From the Publisher
Defining “Customary and Reasonable” Fees
What’s all the fuss about customary and reasonable fees? FHA wrote into recent regulations that appraisers should be paid fees that are fair; customary and reasonable is the language they use. FHA did this in response to feedback that pressure for low fees from appraisal management companies (AMCs) hurts appraisal quality (see Appraisers Talk, FHA Listens, WorkingRE.com, Library, Issue 23).
There is similar language regarding “fair” fees in federal legislation before Congress and in various state bills, enacted and proposed, designed to protect appraiser independence and/or to regulate AMCs.
What does customary and reasonable mean to you? Anywhere from about $150 to $250 per assignment.
Results from our HVCC Talkback Survey, with over 5,500 appraisers responding, indicate that price is the main criteria in appraiser selection by AMCs and that low fees and fast turn around hurt appraisal quality (see HVCC Survey Results: Appraisers Still Feel Pressure, WorkingRE.com, Library, Issue 23). This is driving seasoned appraisers out of the profession and rewarding “shortcutting” among those who remain- if cheap and fast is all that matters.
Moreover, what of the future ranks? How many bright young people with the requisite education will be willing to labor as trainees to split $175 appraisal fees? How many mentors will be willing to train them? According to our HVCC survey, less than 27 percent answer that they “would consider taking on trainees in the future.”
AMC Fees Customary and Reasonable?
Appraisers and other interested parties know what customary and reasonable fees are in their market and it’s not the cut-rate fees paid by many AMCs. To back this up, a la mode did a year long fee survey for non-AMC appraisals (see HVCC: Taking Back Control of Your Fees). The national median fee according to that report is $350 for non-AMC orders. Fees for FHA and certain other appraisals are higher.
The AMC trade group TAVMA (Title/Appraisal Vendor Management Association) framed this debate almost immediately after the fee survey was announced in Working RE Online and elsewhere, arguing that it is AMC fees that ought to be considered the standard (i.e. customary and reasonable) because these days the majority of work flows through these middle-men. As incredulous as that logic may leave you, it is their argument, and so far, FHA has not disagreed (see HUD Responds: Customary and Reasonable Fees).
However you feel about the wisdom or the right of your fellow appraisers to work for as little as they want, the lowest bidder is certainly not the intent of customary and reasonable. I urge you to lobby FHA and other regulators, who have called for fair pay for appraisers in the public interest, to step up to enforce the intent of the customary and reasonable, if they are serious that the public good requires valuations by trained and licensed professionals.