The Reality
There is no shortage of appraisers, only appraisers willing to work for Appraisal Management Companies, but there will be a shortage if the current toxic business climate does not change. The AMC business model is based on lies that hurt the consumer and your constituents.
There are many voices that have agendas to reduce the qualifications to become a Real Estate appraiser, whether it be a Licensed Appraiser, Certified Residential Appraiser or a Certified General Appraiser. There are also voices that would like the requirements of an appraisal by a person licensed by the state to be waived as there is a reported shortage of appraisers in some areas and this needs to be addressed truthfully.
In response to the financial crisis of 2007-2008 many rules were put into place to change the way appraisals were ordered which resulted in the proliferation of Appraisal Management Companies (AMCs). This business model was not new, but was not dominant in the industry prior to 2008. By 2009 the AMC model for residential property ordering became the normal and the ordering of residential appraisals by AMCs dominates the market to this day.
While there are good and bad players in every industry the AMC business model is highly unregulated and manipulative and many of the AMC’s base their business model on lies and deception to not only lenders but also the consumer who needs to be protected as there is no way for them to know how this middle-man between the lender and appraiser works.
A typical AMC sells a lender on a set fee for appraisal products and charges that fee to the lender (paid by the borrower). The AMC then has a set fee to work for and any difference in fee they get and what they have to pay an appraiser is profit.
The AMC model tells the lenders that they will hire local and competent appraisers to perform the appraisals on consumer’s homes or potential homes they wish to purchase. In reality many AMCs do not do that but rather seek out appraisers from many miles away that will do the report for the lowest fee and in the quickest time.
There is nothing wrong with consumers and companies to look for a service provider and competitive pricing as many companies and consumers do it on a daily basis. However, most consumers look for not only a reasonable price for the service but also for a person that is competent to do the job. A vast majority of the AMC model does not do that, they only look for the person (provider) who is the least expensive, despite qualifications or competence, so that they may keep the difference in fees.
The AMC model has been known for years to send multiple appraisers an “offer” for an appraisal assignment and the first appraiser to accept the assignment would get the assignment no matter their location, qualifications or competence. This is not good for the consumer or your constituents.
It was very typical for the fee offered to the appraiser to be very low but that is not the problem with the AMC model. If there are local, competent and qualified appraisers who are willing to take the assignment it would be the result of the free market (capitalism). However, because the AMC model was so abusive to appraisers many became desperate and accepted assignments to put food on the table no matter their competence or knowledge of the local markets.
This model continued for years and over time many appraisers left the industry for other income streams as it was no longer feasible to work in the industry.
Fast forward to 2016 and the COW states (Colorado, Oregon and Washington) had an “appraisal crisis” with fees rising significantly; the appraiser shortage that was created by the AMC business model became true. It is debatable if there is really a shortage of appraisers or just appraisers willing to work for the AMC business model.
The truth of the matter is the AMC model refuses to change and the lenders are not yet to a crisis. During the COW state “crisis” of 2016 it was not uncommon for a simple single-family home appraisal to cost the consumer $1,500 through an AMC yet the appraiser was paid $600 to $800. In the same time period an appraiser in southern California or Atlanta was being offered $250 for the same amount of work with the consumer paying the AMC $350. The AMC business model has been gouging the consumer because they have created a false narrative and have facilitated the shortage of appraisers in some areas, real or not.
In September, 2017 Matt Simmons of Maxwell, Hendry & Simmons, LLC wrote the following with the chart seen below:
“Speaking of supply and demand, our firm recently compiled some data on the supply of appraiser credentials in comparison to mortgage origination volume. Based on the level of hysteria out there, I bet this will show how few appraisers we have to complete all of this mortgage finance work, right? Wrong. The number of active credentials on the National Registry was 92,434 in 2003. It was 96,856 as of 2016. That’s an increase of 5%. Meanwhile, the number of annual loan originations actually dropped 42% over that same period, according to ATTOM Data Solutions. Most of the articles claiming an appraiser shortage reference the number of credentials on the registry in 2007 (121,407) versus 2016 and then build the narrative around a 20% decline in appraisers. This is completely misleading and measures the supply of appraisers from only the high water mark.”
APPRAISAL INDUSTRY FACTS:
- The AMC business model is based on multiple lies to the consumer.
- Consumers are being adversely affected by the AMC business model.
- A vast majority of appraisers do not like (many hate) the AMC clients they are forced to work for.
- A vast majority of appraisers would choose to never work for any AMC ever again if given the choice.
- Many AMCs require the appraiser to submit the report within 48 hours of inspection. This requirement reduces the potential income of the appraiser (a self-employed person) in that they might have agreed to a turn time that allowed multiple inspections in certain areas to maximize efficiency. The AMC model does not care about the appraiser, their efficiency or their income potential.
- The AMC business model now requires an appraiser to PAY a technology fee to submit a report. The AMC requests an appraisal but the appraiser must pay a fee of $12-$40 to submit a report to the company that requested the service. How is it that the AMC cannot pay for its own technology or pay for the tech companies that THEY EMPLOY for their technology?
- Many AMCs do not pay the appraiser in less than 30 days and some don’t pay for 90 days. There are a couple states who have felt the need to legislate payment in a timely manner because of this abuse by these companies.
- It is not uncommon for AMCs to send 25-page letters of engagement while direct lenders typically have a one or two page letter of engagement.
- AMCs are supposed to vet the appraisers on their rosters yet none ever require samples of reports from their vendors (appraisers).
- A significant number of appraisers have experienced not getting paid from bankrupt AMCs (Appraisal Loft, Vesta Valuation, ES Appraisal, JVI Appraisal, Summit Appraisal) and there are rumors of three more AMCs going out of business. One AMC is borrowing money at 24% interest, one company just offered $0.25 on the dollar for past fees while another AMC was just bought by a competitor and that company won’t pay the bills of the company they acquired.
- A national AMC has been documented sending “appraisal offers” to 200+ appraisers at a time; it is not uncommon for AMCs to send a “possible assignment” to 30-50 appraisers at a time. This cannot be good for the consumer.
- A national AMC had a manager in December 2017 who sent a scathing “Christmas memo” to appraisers detailing the checking up on appraiser’s schedules and the need to turn in reports that were due Christmas Day.
- Multiple AMCs now have tracking software that they want appraisers to download on their cell phones.
- AMCs review reports with PDF checkers and will automatically send a list of revision requests to appraisers with no actual person looking at the report.
- Appraisers do not like getting revision requests from former fast food workers who are classified as REVIEWERS (two AMCs have been documented as hiring people off the street with their most recent job being in fast food).
- AMCs are now asking appraisers to do reports based on photos taken by an unknown person who knows nothing about real estate and sign their name to a report which is backed by their license.
- It is not uncommon for AMCs to require revisions be handled within two hours or be punished with less work. Some AMCs have due dates with specific times (report due at 10:47 AM or it is considered late).
- It is very common for an AMC to send out an e-mail to multiple appraisers for a set fee and for that order to sit for weeks until they find someone to take the conditions of the assignment.
- It is common for AMCs to lie to loan officers or borrowers about a lack of appraisers in rural areas when there are plenty of available appraisers to do the work but who want to be fairly compensated with reasonable conditions.
- Consumers are being hurt by the AMC business model by paying inflated fees to AMCs for unqualified appraisers hired by the AMCs.
The AMC model has little respect for the residential appraiser and until appraisers feel respected or enjoy what they do they will not train future appraisers. The AMCs will not change the way they do business and in order to realize short-term profits they hope to change qualifications for becoming an appraiser or to change the way the business works.
Appraisers used to recruit their children and train them for the profession. It would be hard to find appraisers who will encourage their children to enter the appraisal profession as it simply is not an enjoyable or rewarding career anymore.
There is no shortage of appraisers, only appraisers who are willing to work for Appraisal Management Companies. There will be a shortage if the professional appraiser is not treated as such and as long as the toxic relationship continues unchecked.
By Timothy S. Evans, Certified General Appraiser, Commercial, Industrial, Agricultural and Residential Appraisal Services, Monroe Valuation, Inc. – Michigan and Iowa
Thank you Tim for an honest assessment of our dilemma as Independent Fee Appraisers. We love our jobs but now hate our work environment. It is past time to start getting the resources of time and money get to the actual appraisers, not getting skimmed away by an anonymous management company.
As a Southern California appraiser I agree with your assessment relating to the very low blast e-mail fee splits being offered ($200 to $300), however I would add the following. Lenders and their hired puppet AMCs love to bring to light the Holmes County Ohio issues (0 appraisers ?), and perhaps the four figure fees needed for the random assignments there (Population 42,000), but will ignore the truth relating to counties that are 80 times bigger (San Diego County / 3.3 million), where they thus have 80 times the volume at 5 day turn times with wages from the early 90s.
Seek the truth..
Let’s hope that they take the time to read this. The truth will set us free. Great letter
Keep the hope alive. This website reader counts have increased substantially. There are worthy other sites as well, but not always applicable on such a broad scale or without sponsor content control. AF rejected half of the viewing base with ad blocker denial software. This site is it. There is no censorship (beyond bots and flaming, appropriate editorial actions.) In case you did not know, this site is managed by a working appraiser gal whom also is into charity efforts, she runs this site at a substantial cost to her personal time because she believes in the workers of this industry. This is truly a great independent website to support independent appraisers. Best of all, when you post things here, they’re usually searchable on google in a heartbeat and often link to front page results. You can bet your bottom dollar that someone is reading. Admin, impress the readers as to the scale of this websites reach. There is no posting limit, blog away, or even dare to lead and write articles yourself, the admin will review all submissions.
Well written and honest assessment about the current working environment within the appraisal profession. The article effectively mirrors my interpretation of the problems encountered with AMC’s. I am fortunate that I have been able to make a living without doing any work for AMC’s over the past 2 to 3 years. I receive offers to complete appraisal reports for AMC’s almost daily but refuse to because of the low fee’s offered and knowing that most will be returned for unnecessary and frivolous revision requests that have zero impact on the opinion of value provided. Thank you.
Can I have permission to forward this to my senator?
Absolutely!
An additional side effect often ignored relating to the title wave of AMC influence (2008 / 2009), relates to traditional business structure 101. As independent businesses who happened to do appraisals, as the business grew (more work than a single appraiser could handle), the owner could hire more staff and self assign (internally) any and all overflow via his understanding of the talent in his office. The income stream by the owner/chief appraiser was not capped by how many hours a day he could work, but was limitless based on his teachings, guidance, and business expertise. This traditional business structure was motivation for his current appraisers to work towards, and was a draw for entrepreneur spirts. With the real acceptance of AMCs starting in 2008 / 2009, and the assignments going directly to individuals versus the business, overnight the business model was mostly destroyed. The allure of the business was permanently damaged, and to this day the adverse effects of the glass ceiling to income has become the norm. Seek the truth.
Swap amc’s for ‘most mortgage lending order distributors’. Amc or not does not matter, very few and often none of the individuals in distribution are licensed and the ‘direct’ guys answer to the interests of lenders the same way, they’re all employees. The new game in town is to drop amc’s, form a direct assignment team, outsource services to other lenders, and then skim the appraisal fee to fund your operations. They call themselves direct but maintain similar processes as amc’s, bidding, quoting, chopping fees, demanding 48 hours, grading, technology fees, etc.
Are the banks/mortgage companies required by law to disclose that they, in fact, OWN the very AMC that they are giving their orders to? Yes, of course, they are hidden by some different corporate name and they say they are “totally” separate but really, the money is going into the same pockets. I know of one AMC, owned by the mortgage company who makes at least $2,000,000-$3,000,000 in their portion (30% of the fee charged to the borrower) They never ever have to close one loan and still make this money… I am disgusted by this beyond belief…
Exactly.
Only several years ago ‘direct’ seemed to have a different model. I’ve spoken with ‘direct’ managers who say they also service orders for other lenders whom want to get away from amc’s. They play the same games, when volume goes down, fees get chopped. They may often engage in bidding rather than accept the necessity of upward fee movement. My argument is that if there is too many orders, are they all worth 1k+, and if there is only 1 order is that only worth $1? It’s illogical that for basically similar housing price scales, an appraiser in one location can demand 3x that of appraisers in other lower demand locations, yet consumer charges rarely vary by this much. Also illogical is the notion that although cost of living increases nationally, appraisers fees must remain stagnant. Nationally distributors also may cover cost spread differences out of the group operational pool, no longer being restricted with direct consumer to appraiser fee disclosures and billing practices. The more they save, the more they earn, cost savings are not returned to borrowing consumers. They take a position that all fee increases are temporary, necessarily rolled back once volume decreases. Doctor for a dollar, anyone, going once, going twice… My quote unquote direct lenders still skim off the top to pay for the distribution staff, this is usually 100 to 200 as a standard fee now a days. Many lenders in CO are charging consumers 700+, appraisers are targeted for service in the 500-600 range and falling. But at least they have a temporarily consistent minimum fee standard, the worst aspect of amc’s is there is no bottom to minimum fees. Lenders should demand a return to consistency.
10 years ago fees were much more consistent nationally, commonly in the 400/450 ranges. It was common industry knowledge that appraisers who lived in lower cost of living environments typically had more free cash, since fees were generally consistent. This provided the incentive for appraiser population nationally, especially in difficult to serve rural areas. My parents rebuilt their appraisal business instantly with increased profit by moving to the boonies with half the cost of living, their fees remained consistent, because the lender paid consistently state wide. We routinely booked out 5 a week at 400 each, and there was no question regarding our standard 6 week turn time regardless of volume at the time. We were trusted because we were trustworthy. That is how I came into this business, a consistent financial incentive by lenders and subsequent need for more appraiser labor help in an underserved area. I moved to the middle of nowhere too. But these days that’s folly, since the bidding process removed consistency in both locational and quantity of fee assignment patterns. The distributors removed the very incentive which previously answered their labor sourcing problems they are experiencing today. My tried and true tagline; I can not build a business and hire help around a question mark (if I can count on continued assignments or not.) Industry players have done a great job at branding the need for appraisers to eventually raise fees to stay in business as a ‘crisis’. When they profit and succeed it’s called successful lending. When appraisers succeed it’s called a crisis, excessive fees, and lack of available appraisers.
My personal wish is that well informed industry leaders whom are appraisers will come around and recognize that the ‘direct’ market is following the same path as amc’s and there is hardly any reason to distinguish between the two. Also I hope for traction on the notion that only licensed appraisers should be allowed to engage in appraisal distribution, they are in fact the only qualified people for the job. Individual appraiser licensing for ALL distribution workers. Separation from loan production only applies to appraisers, lenders and brokers have the distribution persons on speed dial, and they answer immediately or they are fired, amc or not. There is no ethical restriction for an unlicensed distribution manager that I am aware of, but rather only a limited array of process and lending rule compliance restrictions. Hence the short circuit in distribution which never corrects. Thank you for reading on this site. Tim, another great article, keep them coming please.
Separate the appraisal fee from the AMC fee on the HUD 1 statement and stop the amc pit of misery. Dilly, Dilly!
https://www.hud.gov/sites/documents/DOC_23716.PDF
Related 5-97, to 5-102. Sometimes we must look to the past, to understand the present better. I’ll leave refreshed interpretation for those older and wiser than me. Clearly previous analysis underestimated damages to the appraisal profession. Looking at income figures for appraisers nationally prior to middle management mandates provides important insight. 3 man firms used to rake $300k, prior to QE inflation. So how’s your appraisal distribution company treating you lately? Greed is a terrible thing.
FYI, That’s the RESPA 590 page regulatory impact analysis, circa 2003 I believe. When I first started I used to read through everything I could find. Oh, the memories, dreaming of tangible success in my near future. Clearly I underestimated the power of middle management to swindle futurity.
Interesting HUD article Baggs. Thank you. Road to hell is paved with good intentions kind of thing from HUD? As usual we were either an afterthought or a never-given-a-thought line entry.
Excellent letter Tim.
We continue to blame only the AMCs (blame well deserved); but too often we ignore the other part of the problem. When Cuomo promoted the garbage that came to be known as HVCC, the banks saw this as an opportunity to trim nearly all their in house appraisal costs.
They are not going to give that up. More directly related to Cuomo’s settlements, big title insurance companies used their clout to direct and control increasing orders for appraisals. Some bought out AMCs; others simply bought out everything else in the real estate business chain (First America).
Title companies have always been infamous for making a quick buck. In and out, short term fast profits. Consequences to related professions and businesses be damned.
Doubt me? Poll all the buyers that got First American Home Warranty “inspections” thinking they were actually getting a meaningful home condition inspection analysis from a qualified and unbiased expert. What they got were limited coverage insurance policies on some items.
Anyway, the real problem now is 50 & 7 different states & territories re interpreting or optionally choosing to enforce federal regulations in 57 different ways. 10% to 20% of the total have never bothered to pass any meaningful AMC legislation at all. In 25%+ of the remainder they are still struggling with comprehension of USPAP.
More subtle and ever changing abuses by AMCs are simply beyond their comprehension.
Whatever else Congress does, they also need to rescind control of appraisal licensing for FRTs and take it back to themselves. I’m no federalist, but there is no other viable solution to solving all the appraisal related problems hurting appraisers, consumers and taxpayers today.
Let ASC take over enforcement of USPAP using the State Auditors they currently have on staff, and ‘contract’ complaint/USPAP compliance investigations to volunteer committees of the Professional Appraiser organizations, the appraisal union (Guild) and all State Coalitions to assure analyses are done in the context stated in USPAP itself.
Eliminate the confusing Tower of Babel appraisal / AMC regulatory quagmire and refocus in through one single source, ASC. As the oversight / coordinating function of the Federal Financial Institutions Examining Council (FFIEC), no one else is better positioned to sort through all the important issues affecting loan quality as it relates to appraisals.
AMC ‘pressure schemes’ would disappear in very short order, if not overnight when inquiries from federal oversight agencies start being received.
Wow, I just posted a historical analysis doc related to your comment, but I had not yet read your comment. You’re my favorite blogger, you give me more to read! Free speech is invaluable.
I’m licensed as a certified residential appraiser in 2 states (I’m in the Kansas City Metro) and I disagree. I think having state control over appraisers is actually a good thing. What we do is so dependent on geography and market specific that it is imperative the people policing us have similar geographic competence.
What I would be thrilled with is Fannie and Freddie having a portal and system like the VA does. Set fees. Set rules. Set turn around times. We can talk to the LO, but are assured independence by the governing body (VA).
I sincerely appreciate the concern and the viewpoint Olivia.
Lets not confuse ‘geographic competency’ as being any different than competency. The latter, requires the former.
If states surrendered implementation of federal law (FIRREA) to the feds, it isn’t going to result in hoards of people jumping state borders to chase work (more than already happens). Every single one of us is required to perform our work competently.
I would imagine that if you chose to do so, you could familiarize yourself with parts of the Missouri market and go there under a federal license…but you already can do that with a reciprocal license. I live right next to a county line and while I will do work even farther away, I generally avoid that particular county simply because I don’t like how pubic records are maintained for living area. Who needs the extra burdens?
The mechanics are flexible; no one person can have all the ‘only’ ideas. Reaching out and trying to consider and address all appraiser concerns like your own is a first step. I hope you and others will think of this in terms of seeking viable national solutions to inconsistent application of federal law.
Or, we can keep fighting every single issue on a state level 50 times over; and be over taken by new abuses and threats before we can ever achieve 50 individual solutions in 50 states.
What is clear, is that most states cannot competently and consistently enforce USPAP in a uniform manner.
Some states did not, and still do not have real estate appraisers on their enforcement panels! That’s why we get states like Oregon telling appraisers they are in violation of USPAP simply for reports delivered late…and who then argue that “well we checked with 11 other states and hey all agreed we were right.” These are not isolated cases of state ignorance or less than effective enforcement.
As for federal enforcement, I wasn’t very detailed (yet). The reason for that is solutions have to be developed by consensus, not dictate.
Any specific proposals would have to include AI, ASA, NAIFA (& all the others that are equally important); coalitions, guild and individual appraisers across the country. There is tentative willingness to seek solutions of this type expressed by members & or leadership of each of the above.
Tentatively envisioned is a LOCAL volunteer panel in each state to handle the actual analyses of any complaints. The panels would (optimally) be drawn from your local professional organizations (all); your state coalitions, & the Guild.
No single reviewer decision makers – majority would have to concur that something is substantial and significant to results in context of intended use before a serious USPAP violation would be opined. No “gotchas” for not dotting an ‘i’ or crossing a ‘t’.
Integrity related issues would be escalated immediately to more specialized reviewers. Procedural issues would be handled by appraisers familiar with those types of property – not state employee ‘generalists’ that have not performed an appraisal in 20 years.
I’m not thinking of three or five member state panels either – but a pool of pre qualified reviewers that could include as many as fifty to a hundred panelists. It would take a large group of volunteers to cover all areas and residential, apartments, commercial, industrial, agricultural etc..
Big state could possibly have many smaller ‘pods’ of reviewers in all urban areas; and draw from outlying areas as well.
Initial screening by small group to see if there appears to be cause to investigate beyond a cursory review for dismissal. Possibly limiting complaints to clients and intended users; or at least limiting review to specific issues raised by non client complainants – not using complaints for witch hunts.
Issues that COULD be solved by default if we revert to federal oversight are:
1. Reduced fees. States are now increasing fees to make up lost revenue from fewer licensees. Could be as low as the Federal component of our fee is now;
2. AMC pressure. Single FEDERAL point to report AMC violations of AIR to versus the confusing poorly defined or identified authorities in place now.
3. Fees; deminimus fee level COULD be established at VA rate or similar government study – eliminating need to fight this war in every single state
4. It’s unlikely FTC and other lobbied federal agencies would frivolously sue ASC for enforcing federal laws.
5. It’s not necessary to have USPAP rewritten every two years. That is purely for the ongoing benefit of TAF.
6. Eliminate private agency (TAF) development of implementing rules for federal laws. They already finished their jobs as mandated under Title XI
7. Eliminate private agency (TAF) coordinating political agendas with state officials through AARO thus circumventing individual state legislatures will and bypassing laws prohibiting public officials from engaging in political advocacy.
TAF & AARO both now set enforcement policies. Only TAF was ever established by Congress… and they have gone far astray of their mandate.
8. Eliminate all non real estate appraiser disciplines from boards setting R.E. Appraiser policies and guidelines; or AQB requirements. Did you know that previously we had a foreign national business valuator with offices in Mexico City as a TAF board appointee voting on real estate appraisal issues on her board? (Smart, nice lady but what business did she have helping set R.E. Appraiser practices?)
9. Perhaps most significantly, having a single point of appeal that has uniform standards for appeals. Many states have Admin Law Courts, but even if you win as an accused, they don’t have to accept the judges decision! Don’t even think of trying to represent yourself. Volunteer panels could be less formal – applying common sense over formalities too technical for most of us to navigate without costly attorney fees.
10 Several states have proven high levels of corruption if the administration of their appraiser licensing laws. In some cases it is having board members that are direct competitors to those they investigate; in others it is a good ol’ boy network; and in others it is adoption of policies to coerce settlements rather than to impartially investigate complaints.
11. Some states (California) have already announced they are raising fees to make up for loss of license revenue. Many larger states are left with similar short falls and would actually save a lot of money if they no longer had USPAP compliance obligations. Many (if not most) states have already abandoned the practice of having field reviews for value complaints. I doubt any here want to be second guessed by a hybrid style review. It also appears TAF, & AARO are advocating that it is unnecessary for enforcement reviews to be USPAP compliant themselves. (Do as we say, not as we do?)
Some larger states have backlogs of 500 or even 600 complaints with less than a dozen investigators, doing as little as 2 to 3 cases a month. Do the math. They will never catch up; hence the pressure to coerce settlements.
These are just some of the issues. Right now very few AMCs worry about state enforcement of any issues because they know the state laws are weak and unclear. Faced with federal enforcement by people that potentially have access to their tax records, or that are less susceptible to issue mischaracterization – I think we’d see AMCs AND mortgage brokers cleaning up their acts a lot.
Olivia, I sincerely appreciate your input and hope you will continue to offer more ideas and views, whether in agreement or disagreement.
I agree in wishing that Fannie & Freddie had a portal and set fee’s such as the VA does. With the VA, we have a relatively clear set of rules to follow. When completing an appraisal report for the VA if we cross our T’s and dot our I’s, the lender/underwriter typically has no say in the matter.
The way the current AMC model works appraisers have literally hundred’s of variations regarding the playbook we have to follow, including USPAP.
AMC’s, lender’s, underwriter’s, etc., often seem to make things up simply to justify their existence.
When I do an appraisal report for a private client such as an attorney or accountant, I have a clear set of rules to follow, USPAP.
When I do an appraisal report for the VA, I follow USPAP and the VA Handbook.
When an AMC orders an appraisal report……it’s a free for all more often than not that might require days worth of revisions that are unpaid to the appraiser.
No thank you AMC’s.
Well put Scott R.
Just my opinion but I believe wishing that Fannie and Freddie set fees and rules for appraisers could be an indication of the Stockholm Syndrome. For those that have forgotten, the Stockholm Syndrome is a condition that causes hostages to develop a psychological alliance with their captors as a survival strategy during captivity.
Has everyone forgotten who some of the players are that have created much of the misery that appraisers now deal with?
Such a central portal for fnma work was proposed in the IVPI proposal. Care to revisit that yet?
I swear to you, this is the most important shock document you can send a non appraiser.
Reading it a decade later is much more hard hitting than dealing with it at the time in 2008 era.
Hindsight is 20/20 and dang, most ‘reforms’ resulted in even more god awful unethical behavior than could have even been predicted. The work towards effective solutions was completed some time ago, no additional work is needed other than to institute these amazing process approach ideas.
http://www.workingre.com/wp-content/uploads/2013/08/IVPI-Proposalfinal.pdf
Excellent letter Tim – thanks for writing it! The AMCs (Appraisal Mismanagement Crooks) have secretly wounded the industry and the regulators are doing nothing about it. An AMC is a broker of appraisal services. The logical AMC business model is to sell an appraisal job to a lender for a given fee, then hunt down the cheapest appraiser to produce the appraisal: every dollar kept from the appraiser is pure profit for the AMC. The lender has no clue what the appraiser made and the appraiser has no clue what the lender paid (this is far different from a free market). Real estate brokers make 6% but I have seen AMC brokers keep 50%+. The AMC profiteering needs to stop.
CO has a mandatory fee disclosure for the appraiser within the appraisal report if accepted from amc. Nothing wrong with disclosure of fee in normally confidential and limited use valuation reports. A national study or focused audit regarding habits of same distributors whom operate in fee disclosure states like CO, vs their same trends of raking fees in non disclosure states may be quite illuminating. Coincidental to CO sustained fee increases? Swap coincidental for instrumental…
I completely agree with Mike Ford’s idea of Congress taking over control of appraisal licensing for FRTs. It also makes sense to have USPAP enforced at the Federal level in order to provide consistency that is currently lacking. Mike you have always struck me as being a very smart, thoughtful, and rational person. You have good ideas and are adept at explaining them to others. Maybe you should consider a run for congress. We could use your insight.
That is so kind of you Juliana. As for Congress, probably not. Circa 1986-1990 I did my political activism in a small city of 150,000 (in Redondo Beach; L.A. Times; Daily Breeze and Easy reader for background). Its an all consuming, dirty behind the scenes process that leaves almost no time for anything else. If successful it would make me one of ‘them’ rather than an ‘us’.
I think there are other, smarter folks for that. My commitment is to my profession; my peers and our appraisers Guild.
I’ve been struggling with this AMC dilemma for years now. It is very frustrating knowing how many appraisers and their families have been affected by this. AMC regulations such as customary and reasonable fees all the way to assigning an order to a competent appraiser in the area are being violated to the point where it’s right there in your face. It’s as if they get some kind of sick satisfaction out of hurting so many people. They must go home at night laughing at us and telling stories how they took money out of another appraiser’s pocket and put it in their own pocket. It is very clear that the regulations put in place will never be enforced (although, VaCAP seems to be on the right track). So many appraisers have been hurt since Dodd-Frank was implemented. I promised myself I would never lower my fees and so far I’ve been stubbornly getting by with the help of a second job for a few years. Almost 100% of my clients were lost due to the new regulations. It was like starting from scratch but even more difficult. I know of Appraisers that lowered their fees because they needed to provide for their families. I am not judging those people. For them, changing professions just wasn’t an option and was too risky at the time. I currently work with only one AMC because they seemed to be very fair. My workload recently decreased by 90%. When I asked what was happening I was told that there were two other appraisers within 20 miles that offered lower fees. Almost all of my work now goes to them. My reason for responding to this topic was this: I recently realized how many borrowers never ask about the appraisal fee. It occurred to me that many people just assume that they are being treated fairly because they don’t have a great deal of experience with the process. About 4 or 5 years ago I was told that the television show “60 Minutes” had been researching the changes in the appraisal industry and how consumers were paying higher fees. The show never came to fruition that I know of but I’d really like to see the public’s reaction if this story could be told. I’m pretty sure the AMC’s would have to start justifying their actions. Public trust would go out the window and things would have to change.
Jack your scenario and story are painfully too familiar top all of us. I’m sorry about your loss of 90% of work due to undercutting. Its one of those 20/20 hindsight lessons for all appraisers. Under no circumstances put your entire livelihood in the hands of any one client – whether an AMC or direct lender.
For those in markets where you either work with AMCs or don’t eat – I strongly recommend at least three AMCs until you can diversify to non lending work. With AMCs it isn’t a case of IF they seek lower fees and cut you off, but when.
I think VaCAP (& Virginia) have done great work but the time to keep trying to fight these issues on a state by state basis has passed us all by. Virginia, North Carolina & Louisiana to my knowledge are the only ones that ever passed any meaningful C&R fee or other beneficial appraiser/ consumer appraisal laws.
Oklahoma is considering repealing its AMC license and registration laws because of the burden (costs) of administering them. Many other states like my own (California) can’t be bothered with enforcement of Dodd Frank. Strange how the Congress Member whose former committee was so supportive of DF won’t even pass enforcement mechanisms for it at the state level.
Jack that by the way is our entire problem in a nutshell. States either cannot or will not uniformly enforce ANY appraisal laws, including FIRREA.
It is why we must move on to the next stage of the regulatory battle – taking it away from the states (for FRTs anyway) and putting it directly back in the hands of the Feds. One agency for monitoring compliance, and the same agency for enforcement of punitive actions when necessary. My suggestion is the ASC.
Going into the future, each states coalition; & AGA, & existing professional peer appraisal organizations would have only one point required to submit ideas for needed changes. A focal point where all appraiser groups could be registered as information contacts; OR the system could be set to notify us individually via emails. ASC has the ability to collectively inform members of the FFIEC on all issues.
Its not like appraisers aren’t already registered with ASC.
Nailed it as usual MIke Ford. We had plenty of rules in place in 2007.. but nobody was ENFORCING them then or now.
AMC’s are a true problem for our existence – http://www.AARO.net not doing their jobs EVER is the true reason for this problem.
Why is AARO a problem? Note who the attendees were for the spring 2017 conference (AMC’s outnumbered even the regulators themselves) – There were approximately 70 attendees for the session. The breakdown of the number of attendees was approximately 20 (out of 50) State Regulators, 24 AMCs throwing free parties and dinners of which Appraisers were not welcomed, 8 Education Providers, 6 Professional Organization representatives, and 12 Appraisers (there were a few more at the Fall Conference in DC) and other attendees.
This event should be renamed the http://www.REVAA.org Conference as they truly are running the show at this time.
How many parasites can this dog of an occupation support?
A lot apparently. Its a really BIG dog!
Although the parasites are killing it. Its not in the nature of parasites to think about preserving their hosts. When one gets too sick to support them, they can always just jump off and find another.
Because state regulatory (enforcement) authorities are not allowed by law (in most states) to actively lobby to change the laws they operate under, they created AARO.
It had the potential to be a good thing, but as operated it is just the opposite.
1. It allows TAF and state enforcers to completely circumvent any laws or legislative limitations that they find ‘inconvenient’.For example, requiring USPAP compliance BY states when investigating alleged violations of USPAP is not considered ‘necessary’.
2. When one state misinterprets USPAP, then the ignorance is shared & promoted with all the others.
3. What possible legal; and beneficial reason can exist for AARO to become so cozy with AMCs and their lobbying organization? When something stinks, it is usually because it is rotten-like that relationship. REVAA has a right to seek favorable legislation. With elected LEGISLATORS, NOT salaried bureaucrats charged with enforcement!
4. Who doesn’t like a free weekend get away at taxpayers expense? I used to love the road trips when I worked for the Feds. Then at years end when the budget was gone, magically we were able to accomplish the same and more by using Citrx Go to Meeting or similar online services.
5. Look at AAROs name. Now look at the above breakdown of attendees. Everyone of these attendees including the regulators, should be getting their direction from their state and federal legislators via well written law. Not lobbyists. There is a difference between appraisers, our organizations and even AMCs attending just to monitor AARO; as opposed to sponsoring parties to push agendas. AARO serves no valid beneficial purpose for either state enforcement officers, taxpayers, AMCs, professional organizations or appraisers. It should not have the blessing, endorsement or support of any state or federal agency.
TAF can do what they want. They are becoming increasingly irrelevant.
Mike Ford – bears repeating
3. What possible legal; and beneficial reason can exist for AARO to become so cozy with AMCs and their lobbying organization? When something stinks, it is usually because it is rotten-like that relationship. REVAA has a right to seek favorable legislation. With elected LEGISLATORS, NOT salaried bureaucrats charged with enforcement!
Related; Centralization of banks and record shuttering of rural branches. And they wonder why they can’t find quality local help. Lead column story on drudge today.
Banks Shutter 1,700 Branches in Fastest Decline on Record
Profits at record levels. Banks are having a hard time finding quality help, because they refuse to pay regular employees and would rather keep it all as corporate executive profit. Reasons why I refuse to bank online, I like having a local branch available and make sure I am one of those regular foot traffic people.