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Summary
Below is a sampling of reader feedback on WRE’s current
cover story- HVCC/AMC's-Change
Equals Opportunity
and, further down, on the HVCC and AMCs. To
summarize, most appraisers feel the HVCC will not solve the
problems it was intended to solve and that the forced
insertion of AMCs into the process will diminish the
appraisal profession. And that the only way to fight back is
to refuse unreasonable fees and turn times.
Reader Feedback: HVCC/AMC's-Change
Equals Opportunity
(You can find this
story at WorkingRE.com, under Current Issue)
“And
suddenly, where appraiser's used to give a rip about what
their long-term client had to say about the quality of work
and attention to detail, now, they're only going to be
worried about quantity, not quality.” -
Carl
Thurber
You made the point
that as soon as an appraiser hires someone as an assistant, it's
foolish to complain about an AMC paying lower fees. Did it occur to
you that the whole point to paying an assistant is to increase the
amount of appraisals to bring in more revenue, thereby offsetting
the cost of the assistant and ultimately make more money? I guess
the economist in me doesn't understand how hiring an assistant, thus
increasing the cost of doing business, while at the same time
decreasing the amount of revenue by working for an AMC, is a good
thing.
I have worked with
two different AMCs over the course of the last 18 months. Based on
my experience with these two companies, I have concluded that the
ultimate reality will be that AMCs will at some point send the work
to those appraisers with the lowest quoted fees. It’s only natural
in a competitive business environment. With an influx of newly
licensed appraisers in the market who are used to getting a low
split with their trainer, suddenly, I can't compete with $125 fees.
I realize that AMCs
are here to stay and I realize the need of the larger
nation-wide lenders to streamline their work and be able to manage
their business. Your comment about one-man shops is
understandable but misses a larger point. What happens down the road
when the appraisals simply turn into nothing more than a glorified
AVM? You as much admitted this ultimate reality near the conclusion
of your article when you stated that, "It is the service level
execution on thousands of transactions per period that defines
success for AMCs and their clients."
You've left out one very important element here- the borrower! I
think they would have a thing or two to say about
"wham-bam-thank-you-ma'am" appraisals which will ultimately be the
result of the "profession" over time. I'm not advocating for anyone
here except for myself as a consumer of loan services for my own
house. I want to know that if I take better care of my home, have
superior elements of design and amenities, whatever appraiser shows
up at my house to do the appraisal had better be more concerned
about what a typical buyer would pay for my house and not so much
worried about how to avoid a request for more comments from some
automatically generated data field analysis from an AMCs' software
program.
You know it and I
know it. And everyone in the game knows that we all know it. At
some point the appraisers are going to realize that even though AMCs
provide wonderful services for their clients, as you so glowingly
point out, they're doing it all on the backs of the appraisers. And
suddenly, where appraisers used to give a rip about what their
long-term client had to say about the quality of work and attention
to detail, now, they're only going to be worried about quantity, not
quality.
How long before appraisers learn how to simply include only the data
that will not generate a review or get flagged for
additional comments and not go out and get the data that will truly
generate a fair and honest estimated market value for the customer?
Anyone who has access to Zillow and the County Assessor can do an
AVM by simply locating the sales that have closed in the last three
months and are located within a one mile radius and match the size
and age of the subject property. Furthermore, what exactly is my
expertise in appraising proposed luxury homes worth to an AMC when
they have any number of less qualified, less experienced appraisers
on their roster who will do it for less? The law of unintended
consequences will undoubtedly rear its head at some point down the
road. And then what?
Ultimately, I know
I'm fighting a losing battle here. I have several friends who are
MDs and practicing medicine. None of them has one good thing to say
about HMOs. Not one! They are the bane of the industry.
Non-licensed bean counters making medical decisions has not been
good for the industry. The current HMO system is a far cry from what
they were originally supposed to be and I can't help but think
that the HVCC and AMCs will ultimately do to the appraisal business
what HMOs did to the medical industry. Sure, there are some good
ones but can anyone really say they're satisfied? Being forced over
to your side of the fence at the end of a regulatory pitch fork is
most unappealing and will undoubtedly leave me with a bad taste in
my mouth.
Five years down the
road, not only as an appraiser, but as an investor in real estate
and participant in the market, I don't see good things coming from
this. I guess I should be asking: "How do I start my own AMC?" -
Carl Thurber
>>
“I fear the day
when most appraisal assignments are dominated by large appraisal
management companies and the monopoly they will have to cut
appraisers' fees to whatever they want and the minor role good
appraisers will have in determining their own destiny.”
- Robert Dixon
The scenarios presented by the author are distorted and do not tell
the true workings of AMCs as they relate to the everyday appraiser.
The typical AMC does not assign the work based on who is most
capable of doing the appraisal but it is based mostly on who will do
it for the lowest fee and the quickest turnaround time. The
administrative work required (phone calls, emails, updates and
misinterpreted/disregarded correspondence) far exceed current non-AMC
assignments.
Experience tells us that an extra step along the way creates more
confusion, misunderstanding and longer resolution to problems. I
have spoken to many appraisers and am still looking for that "hassle
free" AMC. This is the reality of the work assignments. It would
seem to me that the HVCC was not enacted to produce this type of
appraisal environment. In fact, it would seem that this would have a
similar, if not worse affect on collateral valuation and the future
of lending.
I fear the day when most
appraisal assignments are dominated by large appraisal management
companies and the monopoly they will have to cut appraisers' fees to
whatever they want and the minor role good appraisers will have in
determining their own destiny. Sounds like big business licking
their chops to me and less like a sound decision to resolve a
problem in the industry. - Robert Dixon
>>
”When the AMC is performing such tasks as doing
my research, typing
my reports,
etc., I will be happy to share a portion of
my fee with them.”
- Kim Knezevich
Upon reading HVCC/AMC's - Change Equals Opportunity, I am
compelled to write to address two main points of your article which
are very troubling for their illogical nature:
1) You state that while AMCs pay less than a full appraisal fee,
they also perform many other services for the portion of the fee
kept, and list nine bulleted items/categories of services. Upon
reading your list of services, it was evident that absolutely
none are services to assist the appraiser- they are all lender
services. It is illogical, then, to justify an AMC taking a portion
of the appraiser's fee to provide managerial/clerical
services that are the lender's responsibility. In other
words, without the existence of the AMC, the lender would have more
staff, which the lender would be responsible for paying, and the
lender would pay the appraiser the full appraisal fee. The problem
with AMCs is that they shift lender costs onto the shoulder's of
appraisers who have not seen a fee increase in the 18 years I have
been in the business. When the AMC is performing such tasks as doing
my research, typing my reports, etc., I will be
happy to share a portion of my fee with them.
2) You state that once any appraiser hires a second appraiser or
research assistant and pays that person a portion of the appraisal
fee, the foolishness of the "less than full fee" argument is
apparent. Not so! There is nothing invalid about the "less than full
fee" argument. When an appraiser hires a research assistant, it
typically would mean the appraiser's volume will increase and they
will make more money, thereby more than offsetting the cost
of the assistant, and when an appraiser hires another appraiser and
pays them a portion of the fee, that newly hired appraiser is
doing the work, or a portion of the work, commensurate with the
fee split, and the balance is passive income generated for the
owner/appraiser. - Kim Knezevich
>>
”Profit margins give opportunity to
fledglings who require the mentoring that only this type of
relationship can offer. Take this article to its extreme and any
critical thinker will see a severe shortage of appraisers in years
to come.” - Mark Konar
After 26 years, it can easily be
documented that the quality level and amount of time it takes to
produce a report has increased; no one can argue that this is all
for the best. With this also comes an increased cost for data and
the many services that an appraiser uses. Add inflation and even
without an AMC taking a portion of the fee, the profit margin has
decreased dramatically.
For appraiser's to stay profitable, which
is the means of staying in business, fees need to be increased, not
decreased. The cost should shift to those who benefit and can afford
it the most.
#1) Profit margin gives the appraiser the
ability to focus their time on production, delegate research work,
verify data, pre-writing reports and office management, which is
still present even when working with AMCs.
#2) Profit margins give opportunity to
fledglings who require the mentoring that only this type of
relationship can offer. Take this article to its extreme and any
critical thinker will see a severe shortage of appraisers in years
to come.
#3) Profit margins are a necessity for a
variety of reasons. They give the ability to stay in business. They
attract educated professionals to replace those who retire. Lenders
demand quality and quality comes with a price. AMCs will not work
for free nor would I expect them to. Either the lenders should pay
for their services or the borrowers or they can divvy it up. But to
keep demanding more for less is a recipe for disaster.
I also take issue with the comment, "One
100,000 one man shops are not a profession." Are
doctors or lawyers, who have private practices, not professionals?
Are independent appraisers who take work from AMCs still not
one-man shops? Are there employees or do they receive 1099s? Do AMCs provide
benefits? Do they pay for the data, the upkeep of appraiser’s cars
and equipment? - Mark Konar
>>
In my opinion AMCs diminish the appraisal profession. Try explaining
an appraisal problem to a telephone clerk living in another state. I
cannot afford to live on AMC fees AND deliver a professional report.
So much for an "independent” fee appraiser. - Michael McCully
>>
I think they
should be called LMCs (Lender Management Companies), as it is the
lenders, brokers and others who need managing, not the appraisers,
and we should not have to share our fees, they are paid for by the
borrower before we even call the contact person for access to start
the appraisal process. H. Rawie - 34 years experience appraising
>>
I will refuse to accept an AMC appraisal request that does not meet
the time and effort required to complete a professional report. If a
significant number of appraisers would do the same, perhaps there
would be realization that we will not work for "peanuts." I am a
one-man shop and also do appraisals for individuals and relocation
work. I can survive without the mortgage work but my income will be
less. All my marketing efforts- business contacts over 25 years,
will be worthless come May 1. Future mortgage work will not be
dictated by one’s efforts now but some AMC who will be looking for
the cheapest appraiser with the quickest turn time. A question I
have is how will those who have staff appraisers and have a split
fee arrangement going to survive in this coming environment? – John
Digames
>>
When I began appraising almost 20 years ago, most of my assignments
came from AMCs. I soon found that like everything else, there are
the good, the bad, and the ugly. Sometimes I think we over react to
the ongoing changes imposed upon us and they are many. In many
classes I hear the fears, which I share, that our profession is
finished. I think we will adapt and we will prosper if we remain
calm. Work for the good AMC companies and not for the bad. Above
all, do not make rash decisions about leaving a great profession. -
Russell E. Snow
>>
I must say very loudly that AMCs can be forced to pay all appraisers
a full fee for all appraisal reports...but only when all appraisers
are unwilling to accept the (low) fees. - Craig Scheffler
>>
I will not bend or fold to any AMC or other entity forcing me to
loose my income. I am a grown man and do not need to be managed.
Just like many others I can be honest and do an honest job. The
appraisers did not cause the decline or collapse of the real estate
market. Remember, if no one does the appraisal for pennies then we
control the outcome. It takes years to become an appraiser and that
means they have no choice but to pay for your professional service.
Everyone else in real estate gets paid fairly and super fairly,
attorneys agents, brokers, the banks with closing fees. Our job is
the most important, so don't pay me and do it yourself. - Anthony
Morell
>>
In the last few months I have joined or been invited to be included
on the list of a few AMCs. The following are some examples of what I
have experienced. My first assignment for this particular AMC was
scheduled at 9:00 a.m. At 9:15 a.m. I received a phone call asking
whether or not I had done the inspection. The turn times on ALL of
the assignments that I have been given are very unrealistic (for me
anyway), and I get points reduced from my overall score. I guess if
you drop below a certain score they won’t use you any more. I feel
threatened on every order by verbiage listed in the request,
“Failure to meet the deadline could result in less assignments in
the future,” and “Your compliance is required in order to insure
future work.”
I have been offered assignment for as low as $170, which I have
refused. On the assignments that I do accept, I am making on average
$150 less than I typically would have made.
I have had to deal with some AMC's version of Quality Control- here
is a great example: I did a 1,600 sq. ft. two-story with an 800 sq.
ft. basement which I had checked as being a full basement. The AMC
clerk calls me to ask why I marked the basement as “full” when it is
only half the size of the stated GLA.
I have been self employed for 10 years and I made decent money. I
try to do about 15 appraisals a month out of my own company. Now, I
am an employee with no benefits doing more assignment in order to
make the same amount of income. I am not sure if appraising can
still be called a profession.
As appraisers, we can make a difference if we refuse the fees
offered and we refuse to be bullied into rushing our work. I know
appeasers can do work very quickly but I need time and apparently
that is something I am running out of. - Jim Gibson
>>
Regarding AMCs, this (HVCC) is a cure that is far worse than the
disease. I don't know about your AMC but many if not most are all
outsourced to the Philippines and India. These “phone grunts” are
screaming at appraisers to take rear photos on drive-by assignments
and they will open up your appraisals and make changes and nag you
around the clock to submit your appraisal within four hours of
inspection! Non-appraisers from other countries reviewing
appraisals; this is just illegal. I got paid $80 to do a review of a
property in West Los Angels with new comps, where massive prior
appraisal fraud was involved. That was the most difficult assignment
I have ever done and I got $80. That took me several days to do. AMCs will pay you without regard to the complexity of an assignment.
They are in it for the money. They will pay absolutely as little as
possible, force you to pay enrollment fees, and then pay you nine
months out. What a hideous occupation this has become. - Matthew
Schwartz
>>
I would not be opposed to AMCs - although I might choose not to work
for them - if they were subject to the same licensing requirements
that appraisers are. There is currently not a level playing field
and AMCs bend or break the laws (in my experience) just as much as
mortgage brokers ever did. That said, laws and regulations that
aren't enforced are worthless. I am afraid that until banks and
investors truly want to know what the value is, appraisers will not
command the respect we deserve. At the moment, most appraisals are
just another piece of paper in a loan file and all anyone cares
about is the number - whether it is a valid number or not.
>>
Where is the training for the other participants in the loan
process? Why aren't brokers, lenders, originators, processors etc.
required to take classes, pass exams, and be licensed by the state?
I don't want more government or more regulation but I don't want the
appraiser to be the only one in the process subject to licensing.
Who makes the least in the transaction---the person regulated the
most. What's wrong with that picture? I am relocating to another
state soon and do not plan to renew or transfer my license. Why
should my prices be "fixed" by the AMC rather than the free market?
If you want me to take more classes, pass more exams, get additional
experience, do additional work (MC1004), then isn't it reasonable
for my fees to increase?
>>
The appraisal profession is in trouble because the lenders created
this mess and now they want appraisers to clean it up with all of
these unnecessary forms and misguided oversight. The bad actors
should be arrested and put in jail.
>>
I want to know if appraisers would favor an informal association and
means of communicating on issues we have in common. e.g. standing up
for higher fee splits and better treatment from AMCs.
>>
Note that HVCC will not change anything about appraising. Appraisers
report data. They do not make lending decisions. Fix the lending
decision and you will fix the problem.
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story at Working RE’s new
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