Skewed “Customary” Fee Perceptions
I no longer care about “customary”.
“Customary” in Dodd-Frank’s customary and reasonable is a negatively biased fee before state studies begin!
We all know that the “C” part of C & R is supposed to represent the normal fee charged by most appraisers for similar work and conditions. Some AMC appraisers even know the “R” part is supposed to be an amount that is reasonable based upon ALL factors necessary for completion of the assignment in a USPAP compliant and professional manner.
Unfortunately HVCC and the AMC havoc it wreaked has existed far too long for there to be a ‘reasonable customary’ fee anywhere in the United States. Even when very low AMC fees are excluded.
Consumers have now been told too many times by bank loan officers, AMC customer service, and clerical support staff, that appraisers will work for $200, $300 and even still low $350 AMC fees. They think the overage THEY pay goes for “review” costs.
Three hundred dollar full SFR appraisal fees have not been customary or reasonable in Los Angeles since fifteen years ago!
Last week, I almost lost a great client. I told them a week before they ordered the two SFR appraisals, that the fees would be $1,500 and $500 respectively due to complexity and increased liability due to the amounts involved, and that was after I discounted the high end fee by over $1,000 for my best client.
The property owner’s representative was told the same thing and arrangements were completed for our next day appointments and collection of the fees.
About 9 PM I received a terse, rudely worded dictate from the property owner. He cut a pasted an unknown online website excerpt stating:
“…appraisals typically range from $300 to $750.”
He told me he would only pay $300 for the lower appraisal and $750 for the higher one. That I was only charging so much due to the amount involved and all I had to do was the same amount of work for both, as I would for any other house.
I declined his fee offer and cancelled the assignment via email. I restated the specific reasons why I believed this to be a complex assignment. He then cancelled the whole loan, sending a CC of the cancellation he had sent to my best client to me.
My clients ‘loss’ would be measured in tens of thousands of dollars.
I do NOT mind losing an appraisal due to a fee quote. I KNOW what my time is worth to me.
What I DO mind is losing a client AND assignment because some low information property owner reads headlines about AMC fees and thinks THOSE represent real or reasonable fees.
Oddly enough, after a chilly new relationship with my best client for a week, WITH that client’s consent, the new appraiser called to ask me specifically how I had managed to find similar sized multi parcel (potential) comparable sales? I did mention this was VERY complex, did I not?
Like I said it was my BEST client, and the appraiser sincerely seemed very conscientious, and had spent a lot of time searching. It was not a time to gloat or be selfishly narrow minded. I helped the other appraiser to the best of my ability via phone, though I expected and wanted no compensation for this one. This is the kind of owner that will forward complaints to the state over technicalities if he does not like the results. I don’t need or want the headaches now that I know the owners mindset.
The point of all this is that “customary” fee perceptions have been skewed downward from HVCC onward. Not only in the AMC side of the business, but in the spill over to non AMC work. Considerations of complexity appear to have all but disappeared.
Any “university study” would necessarily include whatever low fee the other appraiser had agreed to, rather than a truly reasonable fee. Certainly, ‘reasonable & $300’ should not even appear in the same conversation for either of these two properties.
I no longer care about “customary”. ALL of my quotes are now based on “reasonable” fees based on the complexity of the assignment. ONLY I get to make that determination.
I urge all others to adopt a similar policy. Also, consider joining the American Guild of Appraisers (AGA). Email janbellas@appraisersguild.org, or myself.
We are fighting for customary and reasonable fees for all, right now!
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Customary and reasonable fees have been a mess since HVCC. This is partially the AMC and lenders fault, but lets not forget the appraisers contributory roll. It takes a ready and willing appraiser to accept an assignment at a low fee. If they fail to find appraisers willing to accept work at unrealistic fees and appraisers STOP bidding on orders things will change.
We set our fees for complex assignments based on the amount of time required to produce valid results. Non-complex assignment fees are based on the VA fee schedule in our area. If a lender does not want to pay our fees than they are free to find another appraiser – it really is that simple.
I reject assignments with arduous 20+ page engagement letters and refuse to sign contracts with AMC’s. I am and always will be an Independent Fee Appraiser. I am not your partner or co-worker! If a report revision comes from an AMC prior to being sent to the lender we simply ask to speak to the reviewer. While we rarely make revisions, we do document the requests made by unlicensed employees in our report. You would think that I can’t possibly have any work because I am so picky, right? You are wrong, I have more work now than ever! Finding the right clients who truly value your experience and geographical competence goes a long way.
Until appraisers stand-up individually and refuse assignments based on the low fees being offered and stop bidding for work this problem will continue to be an issue.
Maryland Appraiser-You are 100% right. Having SAID that, we are then truly screwed. Its been proven for over six years now that appraisers WILL NOT stand up INDIVIDUALLY. There are many reasons for that.
Some are just not the kind to stand up to (or for) anything; others think there is nothing they can do-so why bother? Others very reasonably are concerned about the impact on their business if they become “visible” on appraiser issues. Still others are truly independent professionals that have simply been brainwashed over the years, that any kind of collective actions are akin to socialism. Lastly, competing interests. SOME appraisers are benefitting from the current systems flaws.
Members of 19 to 21 different states have formed Professional Coalitions with varying degrees of success. I contend a stronger, national ‘force’ is also needed. That’s why I joined the American Guild of Appraisers IN ADDITION to my state coalition.
Six years is more than long enough to wait for ‘individual’ appraisers to stand up for themselves. It’s time to DO something constructive.
Have you asked the Guild to sponsor a poll to gauge appraiser interest in a National AMC Boycott? You may be surprised at the number that would participate since a real organization stands behind it. I guarantee appraisers would have come out in full force in 2009 IF someone like the Appraisal Institute had been behind it.
Not specifically. Our focus has not been in that direction, nor has there been a significant call for a boycott from our existing members. Most just seem to want to be able to work for reasonable fees without undue harassment.
We MAY have a poll soon related to this, but that’s being considered now. Debating what we already know to be problems is not very productive. Taking a limited exposure poll to quantify what we already know is also not very productive.
In 2009 Id have joined a boycott too; had any organized and large enough appraisal group promoted one.
Today, it would run contrary to our publicly stated desire to work WITH opposition views to arrive at mutually agreeable solutions. RA-if necessary, we will ‘fight’, but why start off by poisoning the well?
A lot of appraisers are turned off by unions & guilds to begin with. Acting like a stereotype won’t help refute that perception.
I think we can “win” before CFPB or Congress…without resorting to old style “job actions”, that only get people angry.
Might I suggest that you toss out the idea to your members during their next meeting or in your next newsletter? If their intent is to regain the freedom to set their own fees and more importantly HOLD ONTO THOSE FEES there is only one way to accomplish it. Talk is cheap but that’s what every appraisal organization for the last year has brought to the table…cheap meaningless complaints. Our country’s revolution war costs up dearly in blood but we paid the price and won our freedom. The Civil War costs us an unimaginable amount of blood and property but it was worth it to consolidate a festering division between our states. The problem with appraisers are that they are unwilling to stand up for themselves. They whine about getting their fees back but they are unwilling to shed any blood in the process. A boycott a declaration of war and it means losing clients, losing income, and getting black listed. If I learned that I was in a real war with an appraiser by my side I would run like L because I knew the first thing they would do is hide. That’s the type of people we (you) have in this business today. The ME GENERATION from age 20 through 75. It’s all about what “I stand to lose” rather than “let’s make a stand boys and fight back for what is (was) rightfully ours”.
If you owned a goose that laid a few million golden eggs each day would you surrender it without one L of a fight Mike? Banks have owned such a goose since 2009 when they were handed the keys to the appraiser treasury. Do you honestly expect them to “work with you” in handing over appraisal fees? Not only do I advocate “poisoning the well”; I am a strong advocate of throwing explosives into the well and blowing it. When banks have gone long enough with water (appraisers in this case) they will hand over those fees. I’ve always preferred a quick death to a slow agonizing one.myself. Obviously the appraisers in business today have problem with a 10 year death. If you know you’re going to die anyway (both literally and professionally) why not grow a set and go down fighting?
You can sheer a sheep over and over (as AMCs & banks do day after day) but you can only skin it once. Banks today sheer their sheep (appraisers) down into the first level of skin. Once they’ve driven enough appraisers out of business and created a massive shortage they will wheel out their AVMs as the only alternative to the shortage…thus handing them 100% of the valuation fees.
I recommend skinning the banks with an AMC boycott before they have a chance to skin appraisers by creating a shortage and implementing their AVM alternative model..
C & R = Crime & Rape
Yet appraisers across the nation continue to participate in the mighty AMC Reverse Auction process (hoping to the lowest bidder). Yet appraisers continue to kickback up to 50% of their fees each month to banks when they send Bugsy (their AMC) around to collect their kickbacks. For those of you who have never watched a gangster film…the correct term is EXTORTION. This shouldn’t be a surprise to anyone when you consider the Sicilian mobster who engineered this multi-billion dollar scheme: Andrew Cuomo.
What part of “participating in criminal activity” do you not understand appraisers?
Way to go Mike, I do a fair amount of private non lender work and when a potential client does not like my quote, I often say “when your sick, do you want to see the cheapest doctor, or the best doctor?” and if I lose the job, no worries I have more work than I need. Most times they agree and pay my fee, sometimes they go with the cheaper quote who screws it up and then they come back, tail between their legs and it was an expensive lesson. When it is something I’m not sure I’m the best for, I let them know and refer a colleague better suited. I try to keep in mind,it is much harder to build a reputation, and very easy to destroy. Good luck out there!
BC-They already came back (today, oddly enough) *G* Like I said, I want no part of it now. I like my old client, but I wont do work for HIS client now. How can I? If it comes in low the argument is its a biased report because of sellers prior history with me. There is such a thing as a “bad borrower” who may have good credit; be willing to pay my fee, but I still don’t want to work for them. This is my second one in thirty years. I sure hope its not a trend.
RA-In 1986-88, I ‘helped replace 80% of a City Council; caused a Harbor Director to resign, had a Boaters Rep position created for the Harbor Commission, and humiliated a City into rewriting their entire General Plan instead of merely updating the Housing Element , and forced a vote on whether or not to rebuild a municipal pier; and embarrassed the Army Corps of Engineers on all their wave-velocity overtopping & flooding projections when I pointed out their models lacked inclusion of known subsidence in the affected area. There were other fun areas including a complaint to the State Lands Commission; Investigation of the State AGs office into Tidelands uses; and graphically pointing out physical construction flaws in the “State of the Art” wave barriers when it was all finished (called ‘voids’). All this took four years because we went “nuclear’ four months out of the gate instead of allowing for face saving alternatives for the decision makers. While ‘we’ were “right” our confrontational methods alienated a LOT of people and community groups needlessly. Yes, it may take a little longer trying to be “reasonable”, even with unreasonable opponents, but in the end I have found we gather more supporters by being fair and reasonable ourselves, than by needless confrontation. People that knew me back then would not believe I just said that. I regularly tell people we are NOT an old style stereotypical union whose first choice is confrontation. I mean it.
RA, how many appraisers do you think are left today? 80,000? 75,000? More? How many post here and in other blogs? How many have you seen jump right out and say “Mike’s proposal is RIGHT! How do I support it?”
20%+- of those 80k +- appraisers (Idaho Survey 2013) belong to some kind of association. Reportedly 80% (79 & change) belong to no professional associations. There are 21 state coalitions; and what? About 12 recognized appraisal organizations in the country? So 20% of appraisers are aligned with 32 organizations that have their own individual agendas; and we simply do not KNOW what the other 80% ‘want’ collectively.
You & I argue over two ideas. Add in 8 more appraisers and we will have 10 ideas to argue over. Before we think of any boycotts, we have to find out how to stop being our own worst enemies, and incorporate the concerns of the 80% as well as many of the 20% as we possibly can into a unified plan. If THAT fails, then boycott away!
So far I have more posts an emails of “Mike’s right”; “Mike MAY be right”, “Not sure if Mike’s right” and “I’ll study this more to see if Mike’s right, or just plain nuts” than I have calls for boycott. Gotta go with the numbers on this one RA.
For those that forgot…join the AGA! janbellas@appraisersguild.org
Of course aappraisers like your idea Mike; it requires a minimal amount of effort on their part ….in other words they lose nothing. All they have to do is throw a few bucks at you guys and pray. Now for the bad news: Your group is doing nothing more than 99 previous appraisal groups have done since 2009. You’re talking…you’re writing…you wishing. In fact you are doing far less than the NAMB did for appraisers. They went so far as to file a class action lawsuit to have HVCC reversed. Appraisers ate it up too. Why? Because they didn’t have to lift a finger.
A quote from Albert Einstein comes to mind when I hear about appraisal organizations who want to “open a line of communications with the people who are screwing us in order to discuss the opportunity to reclaim our fees”.
Einstein described insanity as ” Doing the same thing over and over again and expecting different results”.
Here is an example of the response that you can expect from the National Banking Association and the banking lobby:
Dear Appraiser’s Guild,
Thank you for your expressing your concerning over the fee grab that’s taken place since 2009. At this time we respectfully decline to give back the billions in appraisal fees that are being funneled into our back vaults. Please feel free to express any other concerns that you may have with our AMCs.
Respectfully,
The National Bankers Association
Do you honestly believe that the Appraiser’s Guild will be able to TALK BANKS INTO handing over the billions in appraisal revenue that they are stealing each year? This is precisely what you’ve been telling me.
I can only assume that the following orators are currently on the Guild’s payroll if you intend to talk banks out of billions in extortion money each year:
Daniel Webster, Cicero, Frederick Douglas, Martin Luther King, Patrick Henry, Henry Clay, Winston Churchill, William Jennings Bryan, & Mr. Smith (who went to Washington). Perhaps if you have them calling banks around clock for a year you will wear them down.
As for me, give me liberty (from appraising) or give me death.