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> Upcoming FREE OREP/Working RE November Live Webinar- Fighting Appraisal Board Complaints: An Expert’s Advice
Editor’s Note: A version of this story, reprinted from WRE’s email edition, was published prior to the conference. We have updated the story, with notes from the conference included.
Appraisers, AMCs & Building Bridges
By David Brauner, Editor
I had the honor of moderating a panel at the Appraisal Summit in Las Vegas in November on the “unholy matrimony” between appraisers and appraisal management companies (AMCs). My intent was to support the foundational elements of any good relationship-understanding and mutual respect, in this case, between the appraisers in attendance and the panel of AMC executives.
The opportunity is unique because the panelists have both distinguished and respected careers as independent fee appraisers and experience owning and/or operating an appraisal management company (AMCs). As the song goes, they’ve looked at things from both sides now.
Here is a summary of our pre-conference discussions broken out by subject. Because the interviews were “off the record,” I refrained from quoting anyone directly. And because this is culled from individual conversations, it is important to note that not everyone agrees with every point. Below are some additional notes from the conference.
Most appraisers say incompetence on the part of AMC staff is their biggest headache.
No one on the panel thinks the frequency of revision requests is good for anyone. All agree it is a problem and most say processes are being developed and refined to increase consistency across lenders, among AMCs and even between individual reviewers at the same AMC. It’s a daily struggle. In the old days, most appraisers worked with just a handful of clients and knew what to expect. Today, appraisers work with many AMCs who in turn work with many lenders. Everyone agrees on the need for more consistency.
Some AMCs use only licensed appraisers for review work and say the industry needs greater transparency regarding the credentials of AMC personnel- who is doing what. Some AMCs use a process that combines automation with licensed and non-licensed personnel of various experience levels. Some panelists agree that a reviewer should always have local competency while others believe it is not necessary for quality control purposes.
All say appraiser independence is strictly enforced at their AMC: it is job one. There are processes in place to review disputes when an appraiser disagrees with a revision request. However, at least one admits that refusing to change something, even on ethical grounds, can lower an appraiser’s quality rating, which could result in fewer orders.
Bridge building tip(s): evaluate and consider the revision request before rejecting it or becoming defensive. Listen and learn from your mistakes. Up your game with more training and education. Becoming more skilled will provide you more options to work with the AMCs who have the most competent staff and who do the best job at being a buffer between you and the lender. And who pay fairly. If you have a dispute with someone you think is not qualified, ask to speak with an appraiser or someone higher up to explain your position. This is how you build a relationship rather than burn a bridge.
Darn it, AMCs Provide a Service!
Most of the AMC panelists are chagrined by the general perception among appraisers that all AMCs are (fill in your invective of choice). Appraisers don’t really understand what AMCs do and the relentless bad press is unwarranted, they say. Yes, there are “bad” AMCs for sure but there are many quality AMCs that put the interests of appraisers first. “Good” AMCs act as a buffer between lenders and appraisers, especially when a lender’s request is unreasonable or unfounded.
Not all appraisers need it but many can benefit from working with a good AMC because the rigorous quality control improves an appraiser’s product. Producing reports that are more USPAP compliant also helps keep an appraiser out of trouble. The best AMCs have experts on staff to help raise quality. The worst use unqualified personnel and you are welcome not to work with them.
Additionally, of course, AMCs relieve the marketing burden from appraisers who don’t enjoy that task and aren’t good at it. A dirty little secret, one panelist said, is that banks need AMCs because they (lenders) don’t want to build quality control departments and don’t want any part of hiring appraisers because of appraiser independence issues and the potential for steep fines ($10,000 a day).
Several explained it’s not all roses on the other side of the desk. Onerous and expensive regulations seem to favor the largest AMCs who tend to have a national presence (and deep pockets) rather than local expertise. According to many, an AMC is typically paid a flat fee per order- complex assignment or not and winds up eating higher fees routinely. “Sometimes we may be paid $450 for an appraisal but on a complex property wind up paying three appraisers $2,500 each.”
Bridge Building Tip(s): Work with AMCs that are ethical and responsible. Approach the relationship by assuming that the AMC is operating in good faith until you see otherwise. If you’re not getting the help you need, ask to have the issue escalated. Work on communication, such as giving adequate warnings of possible delays or other unexpected difficulties or anomalies with the assignment, in a timely manner. Remember the golden rule works in reverse: when you are unprofessional and rude to someone, you can pretty much expect the same.
Overall, many panelists found surprising the overall low quality of appraisal work they see. “A lot of appraisers think their work is excellent and it is not.”
Bridge building tip(s): be open minded when evaluating your product when it is questioned. Improve your skills by continually taking education and training. This will help improve your reports, raise your fees and permit you more say in who you work with.
One AMC said the number one question asked by auditors working on behalf of lenders is how the appraiser was selected. When AMCs are audited they must be able to show why that particular appraiser got the order and it can’t be because of the lowest fee. “We turn down fees offered by appraisers every day because they are too low,” one said, “because we are held accountable for paying customary and reasonable fees.” They would never choose an unqualified appraiser solely based on a low fee, they say, but do choose the most competitively priced appraiser among those with an adequate quality rating.
Transparency on the closing docs, separating the fees earned by the appraiser and the AMC, seems like a good idea to most. Most say they also are in favor of a cost plus model where the lender pays for all or part of their services.
A scenario similar to the following was recounted by several and it illustrates why it pays to act professionally when dealing with an AMC: an AMC contacts an appraiser and offers $300 for an order. The appraiser responds to the AMC either with a terse “no” or a higher fee request, say, “$650” scrawled across the order and sent back. The next appraiser contacted by the AMC takes a different approach. He or she takes the time to explain why the property is challenging and why the assignment is worth $650. The AMC listens and winds up paying the $650 requested fee to the second appraiser. And not only that, a new relationship is begun built on trust. The moral of the story: good communication and professionalism go a long way.
Bridge building tip(s): Negotiate fees. Explain and support your requests and decisions. If whoever you’re dealing with doesn’t get it or is not qualified, ask to speak to an appraiser or someone higher up and begin to build a new relationship. Substantiate your fee request and you are much more likely to get it. These panelists cite an overall lack of professionalism among appraisers that strain the appraiser/AMC relationship.
Conference Summary: Many appraisers remain frustrated at being forced to use “middle men” AMCs and work for reduced fees. They feel disrespected by low fee offers, having to answer to often unqualified AMC staff and overall, feel powerless to control their own destiny. They are especially frustrated by a more complex review and quality control process that they believe is due to AMC incompetence.
AMCs are equally frustrated by a bogged down process and put the blame on lenders, whose endless requests stem from being burned by buybacks. Also, because they often are unable to get answers about reports after the fact due to USPAP confidentiality requirements, lenders now want every possible question answered in the report. AMCs say they do go to bat for appraisers more than appraisers know. The current system also costs AMCs time and money- no one is happy. The AMCs at the conference say they respect appraiser independence and encourage open dialogue when there is a difference of opinion.
The main complaint AMCs have is service: appraisers not providing timely updates and responses- acting unprofessionally. Many also continue to have concerns over communication issues: the report should be written in a way that the intended user- typically a non-appraiser, can read and understand it easily. The reports need to tell a story in plain English. AMCs also have serious concerns about the mounting regulatory and compliance hurdles they face in order to operate. These hurdles could force all but the largest AMCs out of business, creating further consolidation and less choice for appraisers.
The issue of fees is still at an impasse. AMCs demand quality and shop for price; taking the lowest fee from a group of appraisers they deem qualified. Appraisers feel they continue to be underpaid and have no meaningful way to compete. Everyone agrees the cost-plus model is a workable solution- where the AMC and appraiser fees are clearly separated and AMC services are paid by the lender. But no one knows how to leverage lenders into paying for something they now get free. The best advice for appraisers remains to upgrade their skills, diversify, and only work with the AMCs that have competent staff, defend your interests and pay you what you are worth.
About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states (OREP.org). He has covered the appraisal profession for over 20 years. He can be contacted at firstname.lastname@example.org or (888) 347-5273. Calif. Insurance Lic. #0C89873. Visit OREP.org to listen to an Insurance/Liability Q&A presented by Brauner, at a recent Appraiser Town Hall Meeting.
James A. Baumberger, appraising 24 years, is president of Synergy Appraisal Services, a provider of managed appraisal solutions for mortgage lenders. Some of his past positions include Regional Chief Appraiser for Bank of America, Collateral Services Manager for Washington Mutual, Division Appraisal Manager for World Savings, and Mortgage Group Leader for Wachovia.
Bobby Crisp is the owner of Crisp Appraisal Service currently located in New Braunfels, Texas and has been appraising real estate since 1992. He is former owner of ABC Appraisal Management Company. He is an AQB Certified USPAP Instructor (Uniform Standards of Professional Appraisal Practice).
John Dingeman is California and Arizona Certified Residential Appraiser and registered Property Tax Agent in Arizona and currently Vice-President of the AMC Value360, LLC located in Sacramento, California. He serves as President and Lobbyist for the Coalition of Arizona Appraisers (CoAA), and is on the Chair of the Government Affairs Committee and Vice-Chair of the Membership Committee for the National Association of Appraisers.
Shawn Telford is Director of Product Management at FNC Inc, a software firm, best known for Appraisal Port, based in Oxford MS. Telford’s career began as a real estate appraiser in the early 90’s.
Danny Wiley, SRA has worked in the appraisal profession since 1982. Danny is an AQB certified USPAP instructor. For 15 years Wiley was the owner and chief appraiser at The Wiley Group in Nashville, Tennessee. From 2001 through 2006 Danny served on the Appraisal Standards Board of The Appraisal Foundation, serving as Chair for 2002, 2003 and 2004. He also served for six years on the Standards Board of the International Valuation Standards Committee. He is currently Chief Appraiser at ServiceLink, a Black Knight Company (formerly LPS).
OREP/Working RE November Live Webinar – FREE*
Fighting Appraisal Board Complaints: An Expert’s Advice
Date: November 4, 10-11 a.m. PST
Bob Keith, MAA, IFA, Former Executive Director and Compliance Coordinator for the Oregon Appraisal Board, gives you a rare expert’s insight into the complaint process, showing you how to avoid the most common pitfalls and mistakes appraisers make when dealing with their state board. Learn what steps to take to protect yourself and what is and isn’t in your own best interests. Keith takes you through a step-by-step process on how to interact with your state board to achieve the best results possible. Read More.
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