Dear AMC, Goodbye…
Why I’m Leaving Residential Appraisal – Dear AMC, Goodbye!
The Law of Unintended Consequences is a law, like Murphy’s Law, which is always lurking in the background to foil the attempts we humans make to control the world around us. It is particularly true of government attempts to reduce crime. A couple of examples follow:
I used to love air travel. I was a flight test engineer at Boeing and for many years I flew all over the world for both work and recreation. Then came the shoe bomber. Now I wait in long “security” lines while thousands of security workers peer at video screens as billions of pairs of shoes go by and more thousands of security workers watch as billions of travelers shuffle along in their stocking feet. Do I feel safer now?
Then came the underwear bomber and now billions of travelers will have to suffer through crotch inspections by full body scans. Am I even safer now?
I used to love appraising. Long before there was any appraiser regulation my clients came to me for valuation opinions because of my years of experience in real estate and their recognition of my accurate and reliable reports. Then came HVCC (Help Violators Cover Crimes). Now my clients of 24 years are not allowed to contact me. They have to order appraisals through a third party Appraisal Management Company (AMC) which takes up to 60% of my fee for their trouble. Is the consumer safer now?
I have signed up with about a half dozen AMCs. One went out of business owing me over $7,000 dollars. Three asked for all my exhibits and I’ve never heard from them again. One expected me to complete a URAR for $90. My most recent AMC has not sent me an assignment in months due to their lack of volume. Am I happier now?
I recently testified before my State Legislature in support of a bill to regulate AMCs. My first suggestion was to support the repeal HVCC at the federal level. Secondly to ensure that a certified appraiser is on staff at the AMC to do review work and third to require the AMC to have a surety bond of $500,000 to $1 Million so payment to appraisers is assured if the AMC defaults. Others recommended that AMCs become regulated by the State Appraiser Licensing Board. Will any of these recommendations solve the problem? I’m not hopeful.
So, why are these well-meaning regulatory actions so useless and demeaning? They are re-active and not pro-active. Instead of looking at billions of pairs of shoes the security personnel should be searching for terrorists and bringing them to justice. Likewise the financial services police should be looking for appraisal and mortgage fraud and punishing the offenders; not ruining the livelihood of many thousands of law abiding appraisers in the name of consumer protection.
Personally I have 24 years of appraising experience, am licensed in two states as a General Certified Real Estate Appraiser, have been HUD approved for the whole 24 years without any complaints and have completed hundreds of hours of special education. What good has that done for me?
So what is driving this patchwork quilt of ineffective appraiser regulation? Have you heard of “The Golden Rule”? The man with the gold rules! The greed of lenders is the source of the problem and always has been. They are the ones with the money to lend. They are the ones that establish the lending guidelines that have to be followed by everyone else in the lending chain. They are the ones with the “pipeline” to keep full and flowing. When they run out of borrowers with 20% down they reduce the requirements to encourage borrowers with 10% down. Keep that pipeline full. When they run out of borrowers with 10% down they reduce the requirements again to encourage borrowers with 5% down, then 0% down, then “no doc loans”. Keep that pipeline full.
What about the increased risk? Well, they just pack the loans up and sell them off to someone else in a mortgage backed security that is so far removed from the valuation process no one can figure out the value any more … not even the sophisticated investors. (Nobody thought to ask the appraisers!)
Now it’s time for me to say goodbye to my clients and friends in the residential real estate and financial service fields. You’ve heard of the theory of “Trickle down economics”. Well here is how my exit from the business will trickle down to you all.
Dear MLS Provider, I will be cancelling my subscription for data services at the end of my current period ($105/Q).
Dear Title Company, I will be cancelling my subscription for data services at the end of my current period ($85/mo)
Dear Software Company, I will not be renewing my annual software maintenance agreement at the end of my current period ($399/yr).
Dear Board of Realtors, I will not be renewing my annual dues this year ($375/yr).
Dear Appraisal Institute, I will not be renewing my annual dues this year ($330/yr).
Dear E&O Insurance Company, I will not be renewing my policy at the renewal ($500/yr).
Dear State of Washington, I will not be renewing my Appraiser License at the end of the biennium ($500).
Dear State of Oregon, I will not be renewing my Appraiser License at the end of the biennium ($500).
Dear Education Provider, I will not be needing any more CE credits so will not need any more expensive classes ($500/yr).
Dear AMCs, Goodbye.
Dear Consumer, you are the only one I feel sorry for. I will no longer be in a position to provide you with an independent valuation for your largest lifetime investment. Your lender does not want you to know who I am, how to contact me, how much I charge, what value opinion I reach, they just want you to pay for some conforming paperwork. If they receive any bad news they just shoot the messenger.