AMCs Billing Scheme, Hidden Profits & Deceptive Practices
Appraisal Management Companies (AMC’s) do not pass on cost savings for reduced appraisal services to consumers. Instead, they keep the savings for themselves without disclosing the amount to the consumer or the appraiser. What should have been cost savings for the consumer are pocketed by the AMC in secret. This is considered a junk fee or unearned fee billing scheme under current law.
Appraisers who participate in this system are in violation of The Management Rule of USPAP, and providing “a thing of value” to the client, in order to be selected ahead of other appraisers. They know very well they are participating in concealing transparent billing from consumers; they agree to as much in AMC engagements. They know when they reduce the appraisal fee, the AMC company keeps the difference, the very financial incentive why that appraiser gets all the work ahead of other appraisers.
Where as with alternative more honest models, like direct lenders or VA panel, who have fair fees set per region, all appraisers get that same base standard fee and there is no financial incentive to drive the appraisers fee down, drive the consumers fee up, and secretly pocket the difference. In fact, those same fee tables are what they pay the AMC’s and bill the customers for, prior to the farming out of the order for discounted appraisal services. Discounting for AMC volume is nothing short of a gratuity fee or a bribe.
Federal Registry guidance previously clarified that entities who assign appraisal orders, must not assign solely based on fee, but rather skill, experience, qualification, merit, and geographic competency. Read the actual rules here.
‘Please advise when the fictitious safe harbor rule pertaining to Customary & Reasonable billing will be rescinded.’
Appraisal management companies often force appraisers to adhere to unethical engagements, which not only violate antitrust laws but also create an unfair playing field. By enforcing hidden billing methods and excluding appraisers who do not comply, these companies are essentially creating monopolies and engaging in price fixing and collusion. This not only goes against ethical business practices but is also illegal and can be considered racketeering. Appraisers who do not agree to their hidden billing methods are excluded from the majority of the GSE lending marketplace for appraisal orders. This creates unfair competition. It is crucial for the authorities to take action against these practices to ensure fair competition and protect the integrity of the appraisal industry.