AMCs Have Failed
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…it will be the appraisal management companies that are going to be held to the fire, not the appraiser…
In the spring of 2002 my wife and I bought our third house; an older cape cod in a great school system where our son would start kindergarten in the fall and his sister the year after. This house literally was 1970 inside. It had deep red shag carpet in the family room and sculptured avocado green carpet upstairs. Not to worry, it blended well with the sunshine yellow stove, bright orange counter top and turquoise and pink bathrooms. After 3 years of removing layers of flowered and checkered wall paper from every inch of plaster down stairs, refinishing the original oak floors, new kitchen cabinetry and brand new bathrooms, we decided it was time to tackle top the upstairs. We gutted the entire upstairs and left 1,000 square foot of open space ready to be transformed. Long story short, by the end of the renovation, we had established a relationship with the HVAC specialist Mike, who installed the HVAC system upstairs. We have followed him to several companies he worked for and last year Mike opened his own company.
New Year’s Day, our downstairs furnace went on to the fritz. So, on January 2nd, I called Mike’s company. The service coordinator, Carol, asked me some questions: What brand is the furnace? How old is it? Where is the furnace located? Do you have any cats in the house? I inquired as to why she needed to know this information. Carol quickly pointed out that they have several technicians trained on certain brands of equipment and are more familiar with the newer equipment with all the electronics. She also shared that one the technicians has severe allergies to cats and dust mites. “If you had a cat or if your equipment was in the attic or crawl space, I did not want to send him out. I want to make sure I get the right technician to repair your equipment.” I was truly blown away! I was dealing with a professional company who conducted business the right way.
This is where appraisal management companies consistently fail. Getting the right appraiser for the assignment type, property type, location and intended use is by far the most crucial aspect of the appraisal management company’s responsibility. Just a little due diligence up front is all it takes. I am unaware of any appraisal management company that does it. I have on occasion had the appraisal management company get the locality wrong.
Blasting text messages to every appraiser is a complete failure by the appraisal management company and speaks volumes of their lack of professionalism and understanding what an appraiser does, is required to do, and how to effectively run a business. Appraisals are a service, not a commodity so one size does not fit all. Appraisal Management companies simply do not understand this basic concept.
For those appraisal management company trolls that read AppraisersBlogs, let me spell it out for you in the hope that you can comprehend the error of your ways. Before I do, the appraisal management companies need to understand they are not dealing with employees, nor are they dealing with independent contractors, they are dealing with another business. Every appraiser who is not a W-2’d employee is a business entity. Even if they do not have a business license, they file business tax returns with the IRS, State and locality in which they reside.
Before even accepting an appraisal order, I search the property in MLS. If it is in MLS, that front photo, interior pictures and the agent comments give me a lot of information about the property, even if it is an old listing, I have a good grasp of the property’s square footage, garages, parcel size, condition, etc. I then pull the tax records and view what the locality has listed. Despite what my license allows me to appraise, I pull USPAP into the decision to accept or not and ask myself, “am I competent to appraise this property?” I am bound by USPAP and competency is a requirement. I then ask myself, “do I want to appraise this property?”
Yes, my MLS allows access from mobile devices, but when I am in the field on an inspection, at a borrowers’ home, I will not be on my phone. This is not only rude, it is extremely unprofessional. When I leave the subject property, I am driving so accessing my phone is not safe, practical or legal.
I do not have any appraisal management company apps on my phone, nor do I allow any appraisal management company to text me anything. This is simply unprofessional and quite frankly, an extremely ineffective means of communication as an address is never enough information. Not to mention my attorney strongly advised against it for confidentially requirements and concerns. If you are an appraiser that is allowing an appraisal management company to communicate with you in this manor, I encourage you to rethink this. At the very least, discuss this with a trusted legal advisor.
A perfect example of the failure of an appraisal management company occurred just the other day. I received an order for a purchase. The MLS listing photo clearly showed a manufactured home and the style stated was a manufactured home. Zillow, Trulia, and Realtor.com, all stated the property was a manufactured home. Even the Tax Card stated a manufactured home. So where is the problem? The first line of the engagement letter stated:
“The lender does not lend on manufactured homes. Stop and notify us immediately if you discover the home is a manufactured home.”
This appraisal management company failed before they even assigned the order. Not only was their lack of due diligence an embarrassment to themselves, it was a complete waste my time, the borrowers time, the real estate agents time and cost each of us money. I am thinking about sending this appraisal management company an invoice for their lack of performance, but I seriously doubt there is anyone employed by the appraisal management company that would understand how they failed and why I should be compensated for my time for doing their job!
The very same appraisal management company called me and asked me to accept an order in an area about 45 minutes from me. It is an area that I cover, but due to a crazy schedule next week because of Presidents Day and my wife and I celebrating our 20th wedding anniversary over a long weekend, I told the appraisal management company, yes, I will complete this appraisal, but the due date would have to be Monday the 26th. The order was sent over with a due date of the 24th, which is a Saturday. I sent a message reminding them I agreed to a due date of the 26th and to please update the order. Several hours later, I received a message stating that due dates could not be changed and the appraisal was due on the 24th. There was no name signed to the message. I sent a second message stating the 26th was a condition of my acceptance. I further explained professional business hours are Monday – Friday and Monday was a Federal holiday. Banks, courthouses and title companies were all closed. A Saturday due date was absurd as no one at the bank would be there to receive it. I then received another message stating that due dates could not be changed. Again, there was no name on the message. I decided this was enough. I called the appraisal management company and asked to speak with the person who was handling this order. The very pleasant person on the phone stated she could assist me. After explaining the situation, she said, “I see the note in the system, I will change the due date.” Human verbal communication worked, messaging was a complete failure.
Saturday due dates, really? No bank has their mortgage department working on a Saturday. Maybe at the end to the month but they certainly are not looking at an appraisal that was just coming in as they are finishing up files that will close that month. My years as a mortgage originator and branch manager gave me great perspective on this. Another example of how the appraisal management companies lack of understanding and communication has failed.
Appraisal management company engagement letters are also complete failures. It used to be when the lender sent an appraisal request it was usually a form from their system they faxed or emailed. It had the borrowers name, address and contact information, the lenders information and maybe a few sentences specific to the assignment. I never received any appraisal requests that were multiple pages. Even the engagement letter the appraiser sends to an attorneys is only 1 page. My take away from this, the lenders understood appraisers are licensed professionals and know Fannie, Freddie, and FHA requirements. There was a professional relationship based on trust and professionalism.
Now in the appraisal management company world, there are multiple page engagement letters that instruct appraisers when to call the borrower, how to speak to the borrower, what to wear, and restating Fannie, Freddie and FHA guidelines. Sometimes the engagement letter will also state a preferred time they have arranged with the borrower. Treating appraisers like 3rd graders is another failure of the appraisal management companies. This only creates more discourse between appraisers and appraisal management companies. If only appraisal management companies understood they cannot exist without appraisers.
Why is the appraisal management company even sending an engagement letter anyway? It is the appraiser’s terms and conditions in which the appraisal management company must accept. Appraisers initiate the engagement letters for our private clients. We are independent businesses, just like my HVAC guy Mike. I agreed to his terms. No different when you call any other service professional. Do the appraisal management companies understand the appraisal is a service, not a commodity? Clearly they do not. Does the appraisal management company not realize without appraisers, they do not exist?
I cannot speak for others, but occasionally I will have difficulty contacting a borrower. After 2 voice messages, I will email them stating I have been unable to reach them by phone and to please call me to schedule the appointment. Once I update the appraisal management company’s system, I usually get a comment from the appraisal management company stating to reach out to the borrower by all means of communication, phone, email and text. I have never texted a borrower, nor will I ever text a borrower to schedule an appointment. I know there are some appraisers that prefer this, but I do not believe it is professional nor efficient.
When I have a borrower on the phone, I start to build a rapport with them. I ask about their home, bedrooms, baths, renovations etc. I sometimes get information about issues within the neighborhood or HOA. In case you were not aware, people love to talk about their homes. During that phone conversation, I also get a feel for who I will be meeting. Although I have never been in a situation where I felt unsafe at the subject, safety is a concern and I trust my instincts. If something does not feel right on the phone, I simply cancel the order and do not go. Texting the borrower or communication via email does not allow this extra layer of personal safety. This is another area where the lack of understanding of what an appraiser does, or the dangers an appraiser could walk into, has created a complete failure by the appraisal management company.
Once the property is inspected, some appraisal management companies require the report to be delivered in 48 hours. I recently heard of one appraisal management company demanding the appraiser submit the report within 36 hours of inspection. Well that is just another example of how the appraisal management company lacks understanding of the appraisal process and the requirements of USPAP. For example the appraiser completes the inspection on a Friday afternoon. The report is due on Sunday? How does the appraiser research and verify all the data required by USPAP? The courthouse is not open to verify a transfer if the records are not online. No attorney is working Saturday or Sunday to verify closing documents, and sales agents are out showing houses. They are not in their offices where the file is to verify information for you. Heck, appraisers are lucky if they can even get an agent to return a phone call sometimes. Even if all the stars are aligned and you can get the report completed on a Sunday, who is working Sunday to receive it? Is the appraisal management company going to provide additional compensation for having you work outside of professional business hours? When you call the plumber at 9:00 at night, does he not charge a night and weekend rate?
Even if the property is inspected earlier in the week, most appraisers will inspect several properties in an area before starting the reports. Much of the research can be shared among the reports, especially if the properties compete against each other. Gas prices are on the rise; all the more reason to be organized and efficient in our day to day routines. Appraisal management companies do not understand we are businesses and work efficiently, even if they do not.
And what is it with appraisal requests coming over at 8:00 PM? If you give me 2 hours to accept, it will just sit there as my business closes for the day at 6:00 PM. I could care less that your office is on the other side of the county. If you ever call me phone at 8:00 AM on a Sunday, like one appraisal management company did, you will get an ear full. Trust me on that! Do the appraisal management companies not know what time zone the property is in? I am not sure they even understand there are different time zones. Another fail!
I live in a suburban county and cover the entire metropolitan area. Most of my appraisal assignments are now coming from rural counties. Some appraisal management companies have hired staff appraisers to complete appraisal reports in my coverage area. These appraisal management companies have set themselves up for some close scrutiny. There is current legal action against an appraisal management company concerning overtime pay to appraisers and attorneys are waiting in the wings for other actions against appraisal management companies and their lenders. If an appraisal management company hires staff appraisers to cover a locality, is that a restraint of trade to non-staff appraisers that are on their panel? What about appraisal management company requirements of delivering completed reports 36-48 hours after inspection? Will the appraisal management company requiring this unrealistic turn time be held liable to the independent appraiser for over time compensation. If the engagement letter tells me how to dress, when to call and what to say, is that not an employer /employee situation? One attorney is looking into these very questions.
To be fair, not all appraisal management companies treat appraisers poorly and have disrespectful and unprofessional practices as I have described. However, enough of them do operate that way that the discourse between the appraisal management companies and appraisers is strong and growing. All eyes are on the profession now that Fannie Mae has asked for another bail out. When our legislators start looking at appraisals, fees and such (and they will) it will be the appraisal management companies that are going to be held to the fire, not the appraiser.
By Milton P, Certified Real Estate Appraiser