Consumers Overcharged by AMCs
Excessive markups are common but consumers usually “know nothing about it”…
The Chicago Tribune has published an article written by Ken Harney concerning appraisal fees. The article is very telling of what appraisers already know. Now the consumers are aware.
Please read and share the article with your colleagues, agents, local MLS Board, Realtor Board, Appraisal Board and your Legislators. The more the abuses of some AMCs are exposed, the more opportunity we have to protect the consumer.
Are you paying unseen add-on fees for your appraisal?
By Kenneth R. Harney
Are you getting fleeced on appraisal charges when you buy a house or refinance? Could you be paying as much as double what the appraiser is receiving for actually doing the work, with the excess going to an undisclosed third party?
Many appraisers say yes. And they’re eager to let consumers know that when the appraisal charge is $500 or $800 or $1,000, they’re frequently being paid just a fraction of that. The rest is going to an “appraisal management” company under contract with the lender to oversee the appraisal process. Management companies hire the appraiser, negotiate fees, review the appraisal and send it to the lender. Management companies often select appraisers willing to work for relatively low fees. In exchange, they make assignments available to appraisers that they might not otherwise receive.
Controversy arises when management companies add 35 to 50 percent surcharges — or more — onto the final bill to the consumer. Federal rules do not require disclosure of the surcharges, nor do regulations in the majority of states. Appraisers say management companies often seek to hide the amount of their add-ons by prohibiting them from attaching their invoices to the appraisal report the consumer receives.
Worst of all, they say, is when the consumer blames the appraiser for the high fee being charged, unaware that much of it is going into a third party’s pockets.
Ryan Lundquist, an appraiser active in the Sacramento, Calif., market, told me about a recent experience: The house he was asked to appraise had complicated features and was difficult to value, requiring a higher-than-typical fee — $800. Subsequently he learned that the management company tacked on an extra $345 — a 43 percent surcharge — hitting the consumer with a $1,145 bill. After the homeowner complained, he learned that the management company said the $1,145 was solely Lundquist’s quote, not theirs.
“I was shocked,” Lundquist said. “It wasn’t honest, it wasn’t ethical,” plus the borrower was being “gouged.” Forty-three percent extra “just seems too much for a middleman service.”
Lundquist described his experience in a blog post, which drew dozens of responses by appraisers around the country, mainly critical about management companies’ add-ons to consumers’ bills.
“I got chewed out by the owner of the house,” wrote one. “Yes, I charged $700. But he (the owner) paid $1,700,” a $1,000 add-on. “Now that is an excessive fee.” Another complained that a management company had “hit (the homeowner’s) credit card three times” for the appraisal fee before the work was performed and then tacked on a 45 percent surcharge. The owner “yelled at me” for the rip-off, he said. The appraiser ultimately declined the assignment rather than work for the management company.
Richard Hagar, an appraiser in the Seattle area, said in an email that “I’m still receiving fee ‘offers’ (from management companies) below $400, while the borrower is being charged $800.”
Carl Schneider, a Tulsa, Okla., appraiser, said excessive markups are commonplace, but consumers usually “know nothing about it” because the appraiser is prohibited from revealing the actual fee.
“I resent forcibly being complicit in this fraud,” Schneider said. “Why can’t they be transparent?
David Doering, a Jefferson City, Mo., appraiser and president of the National Association of Independent Fee Appraisers, said “we often don’t know what’s being charged to the consumer. We only hear about it when people are angry.”
When asked about fee add-ons and efforts to conceal charges, Mark Schiffman, executive director of the appraisal management companies’ national trade group — the Real Estate Valuation Advocacy Association — declined to discuss pricing, noting that “I am not a party to any (appraisal management company) contracts.”
Jeff Eisenshtadt, president and CEO of Title Source, whose TSI Appraisal division is a major management company, said “there’s a tremendous amount of value” his industry brings to the table, but “we believe the consumer really should be focused on the bottom line charge for the appraisal,” not the split between the appraiser and the management company. Consumers don’t care about the individual costs of “the pickles and onions and lettuce” that go into a hamburger, he said, nor should they when it comes to appraisals.
Maybe he’s right. But if you care about where your money is going when you pay for an appraisal, ask the lender or the appraiser. Who’s getting what? And why?
By Kenneth Harney, Are you paying unseen add-on fees for your appraisal? – Chicago Tribune
- We the People… - April 9, 2023
- Federal Valuation Agency Impact on Appraisers & the Public - July 22, 2022
- Is Georgia Going Rogue? - June 13, 2022
My fee goes right into the report and there’s no stopping every appraiser from doing that. Had an AMC client for several years and they stated they wanted my fee in the report and saw/proved they charged $75 fee per report for their services. Then they were bought out by one of the gorillas in the industry and out the door that fee went.
Sad to say I have to agree that the consumer won’t look at who is getting how much they will just get angry with the person they have a physical interaction with.
Harney appears to have missed the real punchline to this joke: TRUTH IN LENDING LAWS. AMCs have no problem hiding their fees on the HUD-1 disclosure form from the consumer. They simply LIE TO THE CONSUMER on the form by calling it the ‘APPRAISAL FEE’.
So much for Truth In Lending boys! Consumers are being skinned alive and few have a clue.
Two situations that I can see.
1. Truly excessive fees like $700 out of $1,700 charged going to the appraiser.
2. NORMAL fees (+-) being charged (for example $550-$600) with appraisers only receiving $450 which has been arbitrarily deemed by the VA to be ‘reasonable’.
In both instances there exists truth in lending misrepresentation. In the first it’s price gouging and in my opinion outright fraud. In the second case it is misrepresentation but not gouging or excessive pricing. Simple lying, if you will.
Small AMCs need a minimum of $75.00 per order to keep their doors open. IF they are doing their jobs; its not an unreasonable amount and they would earn it assuring USPAP compliance and performance by qualified appraisers. Most seek $100 to $150 per order to allow them to absorb customer service related account losses from bigger clients.
Therein lies the problem with what would otherwise be ‘reasonable’ fees for additional appraisal management and coordination fees. $75 to $100 is reasonable. An argument might even be made for $150 on higher end properties involving more administrative work.
Most are driven by human nature and ordinary business objectives to maximize profit. IF it were done with full disclosure of reasonable fees to all parties I’d be hard pressed to find fault.
The problem is that Congress and federal regulators (specifically those Feds that developed the so called Final Rules) implementing DF and TRID. They knowingly screwed both the taxpaying consumer AND the appraisers.
Personally I think any AMC pocketing 50% of the fee charged to the borrower has crossed all remotely reasonable fee boundaries and ventured into outright fraud. Calling something one thing while MOST of the fee goes for something completely different. Then allowing it to be legally concealed under the pretense of Truth in Lending!
Will it change anytime soon?
No. No one really cares and Congress has abdicated its responsibilities in partisan battles to ‘look good’. Could or would President Trump do anything? Certainly, IF the issue was on his radar!
But it’s not on his radar. Doubtful it ever will get the traction needed to show up there.
In the end, the consumer is still unaware of what a reasonable appraisal fee is or why its in their best interests to pay it. All most of them will see is that they paid $600 for an appraisal and the appraiser only got $300. They want their other three hundred back.
The appraiser is still working for half price.
Shhhhhhhh….not so loud. Homeowners may hear you.
If appraisers had half a brain they would stir homeowners about this situation until the homeowners would become so agitated that THEY would fight back against AMCs; thus doing the work for appraisers.
Unfortunately, the high consumer cost of appraisals provides additional support for appraisal alternatives. Maybe, it’s a conspiracy. I can top it all. I had a very complex property, in the millions. The total fee to the Borrower was $4,000. I will leave out what my fee was but, I will tell you it was less than 50%. The Borrower ended up canceling because of the fee and thought it was all mine. I believe the lender did too. Unfortunately, my hands are tied with no defense because we can’t? discuss fees. What a racket.
Lauren, let’s take it back to the basics. If you as a licensed appraiser are engaged in a way that forces an ethical conflict upon you that is; Unacceptable Assignment Conditions.
For your type of scenario there are good defense mechanisms you can set up in simple client selection methods. “What’s your standard fee in x county? The guaranteed minimum I can rely on regardless of volume. Does your amc charge variable rakes or a fixed fee?” The MB matters, the realty agent matters, the underwriter matters, the appraiser matters. The amc people, their sole job that means anything is the ability to connect the MB and the appraiser together, that’s it, they will never successfully add value services above that because the value is in the appraisers report, and it will always be the lenders responsibility to maintain quality control. The amc is not the client, they are the agent of the client. Amc’s are nothing more than yet another outsourcing and services shuttling company. Without the appraisal report, nothing else matters.
In the USA we have separation of powers for a reason, it’s the effective nature of the checks and balances system. Amc’s make a good illustration how a company will by nature, take advantage of the lack of checks and balances in place. There is never confusion about my fee, because I discuss that fee candidly up front. It’s a professional services fee. Amc’s don’t get to benefit from that, since they are not licensed individuals. Regulating a company is entirely different than regulating an individual. Well, it comes down to us individually to craft our own acceptable assignment condition.
These amc’s are hiring all these appraiser hopefuls, but they might be surprised how quickly they strike out to 1099’s when they have their own licenses.
Who says we cannot ‘discuss’ fees? I again urge all who have not already read the AGA’s proposal for minimum fee calculations to do so now. Its on the AGA website or on my own at http://www.mfford.com (C&R Fees).
Does anyone seriously think that all the banks magically ‘paying’ only from $550 to $600 AMC fees happened without some serious anti trust violations occurring?
The ‘bank’ and AMC agree to a fixed fee. The banks loan officers and correspondent lenders quote that fee to borrowers during the initial loan consultation and application process. There is ZERO input from an appraiser, or analysis of the appraisal assignment by individuals competent to do so. Specific qualifications or competency? You have a license and are breathing, you are ‘competent’.
The fee is cited in the TRID. LOCKED IN STONE by practice and policy!
Only then is an appraisal ordered and the appraiser permitted to “negotiate” within that preset range after the AMC takes their cut.
Tell me again I can’t ‘discuss’ fees with other appraisers! (Not you personally Lauren). My guild represents appraisers. We are a union. Discussing fees is what unions do. I defy ANY agency or entity to attempt to restrict my ability to discuss fees. Want me to prove it?
I heartily encourage every single appraiser in America to adopt a minimum fee for a non complex sfr (FNMA or FHA guidelines) within traditional FNMA non jumbo loan limits of $650. Refer to our C&R proposal for reasons why & possible variations.
Anyone thinks they have an anti trust claim? Go for it! Mike Ford, VP/Chairman NAPRC AGA, OPEIU-AFL/CIO
Total fee collected by Servicelink $650. Guess how much of it went to the appraiser?
That’s why we have to resist! It is your business so why accept. Knowing you got to survive, but at one point 6 yrs ago I went back to my old career part time for a year because would not accept $200 for 2055 nor $295 for 1004. I still got my fee but not as many. I would be losing money at those fees.
So yes there should be protection for us on fees, but on the same token we are our own worst enemy.
I could see perhaps $75 to $100 going to Servicelink but how on earth does ANY amc justify charging more? They certainly do not perform USPAP compliant (SR 3 and SR 4) appraisal reviews.
Even if they did, why should a consumer pay for an AMC to perform the legally required obligations of the lender (to assure delivery of USPAP compliant appraisal reports)?
The appraiser should have gotten no less than $500 to $550 of a $650 gross fee.
WHY WOULD ANY BANK, LENDER OR CONSUMER DO BUSINESS WITH A COMPANY THAT PRICE GOUGES AS BADLY AS SERVICELINK IS DOING ? Maybe th excessive AMC fee is to compensate them for ‘special assistance’ in getting desired values?
To suggest that there is anything the trained monkeys at an AMC do that warrants a fee that is nearly as much as the professional appraiser receives is simply DISHONEST!
It has been suggested to print out copies of the article and leave it with every homeowner…
Definitely something to think about.
Most assignments come with requirements not to discuss fees or the specifics of the appraisal with the owners.
Respectfully accepting an order and then putting the property owner or borrower in a confrontational position with our client would be unprofessional (imho).
IF we are going to involve homeowners the time to do it is long before any specific assignment-not after we have already accepted a low fee order.
And that’s why it’s essential to properly qualify the client with direct questions about their distribution process, before engagement.
This goes into every report on Additional Comments section: Fee that was paid to the appraiser to perform this appraisal report is $BBB.
Just one correction there koma, you’ve been stipped! The amount billed by the appraiser for completion of this order is/was; $XXX. Do not say the amount paid, since at the time of order submission, you were not yet paid.
Fee disclosure is an ethical matter that supersedes client sow in most typical ml scenarios. It’s unethical to conceal fees from consumers, aka the primary interested customer party. My fee is printed on the order page, stapled to the manila folder, then highlighted. I casually review it every order when at inspection, makes a simple ice breaker to stay focused and gain trust. Having qualified the clients distribution process before hand, this trust disclosure of fees issue with the customer has never resulted in surprise or confusion. It’s not my fault that the cfpb approved the unethical hud1 disclosure form that puts appraisers at a disadvantage and does not proper separate the distinctly different fees which is amc and/or distributor vs appraiser. The consumer deserves better, and so do I. It’s a free country and I am transparent about fees.
Especially with so many middle manager amc’s in place, and their quite high staff turnover, it’s important to verify the order. I’ve seen all sorts of data entry and other issues which I corrected by reviewing the order and data with the home owner. These days the appraisers must quarterback the whole thing, since the middle managers typically bungle as much as they tie up. Don’t get me started on demanding to speak to underwriters directly, Ha!
Baggins, I stand corrected. Thank you for the input!
all states should do what Illinois does, we have to list out the AMC fee with our appraisal fee in the appraisal
We are not a freaking hamburger you a-hole. I hope one day you get regulated by some bottom feeder who makes their living off of someone else’s hard work scumbag…