Not since the Clinton era has one dress caused so much controversy. I know many of you are tired of the social-media hype centered around the color of the dress, but I actually find it fascinating. The dress is ‘obviously’ white and gold, but I am awestruck that others can look at the same picture and see black and blue. The science surrounding why certain people see one color scheme and others see something different has been presented on the internet, but knowing the science does not change what you see individually. In many ways, it is simply a matter of perspective.
The first time I heard the phrase “customary and reasonable fees,” I literally laughed out loud. One of my trainees came bounding into the office one morning with a big smile on his face. “Did you hear the news,” he asked? “It will now be the law that we get paid customary and reasonable fees for our appraisal work.” Of course, I found his excitement amusing due to the sorted history of government intervention in salaries, but I let him have his moment. Of course, customary and reasonable has been the ‘law of the land’ for some time now and there is some question among many of us as to whether or not what we are being paid truly is C & R.
As I interact with appraisers across the nation (in the social media and one-on-one), I find one of the biggest complaints to be that of AMC involvement in the appraisal process. The typical complaint is that appraisers would be making much more money if it weren’t for those dern appraisal management companies. The typical borrower might pay $500-$800 for an appraisal service and the appraiser (the one doing the ‘real work’ of valuation) might only take home $300-$500. Does an AMC really need that much money for what they do? Well I suppose it is a question worth asking, but I am not sure the answer is really that important to an appraiser’s business model. Stay with me here.
Before I continue, you need to understand that I am a huge advocate for appraiser pay. My mission as the Appraiser Coach, is to help appraisers streamline and improve the quality of their work while at the same time becoming more efficient so they can make more money. If you look at my blog posts over the years, I don’t believe I can honestly be accused of not caring about the plight of my fellow brothers and sisters. At the same time, I have been accused in the past of being a ‘lackey for the AMCs.” Why? It likely has something to do with the fact that I am a believer in the free market system (and the fact that I do most of my business with AMCs).
Appraisal management companies are a business. Like ’em or hate ’em, they provide a service in the housing finance industry. Can we live without them? Probably, but that service would then need to be passed along to the lenders themselves. Now, I have had the privilege of getting to know many AMC owners over the years. I consider some of them my friends. Recently, I had a question that required their perspective and was able to speak for hours on the phone with 5-6 of them. They willingly gave of their time and intellect with no concern for what was in it for them. They are humans that happen to be in the AMC business.
Now, are there legitimate questions about what AMCs do and how much they are paid for that service? Sure. Those are discussions that we can have, but I think it is unfair to castigate all AMCs simply for being AMCs. They are in a business. As such, they provide a service for which the lenders are willing to pay. As appraisers, we can choose to work for them or we can choose to not. There are other options for appraisers.
Much of this is simply a matter of perspective. From the paradigm of the appraiser, the AMC may seem like the bad guy. From the AMC view, there may be similar feelings toward appraisers. The dress is white and gold. The dress is blue and black. We may never see completely the other side, but I am convinced we will get further by at least trying.
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Written by : Dustin Harris
Dustin Harris has been an active appraiser since 1996. For the first 12 years of his career, he was working 60-hour weeks for under $100,000 annually. Then, he radically revamped his business model using principles of success that catapulted his appraisal business to over a million annually, all within 20 hours a week consistently. Since 2010, Dustin Harris (aka “The Appraiser Coach”) has been guiding appraisers towards business mastery, enhancing both profit and efficiency. With “The Coach,” you surround yourself with hundreds of successful appraisers across the nation. Your investment isn’t just in guidance—it’s a blueprint for guaranteed substantial returns. It’s what you have always dreamed your appraisal business would be.
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There should be, a separate AMC fee. This let’s the consumer know that they are paying for both. If AMC’S are a business, it should have nothing to do with an appraisal fee. The additional time that it takes to get an appraisal finished as compared to 2005 has trippled. Between the 1004MC, getting it through the portal, making it UAD compliant, Usps compliant, detailed photos, detailed maps, detailed floor plans, detailed analysis and comments, addendum requests etc, our fees should begin at $500. AMC’S in an effort to increase their profits outsource the work to unskilled workers in other countries. They have no right to profit from my report. Let them justify their existence on their own.
I think you may have stumbled upon the solution within your own thought process. Outsource some of your work the Central African Republic. They’ll work for 10 cents an hour. Let them respond to the countless requests from AMCs to the stuff you’ve already mentioned in your report rather than taking the time to do it yourself. They can spend an hour a day answering the same idiotic questions day after day and it only cost you 0.50 per week rather than $150 if you did it yourself.
It’s obvious to everyone by now that they want to pay you beans for your professional work. Nothing demands respect from an AMC greenhorn more than being forced to speak with your African customer service rep. Once they’ve been threaten with having their bones remove via their ask they’ll fall in line and treat you with respect as well.
Seriously though, it’s the wave of the future. When they pay beans hire someone to do the work for a grain of rice. It’s the American way! You owe it to yourself and to your country.
Lol. Problem is that ultimately you are responsible for everything. Outsourcing doesn’t guarantee quality. ….garbage in….garbage out
You almost had a good point. I think the point was lost for the following reasons:
1 – If AMCs provide a service “the lenders are willing to pay for”, then why don’t the lenders pay instead of the appraisers.
2 – There is no free market left in appraising. In what free market is the supplier prohibited from marketing his/her services to clients, prohibited from even speaking with clients, prohibited from building customer relationships? And no, our customers are not AMCs, they are mere intermediary brokers. They are not interested in long term relationships, just the cheapest service. In that regard, the AMCs operate in a free market, we as appraisers do not.
3 – “there are other options for appraisers”. Theoretically true. However, when the overwhelming majority of work is placed through AMCs, the remaining amount of work is not even close to sufficient to keep appraisers fed.
I agree, the whole “free market” argument is such a lazy cop out. It is only ever used by those who have a disproportionate amount of leverage and want to keep it that way.
Appraisers are not free market participants in mortgage lending. We are regulators. That’s the OPPOSITE of free market participants. Banks don’t obtain appraisals because they want to, they do it because federal law says they have to. Oh, and by the way, because they want to use public money to offset their risk of loss!
Solution #1 – require banks to collateralize their lending with their own money (not going to happen for a variety of reasons. )
Solution #2 – Have the entity that requires the appraisal, manage the appraisal process (that would be The Div of Consumer Affairs here in NJ)
-They would a)set fees, b) determine the scope of work, c) manage appraisal panels and ordering, d)oversee review and quality.
No more scope creep, no more unqualified checkbox reviewers, and probably a great deal fewer poor appraisals. It would go like this…
-Borrower goes to the bank for loan,
-agrees on terms (that, btw, is where the real free market part of the deal should exist), -signs,
– bank gets its materials together to submit for underwriting, applies for an appraisal to be done with DCA,
-DCA has a reasonable time to perform, after which bank can remedy by hiring their own appraiser
-Appraiser does his thing
-DCA makes sure everything is on the up and up
-delivers the results to the bank.
Oh, but the realtor is not happy with the results and wants to fire off an angry letter about how long they have been in the market and the appraiser just doesn’t understand that the subject is, of course, the most incredible property ever offered in their town and there are 3 more buyers who would pay double….
No problem, submit any and all supporting data to the panel of Certified and General Appraisers handling review for the DCA.
Solution #3 – A step up in oversight by the CFPB or similar State agencies…a standardized fee schedule, more specified scope of work with limitations on scope creep, updated and simplified forms (stop asking appraisers to be lawyers, code enforcement and building inspectors and fortune tellers)
The (very long winded!) point is, don’t compare appraisal to free market unless you are talking about private assignments.
“To ensure the public trust” is the purpose of residential mortgage appraisals.
We provide regulation, not services. I am there to satisfy the interests of the People of the United States, not to satisfy a banker, I shouldn’t have to compete for his business. Referees don’t apply to teams for a job, they apply to the league, home inspectors don’t solicit builders for work, they work for the town.
But, from the banks perspective…..FREE MARKET!!….AMERICA!!!
The AMC’s may be getting 500-800 but they are trying to pay appraisers as little as possible. I regularly get complex orders with a $250 fee from some amc’s which is neither customary nor reasonable for a standard home in a subdivision. When I request an additional fee for complexity it is always reassigned to another appraiser. Do you take orders for less than your worth or do you sit at home and not work? My only hope is that as more and more appraisers retire the workload will make it impossible for the AMC’s to shop the lowest fee for an appraisal.
Unless appraisers are willing to come together and stop working for AMC low fees even for a week nothing will change. We are still fighting for reasonable and customary fees from 6 years ago which would not make them reasonable and customary for now. It is time to make a stand.
AMCs fees should be limited to a percentage. For the work they do – 15%- 20% max, of the total fee, considering appraisers do 90% – 95% of the work. Before AMC’s, banks took on the overhead of an appraisal overseeing department – they should be paying the 15% – 20% fee (above the appraisal fee) to the AMCs. We are being _______.
The AMC business model was created by and for lenders. The AMC model has rendered all or most lending appraisers to a “split fee operation”. The AMCs typically receives approximately 50-70% of the “appraiser’s current fee”. If the big boy lenders really considered the lending appraiser’s C/R fee they and the AMC would mutually agree to pay a C/R fee to the appraiser. The amc justifies the low fees by using broadcast emails to contact many appraisers for a single assignment with no real intent on negotiating an C/R appraisal fee. Thus, the typical AMC just waits till a hungry appraiser takes the low fee. Lenders have always known that there is a segment of lending appraisers that will accept their low and unreasonable fees. Supposely, this business model was set up to improve appraisal quality, which it hasn’t. The AMC model has just kept the lender and lender interest groups in full and complete control of the lending appraisal process. The amc business has little to do about improving appraisal quality. It’s all about controlling the appraisal process and those that chose to work in the lending appraisal arena. Bottom line the AMC business model is NO friend of the lending appraiser.
Dustin you’re so full of crap I don’t even know why I bother to read you emails. Every time you put out a letter like this your credibility goes down a few notches. I work with several banks and my fees with them are 30% more than I get from the AMCs that broadcast orders. Oh yeah, let’s just throw a net out there so we can catch all the hard up incompetent appraisers we can
Before the AMC model took over, the lender collected a fee from the borrower and paid it to the appraiser. If the HUD-1 showed $400 as the appraisal fee, that is what was paid to the appraiser. The lender was responsible for review and quality control. When the lenders started using AMC’s, the borrower still paid $400, which was then paid to the AMC and a portion was paid to the appraiser. The lenders eliminated most of their staff appraisers, claiming that the AMC was providing the review function. The lenders used to have certified appraisers performing their reviews, now the AMC’s primarily use clerical people with a check-list. Prices have increased. The HUD-1 now shows $500 for the appraisal fee, but the appraiser only receives $350 or less.
Pretty pointless article. He seems to just be defending himself for being a lackey. If anything, he’s only supporting that accusation. The truth is folks, in case you have not been paying attention to what has been going on, the appraisal industry as we know it will end in a matter of a few years or so due to technology. And out with the bath water will also go the AMC’s. With no Appraisers who needs appraisal management. You can all waste your time speculating and commiserating until your blue in the face but unfortunately the only solution for Appraisers is to find a new livelihood. It’s unfortunate but the truth is that the end is absolutely immanent and the sooner everyone realizes this the better off you’ll be.
Sympathy for AMCs from appraisers? ….a tough sell Dustin. I suppose they have their problems, too, but they are killing the upper half of residential mortgage loan appraisers right now with no end in sight. Ultimately, it is all a product of what regulators will allow.
After the S&L meltdown decades ago there was a fork in the road. The S&L regulators learned many lessons from what happened and took appropriate steps to fix the system that led to so many flawed appraisals. Unfortunately, however, the S&L regulators were transferred to the bank regulation system with the demise of the S&Ls. When bank regulators were asked what controls they had on appraisals, the answer was essentially “none” because it was up to the individual banks. The bank regulators were riding high and felt the S&L meltdown had vindicated their approach since banks were not that much affected. Not only that, the bank regulators really didn’t see the need for almost any appraisal reforms including USPAP, The Appraisal Foundation or FIRREA. When the old S&L regulators came under the banking regulators, the culture of reform and improvement was mostly lost, and we have been backtracking ever since.
Until federal bank regulators really become concerned (not just lip service) with the impact of inaccurate appraisals on the safety and soundness of the banking system, I expect the current trend toward a system that financially rewards cosmetically good but fundamentally unsound appraisals to continue. The AMCs have arisen to fulfill market demand from lenders for a system they see as beneficial to banks and permitted by the regulators. The search is for how much everyone can get away with rather than for appraisal accuracy for its own sake.
Where is my post from yesterday? Evidently you can only get posted here if you do not vehemently disagree with the author….Everybody knows that Dustin’s reasoning has been skewed by the AMCs and we’re not so stupid that we are going to fall in love with the people who are stealing a portion of our income.
We won’t allow you to insult our authors, you are more than welcome to disagree their points. I am sure if your last post was removed it was because it included foul language or insulted the author or the Appraisal Buzz. We welcome open discussion on all topics as long as it doesn’t devolve into name calling.
Easy Boys and Girls! Don’t shoot the messenger! Changes are coming and you don’t have to be patient. You need to contact your Real Estate Appraisal Commissioner and have them enforce Dodd-Frank which provides for Customary and reasonable fees. If your Appraiser Act does not provide for that, lobby to have it changed. You have to work the system to make changes! Work State Reps, Senators, Lt Gov and Gov!!! They work for you!!! Changes are coming. Read the blogs!! Can’t give anymore info now but changes are coming. Some of us are working hard on this. Don’t give up. Keep fighting. But, don’t complain and then sit on the sidelines while the rest of us do the heavy lifting.
Bravo Ted! You belong to the group of roughly 1% or less that actually sees clearly to the solution of the problem. Appraisers have the ability to rip AMCs a new A.H. overnight IF they would simply organize and boycott. It would make national news within a day or two. Eventually even the hold outs would jump aboard.
It really is that simple guys. You’ve had the ability all along but the other 89,999 of you would rather walk around the world than endure a few weeks of hardship.
Congrats Ted! You deserve a PhD from Harvard for seeing the only obvious solution to what has plagued appraisers since 2009.
The author really likes to “toot his own horn”. How can such a successful appraiser (so he says) spout this garbage? I wonder if he ever did an appraisal? AMCs get their employees at college job fairs. They are college kids with mounting debt desperate for jobs.