratt says:

    AMCs & lenders are complaining about the long turn time to get a completed appraisal. Here is the solution. Respond back to the next request with a sliding scale, my fee is $ 1,000 with a 5 day turn, $800 with a 7 day turn, 600 with 10 day turn, $550 I will get it completed when I can fit it in. Now the ball is in their court, they can choose their poison. I can not understand if you have 10 or 15 appraisals on your desk why would you ever consider taking another one for $ 500 or less. My last 2 requests came to me for $ 450, I replied with a fee of $ 650 on one and $700 on the other and got both of them and that was with a 10 day turn time. Give it a try, you won’t get every one but you will get some of them.

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