Workfile With Submitted Appraisal Reports?
Should You Include Your Workfile With Your Submitted Appraisal Reports?
Appraisers,
On several forums frequented by real estate appraisers, there has been recent discussions about a particular Appraisal Management Company (AMC) owned by a lender who is requiring appraisers to include their ENTIRE WORKFILE with every appraisal report submitted (as of 5/21/2015).
The AMC is LenderVend, owned by Provident Funding.
One reason why this has come to the forefront is because Provident Funding has had to buy back numerous loans due to alleged faulty appraisals and other underwriting issues. So by demanding the appraiser’s workfile, they are attempting to protect themselves while requiring appraisers to do tons more work – probably at no increase in fee.
Most appraisers have decided (per forum posts) not to comply with this edict, and thus will not work for LenderVend/Provident Funding. If you are caught up in this situation, you will have to also make a business decision regarding this company’s policy.
If you want to read more about this situation, click here.
If enough appraisers comply with this new Scope of Work item from this singular company, it could become a requirement for many more. So be real careful about this, and your decision.
Related: a couple of years ago, a major AMC told appraisers that a photo of “every fixture” in the bathroom(s) would have to be in every appraisal report. So much stink was raised about that in various places that they backed down. The workfile issue is another stinky situation.
Excerpt of LenderVend Letter:
Effective 5/21/2015, LenderVend Appraisal Zone will require appraisers to upload their workfile (as defined by USPAP) in PDF format into appraisalzone.com.
At minimum the workfile must:
- A workfile must be in existence prior to issuance of any appraisal report
- Each workfile must include the following: name of client… true copies of written reports….summaries of all oral reports…
Dave Towne on e-AppraisersDirectory.com
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HELL NO! They can ask for the moon (like they most certainly try), but we can say no. Had a client ask me to put into my report why did my comparable that I used listing have a different above grade sf. Notified them my source of info was quoted in the report and the noted difference was in my work file. Then I rattle off a number and they said what’s this? I stated it was the listing agents phone #. Also, right there in the listing it stated measurements are approx. The client said ok thanks and I’m still doing work for them today.
Koma really said it in the first two posted words.
I would never agree to do that. Not ever. OK, maybe not ‘never’- I would not work for someone that asks for it UNLESS they are going to add a $1,000 to $2,000 premium charge to every single appraisal fee offered. IF they pay me $1,450 to $2,450 for every single non complex conforming loan limit sfr I can spend two days on each report and the rest of the month copying the work file.
This can never benefit an appraiser and can ALWAYS be used to harm you. For example: Engagement letter you agree to stipulates complete file. You give them one. They sell the loan; buyer buys it based on pick and choose .xml data which does NOT include your workfile. All or parts of your workfile become separated from the loan file as it gets sold and resold. If lenders cant even produce the legally required signatures showing they assigned a loan, how are they going to be trusted with entire work files?
Loan goes bad. Buyer defaulted. “Recovered asset” is bought by speculative investors more than willing to limit their ‘profit’ to E&O coverage of the appraiser. They file complaint. States says send us workfile. THEY contend that workfile state got is not the same as the one they got originally with the loan, THEREFORE that alone is a scope of work violation! Farfetched?
Maybe.
THAT was a best case scenario. What If you do analyses in the computer and keep efiles with links? Say you cited DQNews in a report-recorded the link and then last week went online to pull the same data again and found DQNews is now a subscription service?
Clearly LenderVend AND Provident Funding need to go join the dinosaurs in extinction.
The Voice of Appraisal episode #56 discusses LenderVend workfile issue. Discussion starts at 29:50.
https://youtu.be/rT3TDqmmf8M
This company called me out of the blue, and offered $525 or something similar to that for a standard order. I said o.k., let’s get an order going. It was assigned direct to my box. Everything was good so far. Then I sat down with a fresh cup of coffee to read through the 35 page scope of work, and an additional 15 page terms agreement. When I ran across the requirement for me to furnish them my bank account numbers for direct deposit, as they do not send paper checks, that’s when I rang back and said no go. As they do not allow the appraisers the ability to negotiate scope of work pre order, appraisers are left without the ethical compliance point necessary, which is the ability to adjust scope of work and communicate pre order. I’m more effective with paper than digital, when it comes to comprehensive comp choices and market analysis in the field. Do they want to see my hand written scribbles regarding adjustment analysis and phone notes? A better way to protect themselves from repurchases is to control their mortgage and underwriting staff better, and attract independent minded appraisers instead of employee minded form fillers. Within the first 2 minutes of reviewing their material, I was informed of all the penalties they would levy on me if I failed to comply. Illusionary grading policies for pretend employees is a poor substitute for professional engagement. The list of unreasonable demands from amc’s is growing daily. They get worse than this company though, believe me. Amc’s as a group are hindering operational efficiency more than they are helping it. I offer direct assignment clients a $100 to $200 lower rate than amc’s, simply because that’s really what income per hour equates to, if having to dump so much extra time into every amc managed order. It’s direct assignment or bust for me lately, and most clients are willing to pay 500 straight up for orders anyways lately. Appraisers need to step out into the light and starting actually being independent.
Baggins, I was with you 100% all the way right up until you said you offer non AMCs a $100 to $200 discount.
WHY on earth would you do that? Are you unconsciously trying to assure appraisers adopt UNREASONABLE fees as being customary? I know some AMCs charge only $450 (they too are cutting each others throats). They pay appraisers $300 to $350 on a good day. I rarely do field work for them due to the fee. So are you saying you’d do NON AMC work for $300 to $350 too? Every assignment I accept below my normal fee or a reasonable fee represents time I am not available to work for full fees!
Anyone (client) in a position to waive AMC use based on fees bids doesn’t need the AMC in the first place. For all others, they CAN’T waive AMC use because they long ago abandoned their in house appraisal expertise and processing.
A ‘reasonable’ fee for a non complex, FNMA conforming loan limit appraisal with 1004MC, and willingness to deal with UAD & CU is no less than $650.00. Now each of us can opt to insist or not insist on that amount until it becomes commonplace, but THAT is the reasonable level. Not $450 and certainly not $300 or $250!
Every appraiser that indicates willingness to work for less, undercuts our profession. Tell me (and seriously no offense is intended by this); Do you still look at vacant land sales in your cost approach? Do you actually run through the extraction calculations? How about zoning? Public ‘records’ derived from RealQuest, or do you look at actual zoning maps? Same with flood zones. Actual FEMA maps or some third party vendors? How much time do you spend on highest and best use as if vacant? How about as improved?
Now with regression being adopted as the fair haired end all of adjustment validity; how much time are you spending on that? When you fill out a 1004MC and the data is garbage, do you then use anther RELIABLE source of information and explain why that was used rather than the garbage generated via 1004MC?
All these things we do, take time. Properly analyzing a sales contract should be a half hour MINIMUM-not one minute just to check the counter offers. How about condo budgetary information? Developing market rents? Market expenses for SFRs?
The use of short cuts has become so prevalent these days that 80% of what I review for down and dirty QC purposes would never pass one of my own desk reviews checking for USPAP compliance.
I have discontinued the use of the phrase ‘customary and reasonable’. AMCs changed (drastically lowered) the range of ‘customary’ and too many people ignore whether the result is reasonable or not. THAT is where we need to start placing OUR focus. IF Im quoting $650 and Mercury or Serent or whoever wants $13.75 more, then my fee is going up to $663.75. I am NOT eating the overhead and special handling costs anymore.
I am not going to be content just because a very few clients will toss me a bone and pay what they paid 7 years ago, for much less work! Seven years ago I wasn’t paying $3.75 for a gallon of gasoline! Or $3.89 for a gallon of milk! Or $5.25 for a pound of cheese; or $2.00 to $4.00 for a one pound load of bread!
When I started this business, the “Chili Index” (Dublin Generics) was $0.57 for a can. Now the generics are gone and even my substitute Dennison’s has increased to an average of $2.36 (not on sale). Chili costs me 4.14 times what it did when I started appraising. Appraisals back then were $275. If appraisals ONLY kept pace with the price of Chili, we’d be getting $1,138.50 per appraisal now. How much longer are we all going to keep absorbing the higher costs?
Its time to do more than talk about it.
I hope you will join me. http://www.AppraisesGuild.org
Chairman, AGA National Peer Review Committee
Mike Ford (714) 366 9404
Well Mike, you know what they say about ‘assumptions’…. I don’t touch any full lending based order for less than $400. All full orders for everything except reo (because I like reo and it’s easy w/ limited use), run at $400 base. I’ve been bidding amc’s up to 500 and 600 if they give me the hassle factor. Who’s undercutting here? It’s not me. The great lenders to work with have 1 page sow’s, quality underwriting staff that is there for me to catch legitimate errors when I need them. You can promote regression analysis all you want like the robots are god, and logic is dead. I’m not subscribing. Regression seeks to make sense of an illogical equation. Robots can’t consider the human factor. A program cannot comprehend smells, feels, appearance, cleanliness, and until such time as an appraisal includes an exhaustive list of all home materials itemized to the detail with effective age considerations, regression will continue to be just another tool that works well in some scenarios, but not others. You don’t have to preach fees to me. My mom and step dad were appraisers in a mountain town, where I cut my teeth on mansions to trailer homes, over an extensive area. Now I’m chilling in the suburbs, but still use most of those skills to this day. Until such time as the standard fee is $800 or better, this industry will stay in the attrition phase, instead of expansion. For every new amc worker, there is one less appraiser. So yeah, I do charge a hassle factor, and I’m sticking to that. As I’ve only got so much time, I’m currently promoting a direct assignment or bust ideology and will see how that plays out. I don’t exist as a small business person to save someone else a dollar. Go sell the lenders on those ideas, you’re just spinning your wheels trying to second guess me.
Baggins, good luck.
Im not second guessing anyone. Im responding to your post. Period.
As for regression, I think its generally BS as currently used and promoted. It has a place, though I personally just don’t see it in market areas with less than a couple hundred competitive transactions. Even then it is no better than a checks and balance. Id rather have an informed, experienced agents honest opinion of value features in their own market.
Personally I think minimum fees SHOULD be in the $650 to $750 range so I don’t see us as being THAT far apart. $800? $1,250? Sure; for nominally more complex work.
What I DO see (in the industry-not necessarily your post) is a lot of short cutting of necessary appraisal steps in order to pump work out at low fees in unrealistic turn times. THAT is what I am trying to change.
Again, whatever works for you is fine. The rest of the profession is on its own, right?
For many years the appraisal profession has suffered because we were not a large enough group to get the attention of users of our services. They just bulldozed over us and shoved every requirement they wished our direction. I believe the tide is now turning. It is because we are a small group and getting much smaller quickly that these users of our services are beginning to take note. Many appraisers are leaving this business for a variety of reasons. Some of my major competitors are in their 70’s and I could retire today!
When I get an email from any AMC I just hit the delete button. I pick and choose the clients that I want and that is only because I can. I do FHA appraisals in several counties that have no other appraiser. Guess what FHA?
Wayne, you are right.
Oddly enough, I’m getting news that rates are struggling upward. Partly BCAUSE so many have left the profession, as well as the commendable actions by some groups such as the Louisiana Coalition of Real Estate Appraisers pushing there state to cite a large AMC that was violating their laws concerning customary and reasonable. By the way, I usually no longer refer to it as customary at all. It is the “reasonable” part of Dodd Frank that I think should push appraisal fees now.
I also think members of my own group, the American Guild of Appraisers (AGA) http://www.appraisersguild.org pushing back against unfair fees is helping too.
A recent series of AMC orders turned up the following: Texas-no one willing to do the work for less than $450 AND with a three+- week turn time. Alaska; $800 minimum fee cited. Multiple appraisers contacted.
These are by no means universal trends yet, but the handwriting IS on the wall for the banks and other lenders to read. You can no longer indirectly price fix by only selecting AMCs that charge you $595 for the management AND appraisal fee. You now save on all the administrative overhead of running your own appraisal administrative and review departments. You charge your borrowers $900 to $1,000 in closing costs for this, yet allow the appraisers to only receive $300 to $400? That wont work anymore.
(1) Stop overcharging consumers. YOU did not earn any appraisal service or review fee of more than a few pennies. You passed the buck on that. You don’t get to gouge the consumer and turn appraisals you had nothing to do with, into separate banking profit centers!
(2) Recognize that the real per appraisal ‘cost’ for AMC and appraisers alone in a loan is probably about what you are charging and pocketing yourselves. You need to create a business model that ROUTINELY supports $600-$650 per appraisal TO THE APPRASISER for NON COMPLEX, conforming loan limit work in average market areas; with provisions for increases for cases like those I cited above in TX and AK . AMCs typically need $100 to $150 depending on volume to assure the USPAP required compliance that YOU pass along to them, is obtained.
Whatever proposals are eventually adopted by all participants, they MUST include recognition of fee variations throughout the country. One method would be to employ the Federal Civil Service GS Pay Scale and regional COLA premiums of up to 31% above the base in states that warrant it.
There ARE win-win solutions to all of our problems, but we won’t get those before the decision makers & regulators by ourselves. THAT is why we need all appraisers to join the AGA. 1(800) 660-1835. http://www.appraisersguild.org Ask for Leo or Jan. Inquire about first year discount on dues and or quarterly invoicing.