Over the past couple of weeks, numerous news sites have put out articles that seem to blame appraisers for delays in the lending world. Along with this narrative, the recent Covid 19 pandemic is also being sited as a possible reason as well as the continued narrative of an appraiser shortage and how difficult it is to become an appraiser these days.
While reading many of these articles, I noted something quite familiar as I usually do when I read anything pertaining to appraisers, and that is appraisers are very rarely spoken to about these issues. Another thing I noticed is that its apparent that most consumers, lenders, and valuation professionals are not aware of other factors that actually play a very important part in this and are rarely talked about. As the creator of the 100% Real Estate Appraisers group with over 2890 independent appraiser members and also a member of other forums and groups, I get to see first hand many of the issues that seem to be overlooked.
So let’s start with the biggest issue that is constantly overlooked, and that is The system itself. Yes. The system that is in place due to the financial crisis, the creation of the HVCC (Home Valuation Code of Conduct law), which is now Dodd -Frank. Appraisers were widely blamed for what happened in the financial crisis as yes, there were some bad apples out there that did not have any ethics at all when it came to running their business and protecting the public trust. Name me one profession that does not have some bad apples in it? I bet you can’t. So while most of the blame did go to the right jobs, the appraisers were the ones that saw probably the most significant impact and changes. Overnight their businesses and lives they once knew were changed forever. The relationships they built over years of hard work were swiped from underneath them like a magic trick, and now they would have to change their business practices in order to remain in business. Many appraisers did leave the profession. Many took this opportunity to go work for the now required Appraisal Management companies that were put in as a supposed firewall between the lenders and appraisers to avoid corruption and shenanigans that we saw just before the crash. That firewall, well, that’s another story for another time because it actually really doesn’t exist. Ok, Ill give you some insight… Many of these AMCS are owned by lenders themselves, many are owned by people who also own appraisal firms and many still to this day provide many pressures to the appraisers that were supposed to be gone when the laws were created. I mean come on now, It doesn’t take a genius to see that a Lender owning an AMC, a supposedly third-party firewall, is really no different than the lender just going directly to the appraiser.
The second most overlooked issue is the implementation and use of The Appraisal Management Companies or AMCS. While AMCs have been around for many years, even before the crisis, it wasn’t until the passing of HVCC that many flocked to create one and reap the rewards for doing so. Let me lay out some of the issues that result in delays in appraisals caused by the AMCS. NOTE: NOT ALL AMCS operate this way, and some are good to work with. I work with 3-4 of them.
1) AMC Payment. AMCS set contracts with their clients (The Lender). Now instead of charging the lender a fee per report, they take a percentage or a certain monetary amount from the overall fee quoted to the borrower. Example. AMC charges the borrower $600 for the appraisal. Some AMCS will have a specific financial number they need to make off this order, say $125.00 leaving $475.00 to be paid to the appraiser. However, it doesn’t always work out this way. If they can find an appraiser to do it cheaper, they will gain more profit. Some will go out and get quotes from appraisers and say the average fee is $500.00. Well now the AMC may or may not quote the borrower $125 more or they, as we have seen charge double to triple and then just pay the appraiser their quoted fee. Its widely said that the AMC is the Agent of the Lender. At the same time, this is true in perception; it is actually not as accurate as you think. See many times the AMC will collect directly from the borrower and thus not having the lender touch the money, and as we have seen with many AMCS going out of business, that lender says sorry we can’t help you as we didn’t collect the money the AMC did. I know this for a fact due to my Lawsuit with Coester VMS.
2) AMC requirements. Before the crash, life was more comfortable. Most, if not all, lenders and banks allowed trainees to conduct inspections and do many reports. Now looking back at some old forms, many lenders I worked with had 1-2 pages of requirements. Today AMCS pretty much ONLY allow Certified appraisers or Certified General Appraisers to conduct inspections and sign off on reports. The engagement letters can be up to 20 pages long with requirements. Question? Talk about delays, Who wants to go through 20 pages of conditions to complete an assignment? Not Me. Which i why I only work with the more simplistic clients and AMCS.
3) AMC fees paid to appraisers: This may be the biggest reason for any delays, the notion of an appraiser shortage, and why we are where we are today. Question? Would you in your current position in your company be happy to wake up one day and be pleased to know that you are now going to be paid $.50 on the dollar after years of making that $1.00? Another question? Would you be happy to know that you are being told that you can set your fee however unless you lower it, you won’t see much work? Well, I might as well ask another question. How happy would you be to know that a third party can charge whatever they want only to tell you (the person doing all the work) can only get this order at a much lower fee than you were making 10 years ago? When the AMCS came about in droves, they attracted offering fees to appraisers that we made in the 80’s and ’90s. Name me another profession that still charges the same price they did in the 80’s and 90’s? I bet you come up with 0. There is a thing called the cost of living and inflation, right? I mean come on now.. you cant buy the same house today for what it was worth 10-20 years ago and you cannot buy a gallon of milk for that price either. SO why as appraisers are we now told we have to accept those same fees? See As a business owner; I sure can charge and quote what I want; however, the AMCS are the ones that really dictate what you can and cannot make. See #1 here again. See my other blog post for more called ( What’s Not in Your Wallet) to explain further.
4) AMC bid requests: Scenario: You as the consumer, have a deadline to meet in 5 days. You need to have the appraisal done before then. The lender sent this order over 9 days ago, but it’s still not assigned. It has been offered out to Bid to appraisers, Not just in the immediate area but from as far as 2 hours away. The AMC waits another 1-2 days to get back the bid info and then makes a decision. HOW DOES THIS HELP ANYONE? If they had just assigned it to a local appraiser in the first place at their fee, it could have been completed. So many appraisers ignore bid requests, which now limits the number of appraisers willing to do the job. This also limits the lender and limits the consumer of getting a quality appraisal done in a reasonable amount of time. I have seen the same order come out for bid 2-3 weeks in a row many times. So who is being truthful here? Is the AMC actually telling their client they can’t find anyone, or are they telling them they can’t find an appraiser to do it cheap so they make money or are they telling the lender other false stories?
5) AMC appraiser searching: This ties into the above. AMCS are notorious for searching for the lowest appraiser as to maximize their profit on an order. As I stated, I have seen orders come back around 2-3 weeks later. So who is delaying the process, and who is being honest with who? Let’s be clear. The lender is the client of the AMC. There is no way they are going to admit fault to not having an order assigned earlier. After all, if that lender gets mad, then they lose the business. SO yes. Its easier to blame appraisers, blame the lack of and blame whatever it is they do in order to salvage that relationship. (Lenders… WAkE UP, remember when you could talk directly to the appraiser. How great was that)
Next, we look at the issue of a shortage of appraisers, which is, in fact, a false idea that was created in order for the GSE’s and government to allow lenders to use alternative products such as appraisal waivers, AVMS, and hybrid appraisals. Let’s be honest here… There is no shortage of appraisers in this country. There is only a shortage of appraisers that are willing to work for AMC for $.50 on the dollar as well as deal with a laundry list of requirements that exceed that of a week’s worth of actual laundry of the Brady Bunch.
When it comes to new appraisers trying to enter the profession… When actually established appraisers are making the same amount of money they made in the 80’s and 90’s with rising costs of running a business and what they actually put in their pocket after, why would ANYONE want to spend time training an appraiser who cannot do anything due to AMC and Government regulations? What is the benefit? Conspiracy? Maybe we need to look into this more.. I’m not a conspiracy type of guy, but with all these new products, waivers, and more, maybe this is exactly what it looks like…. A way to rid the world of appraisers so that the financial world can have at it and create a bigger mess than they already have.
I am an Independent real estate appraiser. I work my ass off. I work with 4 AMCS. I have walked away from more jobs than I can count. Some even in the same neighborhood. Why? Because of everything I have described above. Stop blaming appraisers. Stop making us be your Martyr. Maybe its time government, banks and more to reevaluate their ethics, their purpose and their mission but stop blaming me for your shortcomings and the shortcomings of the company you choose to keep.
Appraisers today are a proud Group. We have been through so many changes and constant updates. There are still some bad apples, and you again get what you pay for. Stop basing an appraisal on the fee and start doing right by your client. Choose the best and get the best. Allow those that aren’t the best to prove why they should be. DO the right thing. To all the press out there… do your due diligence and stop putting out false and bad info. You look silly, and you do nothing more than harm the consumer who you are supposed to be getting factual info to. stop playing favorites and start doing what’s right regardless of a backlash.
Last point. I make more doing private work than I do with any AMC I work with. So Tell me why I should do your Lender work? Its a FACT.. You and Your Partners are delaying appraisals. Not Appraisers. I value my relationships. I value my time. I value my work. But I’ll be the first to walk away, and now you are down one more appraiser in the Atlanta Ga area to do your dirty work. It’s NOT the Appraiser. Its Everything Else.