FTC Has Cost the Appraisal Profession Dearly

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VaCAP Board
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FTCs Pursuit of the State of Louisiana Cost the Appraisal Profession Dearly

The FTC has cost the appraisal profession dearly in their pursuit of the State of Louisiana. This entire episode has been entirely misguided… The FTC’s time SHOULD have been spent investigating the AMC trade group known as REVAA to find TRULY non-competitive practices…

The FTC is asking for public comments on the consent decree by the Louisiana Real Estate Appraisal Board. The time line to comment is short and ends on July 22, 2021. VaCAP asks each of you to take a few minutes and read the consent decree as well as the analysis provided by the FTC before commenting.

It is important for each of us to comment on the practices of the Appraisal Management Companies and to encourage the FTC to investigate their practices.

The link for the Federal Register that contains all the information can be found here. The pdf version is below. Post your comment here.

So far only 3 comments have been posted:

Louisiana Real Estate Appraisers Board; File No. 161 0068, Docket No. 9374

The FTC’s pursuit of the State of Louisiana is, and has been, a case of over zealous interpretation of the Sherman Act.

Dodd-Frank specifically addresses customary and reasonable appraisal fees, and gives guidance as to how the fees can be determined. The state appraisal board was simply exercising this guidance.

The damage that low fees offered by AMCs is quite far reaching. It has resulted in a lack of new and diverse appraisers entering the profession. Appraiser supervisors cannot afford to train new faces because of low, non-competitive fees. AMCs has caused irreparable and far reaching damage to the profession. Any notion of an appraiser shortage is rooted in the fact that many appraisers are turning away from AMC ordered assignments.

The FTC’s time SHOULD have been spent investigating the AMC trade group known as REVAA to find TRULY non-competitive practices.

The FTC has cost the appraisal profession dearly in their pursuit of the State of Louisiana. This entire episode has been entirely misguided.

Three comments. Customary and reasonable “rules” are a cruel joke upon appraisers. Given the opportunity the Appraisal Management Company will cheat appraisers out of a fair fee, or not pay them at all with impunity. The bank simply uses the AMC as a firewall to give the banks a Sgt. Shultz defense, “I know nothing.”

As a result many appraisers eschew working for AMCs thus creating a shortage of available appraisers when times like this year when sales are off the charts. I am one of those. I do not have to take the stress of working with these moron AMCs.

Next, Real Estate agents who have an over-priced deal complicated by an appraisal that is less than the sale price are now dictating to banks (and banks kowtowing to it) that the targeted appraiser cannot appraise their listings. A blacklist. You can go into realtor sites where they openly brag about it. You can go into appraiser forums where they talk about it. Does anyone do anything about it? nope. When contacting the Real Estate board over the issue I was told to call the FTC…when has the FTC taken action on anything similar to that?

Finally, the idea that boards should be regulated by people outside the expertise of that industry is a two edged sword. No. They don’t have a dog in the fight. But they don’t know come here from sic’ ’em either. I don’t know which is worse. LA fought a poorly defended fight. But I don’t understand why the FTC cannot at least put some pressure on banks by punishing crooks running AMCs and then pounding the bank that hired them equally hard. As I said, the bank should be held accountable but instead is allowed a ‘bye’ as if they innocently hired these vultures.

As an appraiser, I applaud the state of Louisiana for supporting the Dodd Frank Act. When the Dodd Frank act was instated, appraisers were being pushed by lenders to provide inflated appraisals. After the housing market crashed, the Dodd Frank Act was created to help create a ‘firewall’ between appraisers and lenders to remove the pressure from lenders. Appraisers are now able to provide independent appraisals without undue pressure from the lenders. Lenders are responsible for paying appraisers and there is a dependent nature between the two parties in terms of income. The Dodd Frank act was in part used to relieve this pressure on appraisers, but it created the need for a 3rd party to facilitate the appraisal ordering and servicing for lenders. This created Appraisal Management Companies (AMCs) who now assign most appraisals within the nation. Appraisers are dependent on AMCs for work in a similar manner to the lenders. The AMC business model is based on ‘faster/cheaper’ and created a ‘race to the bottom’ for most appraisers during the downturn in the real estate business. AMCs typically would collect the appraisal fee from the lender, then turn around and offer an appraisal to a ‘for hire’ appraiser based upon the lowest available fee and turn time. As time went on, appraiser pay was dramatically cut in half. The AMCs would take half the appraisal fee and offer the rest to an appraiser for the work. The appraisers fee of $400 was now being cut in half; $200 to the appraiser and $200 to the AMC. The AMC model cut appraisal fees because they held all the work available and appraisers were held hostage in terms of work. Most appraisers must rely upon AMCs for work as the Dodd Frank Act has created a need for a 3rd party to facilitate the appraisal process. The Dodd Frank Act also stipulates appraisers are to be paid a ‘reasonable and customary fee’ which was almost never paid by the AMCs. The AMCs sometimes conduct their own ‘survey’ of fees and determine they were paying reasonable and customary fees based solely on what they were paying the appraisers on their panel. This is a self-fulfilling prophecy at best. Fast forward 10 years and we have more issues with the AMC model. Not only are the AMCs taking a significant portion of the appraisal fee, but they will also hold an appraisal order and shop it for weeks before getting it assigned. This is an effort to only keep fees low and to find an appraiser who will finally accept such a low fee. In the end, the borrower is punished by a slow turn time, low quality appraisal (low fee work), and still has to pay top dollar to the AMC. I am thankful the state of Louisiana is keeping AMCs in line and requiring them to pay the ‘reasonable and customary fees’ that are required by Dodd Frank. Without any penalty from the states to enforce the entire reason an AMC exists, it is the least they can do to enforce the other half of Dodd Frank to protect appraiser fees. Appraisers are becoming unwilling to work for AMCs who pay the low fees, and this is creating what appears to be a shortage of appraisers which is not the case. There is a shortage of appraisers willing to work for low fees that were created by AMCs. The AMCs themselves should be held accountable for their own price fixing by conducting in house surveys which are not accurate and do not reflect appraisal fees at large.

 

VaCAP Board

VaCAP Board

Coalition of individual appraisers working together to unite, promote and protect the collective interests of all appraisal professionals in Virginia; to promote needed changes in laws, rules, regulations, policies and standards affecting all appraisers in Virginia; to observe and report the actions of regulatory, legislative, oversight, and standards-setting entities of the Commonwealth.

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12 Responses

  1. Avatar DianaN. says:

    Excellent, it says it all and says it well. AMC’s are still the bane of most appraisers, they put the assignments out to bid, and take the lowest which in a lot of cases is not the best report. After 53 years of doing this, I get truly disgusted with some of the fees being offered.

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  2. Baggins Baggins says:

    Submitted. Thanks.

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  3. Avatar Scott says:

    In my opinion, the reduced fee offered to the appraiser due to the AMC model is only a part of the problem.

    Another problem is AMC’s also create their own appraisal guidelines that vary from AMC to AMC. An example would be AMC #1 requires 4 sold comparable’s while AMC #2 requires 5 sold comparable’s while AMC #3 requires 3 sold comparable’s and 2 active/pending comparable’s. Some AMC’s want all sold comparable’s under 90 days while others want them all under 180 days. Some AMC’s want all comparable’s within 1 mile and others want them all under 3 miles.

    Another problem with AMC’s is micro-managing. Some AMC’s will call, email or text the appraiser so many times wanting updates the appraiser has no time to get any work completed.

    Another problem is upload /portal /technology /maintenance fees. It’s not enough AMC’s have been taking half or more of appraisers income, they started creating fees with different names to capture more income. There needs to be one fee given to the AMC and one fee to the appraiser. Enough with the add-on “NUISANCE” fees that AMC’s keep coming up with.

    Another problem is the time it takes to pay the appraiser. The AMC’s hold the money due the appraiser hostage to various degrees. Some pay within 2 to 3 weeks. Other’s, like Mecury Network offer the appraiser their money fast but ONLY if the appraiser pays ANOTHER fee to Sekady Capital to release the funds. Otherwise it takes 30 + days every time to get paid. The whole thing is a racket!

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    • Baggins Baggins says:

      It appears my comment is noted as received (now to 4 total comments), but is not yet visible.

      It is imperative to comment but remember, scope of work issues are not what this is about.

      Keep it simple and just push the one point, separated billing practices would put an end to this.

      This is the first major legal challenge to the errant misinterpretation of C&R rules by the CFPB, over 10 years ago.

      And it will likely be the last unless more appraisers contribute and tell their stories of the existing anticompetitive nature of current amc engagements.

      FTC people are not going to bother reading this blog, they will only read the comments submitted. Submit a comment today please. There are great comments, read through them and please follow with your own.

      6
  4. Avatar Eric says:

    The AMC business model will never be satisfied until the Independent Appraiser is “paying them” for the privilege to do the work. They are spending 7-10 days “shopping” for the lowest fee and then blaming the Appraiser for the lag times. This business model has been corrupted and adds zero credibility while the AMC’s only incentive is to their “bottom line”. The FTC is culpable to REVAA IMHO and this entire farce in LA has been a kick in the face to Appraiser Independence nationwide.

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  5. Avatar Appraisers Appraisers. says:

    So the FTC has wasted tons of time to pursue an effort to go after the state of LA after they fined and reprimanded Coester VMS and IMortgage for offering fees that were less than customary and reasonable in the state. Two of the worst actors in the AMC business to date, one which is now operating under a new name and another that went out of business still owing appraisers a lot of money. Makes sense.

    Both these AMCS got away with shenanigans and one got away operating a business that not only harmed appraisers monetarily but also by conducting themselves in a poor business manner. Has the FTC even looked into the operations of these companies? I am sure that if they did at least they would see that one of them abused their powers so much so that they should be the ones facing FTC anti trust and other violations of the laws, including not paying their panel the fees they were owed. Maybe just maybe the FTC should look into the many publicized “Customary and Reasonable FEE LISTS” that are shared online and more between these AMCS.

    Once again Government is protecting the bad actors that have abused their powers, abused the laws and have left many hard working appraisers on the hook. Add to this the trade group REVVA who likes to portray themselves as a GOOD GUY in webinars and more but in reality only care about the money and memberships from their million dollar members that continue to this day to siphon money from hard working appraisers as well as hard working consumers. Has the FTC looked into the fact that AMCS will charge an unknowing borrower $1000.00 for an appraisal yet only to pay the appraiser half of that or less? Have they looked into how an AMC can charge a tech fee to the appraiser to upload a report so that they don’t have to pay for their own technology? Yet a state board trying to make things fair and correct as per the Dodd Frank law is the one under scrutiny? What this tells me is that its not about the hard working appraiser. Its about the Money, the Power and a law that was created that no one clearly understands.

    The FTC should spend more time on pursuing the bad actors and the AMC sector to find the real issues going on here and let the states and their boards worry about making things fair for all involved in the valuation profession.

    The FTC is clearly being persuaded by others on the outside and ignoring the facts. Facts that would show how anti trust laws are being broken by the very people they seem to want to protect.

    9
    • Baggins Baggins says:

      That’s good content. But if you don’t make a comment, REVVA will play the good guy and nobody will be the wiser.

      Back it up already. Submit the comment.

      Phone a friend, send some emails, get some more comments on that board.

      This is the first legal challenge and will probably be the last if only 4 out of 80,000 appraisers are willing to stand up against amc’s anti competitive practices. Practices which would be illegal for any other licensed person to engage in.

      Amc’s have decimated the industry and intimidated appraisers to no end. Comment anonymously if you must but you must comment or forever hold your peace.

      5
  6. Avatar don says:

    I retired recently after over fifty years of SELF employment and ten years of employed by another. I enjoyed my job and always strove to make my product better. However age, delivery times and competition tends to destroy ambition and enlivening effort. Valuation science is critical in our society, honesty, integrity and reliability Have to be insured to keep our society moving forward.

    I built my business based on a hard earned reputation, not a negotiations among business’s and politicians using undisclosed contracts, credits and fiat monies. My reports were based on verifiable-repeatable information which made me responsible, justifying my fees.

    The AMC regulations add another component which already has adequate. The licenses, and codes from the individual States adequately protect thru their justice system. Compounding a Federal code with a State code confuses any constituency and the news media.

    1
  7. Avatar Pat Turner says:

    Fees paid to appraisers have been reduced
    Not the Appraisal fees borrowers pay!

    5
    • Avatar don says:

      Huh, have appraisers reduced their fees, are appraisers less qualified are they delivering a lessor report is the LIABILITY to the appraiser less?

      VA fees in 1961 for a single sheet plus a drawing of the floor plan and verified sales was $25, FHA was $20, in 1972 it increased to $45, when I retired it had gone to $600 to $800.

      MLS included only about 30% of the sales and every little city had its own MLS. The Progress began at the Assessors and recorders office, Agents lied then, and do today. My bosses counted rafter ends in judgement of house sizes, they had libraries of past jobs in the interest of accuracy.

      A group of assessors from the 57 California counties petitioned legislature to make public records available to counties of over a $Million population in about 1970+- You could buy a tape from the county, re-sort it and resell specialized data.

      CMDC was a group of lenders organized to republish sales data from subscribers.

      Several groups met together for discussion and self help including one beginning in the 1930’s

      If we are driven apart from our original goals or driven to recognize other priorities we will loose usefulness and perish.

      Collect fair fees, do THE job, or perish!!!

      2
  8. Baggins Baggins says:

    Follow up. A few more comments came in. The auto redirect for comments no longer works.

    But you can access comments here:

    https://www.regulations.gov/document/FTC-2021-0033-0001/comment

    These damned amc’s won’t stop emailing me no matter how many times I ask. Month after month, year after year, across multiple platforms, the same amc’s simply never stop. This is harassment. We demand amc opt outs across the board from the tech companies, these emails come directly from mercury and scope systems primarily. Join me in my quest to constantly forward all the unwelcome amc bid quotes back to the tech companies.

    0

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FTC Has Cost the Appraisal Profession Dearly

by VaCAP Board time to read: 5 min
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