Evolution of C&R fees – Alter Your Thinking
Appraisers reluctant to force actual C&R fees on AMC clients…
Appraisers,
I’ve spent the last two days reviewing the ‘new Rule’ involving the registration of AMCs, which has – buried within it by reference – information relating to Customary and Reasonable Fees for appraisal reports. I’m grateful to an appraiser acquaintance in Pennsylvania for her assistance.
Below is a 4 page document that shows the mentions of “C&R Fees” – and how those apply to AMCs.
You may forward this to anyone else, or may use this information in any article or publication disseminated to appraisers, lenders, AMCs, other clients or interested parties, providing that I and the other appraiser shown on page 4 are credited.
The fact is, appraisers have been taken advantage of since AMCs became industry players more than two decades ago, and more so when the HVCC was implemented, after which the Dodd-Frank law was passed, and then with the Interim Final Rule put out by the Federal Reserve Board – which allowed two ‘provisions’ to determine if fees were C&R.
The fact also is that nothing in the law or rules intended that a compilation of AMC fees paid would be the basis for determining C&R fees in any geographic area. However, appraisers (and appraisal organizations and associations) have been reluctant to force actual C&R fees on AMC clients due to fear of losing business. Net result has been a severe degradation of earnings for individual appraisers who accept assignments from AMCs. That has forced many out of the business.
The ‘new Rule’ does not yet have an Effective Date; that will be 60 days after publication in the Federal Register (date unknown). Then States without current AMC registration laws will have 3 years to get those in place. The Rule will apply immediately for those States which already have AMC registration laws in place. However, it’s left up to the States to enforce provisions in the Rule.
It’s time for appraisers, and the associated lenders and their AMCs, to acknowledge that C&R is fair and expected when appraisal assignments are distributed. The new ‘Rule’ mandates it.
Because AMC fees paid cannot be used to determine C&R for any geographic area, it’s time for regional appraisers to evaluate what fair fees are for various appraisal services in their areas. And then don’t back down, as has been done up to now.
C&R fees can be determined by examining appraisal fees paid by non-AMC clients – such as lenders with their own appraisal placement departments, fees collected for private, non-lending assignments, and perhaps by what the VA pays (which is a flat fee based on geographic areas). It means the appraiser should collect an appropriate fee for the service rendered directly, and should not have to share a significant portion of that fee with anyone else just so the appraiser is kept ‘on a panel’ of appraisers.
By the way, a ‘portal’ used for receiving and uploading assignments and reports is not considered to be an AMC for the purpose of the new ‘Rule’, because a ‘portal’ does not meet the definition of an AMC.
It’s time for lenders and their associated AMC’s to realize that keeping (or stealing) a portion of the appraiser’s C&R fee is unlawful. It’s time for a “Cost Plus” business model to be fully established when a lender chooses to employ AMC agents to handle appraisal management. That means if $750 is charged to the borrower for the appraisal, and the appraiser’s C&R fee is $550-600, the balance can be paid to the agent for their work. These are just examples and not meant to suggest any particular charge or fee.
Important point: all AMCs are regulated with this new Rule, even those that are wholly owned departments within and controlled by a lender. The difference is States won’t regulate those directly and cannot force those to register with the State; instead they will be regulated by the particular agency who regulates the lender, but that agency will employ the standards in the new Rule. Any entity which performs activity shown in the AMC definition is considered to be an AMC, and must be registered.
Final point: you are worth what you charge for your service. You are NOT worth what you accept when that fee is lower than C&R for your area. Appraisers need to pull their heads out of the trench and demand to be paid what is determined to be a fair fee (what you charge) for a particular service. The time to do it is now. The new ‘Rule’ provides the backbone needed.
Dave Towne on e-AppraisersDirectory.com
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Dave, another great article. One that I HOPE will have appraisers thinking in terms of what it costs them in time and overhead before they start quoting fees for surveys from now on.
I’d concur that VA fees could be the bare bones minimum fee charged for non complex appraisal assignments prepared in a format identical to that used by VA. You don’t know how many I’ve heard that oppose that though! Like they are getting more now. Not likely.
A better metric, in my opinion is the federal General Service (GS) pay scale PLUS regional location allowances; divided by 48 (for appraisers with longevity that would have 4 weeks paid vacation a year) or 50 weeks for newer appraisers (up to 8 or 10 years).
Trainees equate to GS-7
Basic licensees with less than five years experience, GS-9
Basic licensees with more than five years experience, GS-9 to GS 11 (able to properly complete 2-4 units)
Residential Certified GS 11 to GS 12 highly complex and or non conforming limit transactions.
General Certified GS 12 to GS 14 – Generally GS 13 to 14 for apts; commercial and industrial
International Appraisers perhaps in the GS 15 range
Take the annual salary and divide it by the number of working weeks based on longevity; assuming a FORTY HOUR WORK WEEK ONLY! Not the current 50 to 60! Also give yourself 3 to 6 sick days a year.
The result is the NET amount the appraiser should earn per work-week. ADD ALL overhead and training costs; office expenses and E&O; travel time, car wear and tear etc. ON TOP of those amounts (since IF you worked for the Feds-that would all be paid anyway)
Take THAT weekly amount and divide it by the number of assignments you can complete in a week (or two). THAT is the “Reasonable” fee that should be charged. Frankly I think good appraisers can only do FOUR (4) SFRs a week start to finish; 8 hour days; 5 day work weeks.
The last time I extended this out, it put the “reasonable” fee for a non complex, FNMA conforming loan limit transactional appraisal at between $650 and $750. (includes California 27% to 28% federal high living cost area premium). Appraisers can argue about whether they are willing to be ‘constrained’ by these fees, but how many are actually receiving them today? I too “used to” get as much as $3,500 for an SFR-though that was the very rare exception rather than the rule. Complex SFRs used to run $1,000 to $1,500. You get over 2 1/2 million property involved and its going to go up…significantly. So does my liability. Right now, extremely complex assignments are being completed by untrained and unqualified individuals selected only for their willingness to work for less than a ‘reasonable’ fee.
We can continue the individual fee arguments, but WHEN WE ARE SURVEYED REPORT THE ABOVE or some approximate variation!
Basic $700
Complex under a million $750 to $1,000
Res. Cert. level appraiser REQUIRED (over a million), then fee goes to $1,000-$1,500 (and up in some instances).
General cert. required-Should Be $1,500 and up. Any license level operating at a lower license level could accept that fee as ‘reasonable’ for the assignment.
I appreciate there is no single solution to defining “reasonable” fees. This is merely one method. One for which the federal government’s civilian personnel classification specialists have already done the research.
Probably an argumentative refocus is necessary to solve this C&R issue. Let’s not look at what appraisers should be paid. Let’s look at the factors that constrain our abilities to price fairly. This is what farmers have felt like for a century. What goes around, comes around.
before i say anything, i want to applaud Michael for his well thought out and well written response above.
next, addressing the article, i would like to say, its about damn time. thats the good news. the bad news is:
1. its way too late. a lot appraisers have already left because of fees. how long did this take? how long have appraisers been barking about this problem? how many appraisers could have been saved if this one problem was tackled much sooner? i am guessing quite a few.
2. there is no publication date for this Rule, and when one does come, “States without current AMC registration laws will have 3 YEARS to get those in place.” Talk about unacceptable. Add those three years to the numerous years appraisers have already been waiting for something like this, and this matter got drug out for how long?
IMO, if the states and all the numerous appraisal organizations really cared about their appraisers, a push to fix this problem would have happened a long time ago, and it shouldnt have to take another three years on top of that for some appraisers to wait even more.
its a start, but the bleeding continues . . . . .
Great discovery of a little known fact AppraisersBlogs team! Take a long hard look at the east face of The Matterhorn appraisers. That will give you a clear idea of the uphill battle you’re in for in eventually obtaining fair fees. Don’t blame anyone but yourselves though because you were your own worst enemy.
I predict that Kentucky will bring up the rear in implementing a rule regarding fair fees.
Raking premiums lately, if you could call them that. Comparatively, the fee has still not recovered from the equivalent fee from 15 years ago, in terms of inflation and additional costs and time required to furnish the appraisal report. Raking 450+ for all standard in CO, with many running up to $550+ for standards. Been quoting tough work at 800 and 1k+, but the assigners end up being advocates for the lenders and therefore are hesitant to even call the lender and get any fee approvals. Charging all problematic grade based amc’s super premiums and rejecting most of that work all over again. There are some smaller scale amc’s that turned out to be nice to work with, which was a nice break. Unfortunately they usually have a very weak position when it comes to negotiating on behalf of the appraiser for proper inflationary increases to fee. The industry will continue to retract until such time as the standard appraisal fee gets back up to $800+, which is the equivalent of yesteryears. Amc’s serve as an effective firewall to keep many lenders from being exposed to quality appraisal service. The C&R argument died with the advent of the 15 page engagement letter. Moving to sales this summer because after this current 2015 early rush, which is quite remarkable, many an appraisers heart and wallet will be broken when the music stops. This up cycle shows promise for the future, but the industry will need to shed more of the check to check yes man appraisers before the serious appraisers can get a better footing to drive constantly higher fees and longer constant out times for order booking. My appraiser buddy is raking 600 and 700 per standard from quite a few companies, simply because he’s offering 2 week or less service. Brushing off 2 orders a day at least, and these amc’s are not able to deliver any increase in service or affordability. They only delivered that because they constrained the appraiser, and rarely brought any real value to the process anyways. Illusionary grading for pretend employees. The standard for good amc service requires at it’s core, fair distribution without grading nonsense, and without care for the fee which should be passed cost+ back to the borrower anyways. Centralized distribution did more harm than it ever did good for this industry, regardless if it’s a portal, amc, or what ever.
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What would happen if we all took a nationwide day of rest and reflection in protest against AMC fee’s ?
Maybe someone could provide me with an answer. I have tried to think of any other “profession” where the client determines what work is to be performed, when it is to be completed, what fee they will pay and when they will pay it. I am talking about a profession that requires a college degree, state exam, certification and years of verified experience. What other “profession” puts up with this?