It was March 28th, 2018 that I wrote my very first blog post on this site entitled “What’s not in your wallet?” where I went into great detail about how Appraisal Management Companies or AMC’s get paid and how the consumer is not aware of the fact that the AMC is taking much of the fee while finding the cheapest and fastest appraised.
In that blog post, I gave many examples of the abuse appraisers and consumers are absorbing by these AMC’s. How one borrower back then was charged $1,150.00 for an appraisal where the appraiser was only paid $500.00 while the AMC took the rest and put it into their bank account. Seems pretty insane, right? I mean, how is it that an AMC that is supposed to just manage the order (take the order, assign it, follow up, do some QC control and send to the lender) making more than the appraiser who is taking on all the liability with their report? Good question.
Now my blog was written in 2018; however, this practice had been going on since 2009 when HVCC (Home Valuation Code of Conduct) went into effect and is today known as the Dodd-Frank Act. Since I wrote this blog, many things have changed in the appraiser profession.
These changes range from newer cheaper appraisal products, the push for AVMS, Desktop appraisals where the appraiser doesn’t even visit the home but a realtor or some other trained person off the street to gather the subject data, to some regulation changes and new appraiser profession entry initiatives. While the profession is changing in more dangerous ways than good, some things just seem to remain the same, as seen in the photo below.
An order sent to an appraiser
They sent the above order to an appraiser and well, while it’s not as poor as the example I stated above earlier, it still proves my point here in this blog.
Now, much may inquire, “is that the fee the appraiser requested?” The answer is NO. They sent this order to them with this fee to perform the appraisal and also shows the “CUT” the AMC is taking. The AMC charged the borrower $649.00 and is only willing to pay the appraiser $350.00, and they are making $299.00 to manage the order. So, I have to suggest this: If the AMC is charging $649.00 for the appraisal, then wouldn’t that equate to that price being what’s customary and reasonable in the market for an appraisal? Another question? I’d the AMC disclosing to the borrowers that this amount being paid is including their services? My answer, probably not. Oh, I know, it will be in the appraisers report and be on the closing statements. Right? Yet when has anyone read an entire report or even given a crap about the closing statements, especially when they most likely just state: Appraisal Cost and not Appraiser Fee and AMC Fee.
This is 2022. We are in a period of inflation where companies and more are raising their costs for services and prices daily. Yet here we are in 2022 and appraisers are subjected to what I call the greatest and most legal Ponzi scheme ever created. It’s 2022 and yet appraisers are forced by these AMC’s to take fees for their hard-earned services that they made in 2005 due to this broken, over regulated and ridiculous system that they had no say in.
There is something that was developed during the time when HVCC was rolled into Dodd-Frank. It’s called Customary and Reasonable fees. What that even means is a mystery to me and probably as you as well. Basically, it means a fee paid based upon what everyone else in your area is accepting or charging. Name me one other profession that has this sort of language or rule? None!!! It’s by far the most magical and crazy language in any document ever. What’s funny is NOONE has a clue how to decipher what it means, not even the people who created it. Typical Political garbage. We may need some GOONIES adventure soon to find the reasoning.. This brings me back to my earlier question. If an AMC is charging a borrower $600 for an appraisal and that borrower believes that is the cost of the appraisal, then couldn’t that be considered Customary and reasonable? Take the AMC out of the equation. If they are capable of charging that, then why can’t appraisers? Why can’t experts charge what they want for their services and not be beholden to a third party that is getting rich off the experts? Think about the example above. The AMC takes $299 out of the fee. Let’s say they do 5000 appraisals a year across the country. By my math they made $1,495,000.00 for managing the orders with no liability, no recourse and not doing anything.
Maybe I am wrong. I know many appraisers like myself have stopped doing lender and AMC appraisals because of this very reason. Many have moved on to doing other things, more private business, or just left the profession. AMC’s act as if they add something to the process. Perhaps they do; however, they do not deserve to determine what fee an independent appraiser who runs their own business should take, nor do they deserve to keep misleading the public and consumers.
My final thoughts. It’s time to revisit Dodd-Frank. It’s time to start listening to the hardworking boots on the ground appraisers and stop listening to the AMC’s. AMC’s will do everything in their powers to keep things rather the way they are. Appraisers are being abused, being torn down and continue to be laughed at. Appraisers are being put in bad positions with consumers and in the media with all the recent news of Racial Bias, which is a topic for discussion later. However, for now, it’s clear, the AMCs have no liability, will continue to charge more and pay less to pad their pockets during these tough times. It’s time to find other solutions that may include leaving AMCs in place but being paid per order by the lenders they have contracts with. Maybe it’s to take the independent appraisal fee quote out of RESPA and TILA and allow appraisers to get back to WANTING to appraise homes instead of seeking alternatives. I’m looking at you CFPB, Government, Congress, Fannie, and Freddie. Stop looking out for your friends and start looking for real solutions.
Consumers: Stop being played for a fool. You deserve better