|> The Appraiser Coach
Changing the Appraisal Ordering Process: Interview with David Cedar
by Kendra Budd, Editor
Fees are a necessary evil that every appraiser, lender, and buyer has to deal with. But what if there were a way to lessen the blow a bit? What if, the AMCs didn’t hold as much power as they currently do? Well, David Cedar, President of The Private Asset & Management Group (PAM), has designed a software and non-AMC model along with his team that will save buyers money while making lenders and appraisers more. The kicker? It’s perfectly legal.
In fact, PAM has transitioned since 2008 from a successful AMC to becoming a “partner” with Lenders across the country and helping and assisting them with creating their own Appraisal Panels in all the states and geographical market sectors they lend in.
Cedar felt that the states held too much power when it came to the AMC model, and thought it was long overdue for a change. Here is what he told us:
Q: How does your non-AMC model work? What makes it so different from a traditional AMC?
Cedar: We are doing something that’s very different. This isn’t being done by anybody else in the country. Yet, it’s a very simple idea. We have been an AMC since 2008 and prior to that, we were just an appraisal company that got tired of all the fees that were being thrown at us. After COVID died down a bit, I started looking at ways to improve the AMC model. The idea centered around benefiting the three parties involved in the appraisal transaction: the lender, the AMC, and the appraiser—without compromising the three in any aspect of the appraisal.
Usually how it works is, the AMC gets the order from the lender, then the AMC assigns it to an appraiser they’ve used before. Often, they find the cheapest one and the lender is not all that much involved, and neither is the loan officer. Instead of using an AMC, what we offer is a self-managed software that has zero cost to the lender and greatly reduces the appraisal fee to the borrower. How we do that is by helping the lenders set up their own appraisal panel, instead of the AMC setting it up. Lenders don’t realize they’re legally allowed to do this. Many are afraid that their state will hold them liable for running their business this way, but the truth is there’s no reason, especially legally, why they can’t do it. This isn’t a law or a rule that came out of Dodd-Frank that forbids it. So, what we do is give this software to the lender for free. We don’t charge them anything. We help them set up their own appraisal panel. They literally have coverage for every county, in every state, whether it’s one state, two states, or 50 states that they’re in—everything is available on one dashboard.
Now what are we going to do as a non-AMC? We provide the appraisal software to the lender. We do it for free, we absorb the cost, we will continue to collect the appraisal fee from the borrower this way. In fact, we have adopted a policy to pay the appraiser the next day after delivery. Let’s say it’s five o’clock—everything that comes in today until five p.m. our time will get paid tomorrow. Which if you think about it, the appraisers might push themselves a little bit to get those orders in. Everybody likes cash flow!
So how do we make money? Under the old rule if you order an appraisal today under an AMC and we accepted it as an AMC, we’re probably charging $625 for a typical single-family house. We would pay the appraiser anywhere between $350 and $400, while we’re making around $200 per appraisal. Here’s what we do instead. We charge a flat fee of $99 for a full appraisal in this model—essentially, if an appraiser is getting $375 to do an appraisal, that now becomes a $474 price appraisal with our fee. While typically an appraisal would be around $600—it’s quite a bit less. As, an example, let’s say we got an order from an AMC yesterday in Brooklyn. It’s a $1.8 million purchase—a three family house and we’re charging $1250. Now the appraiser is getting $700. So, we’re making $550 on that deal. However, if that was ordered under our new model, that $1250 becomes $799 for the buyer instead—that’s quite a bit of savings. As a lender, who wouldn’t want to have the advantage of being the lowest cost appraisal in the market area? We’re able to do this and make money because we don’t have licensing requirements, and we’re now not getting charged all of these other fees.
That’s what we do. I mean, that’s as simple as it is. The software is a big part of it, and it’s been around since 2008. So, all the bugs and the kinks have been worked out of it and now it works seamlessly. It’s a model that makes sense, it’s compliant for every lender in all 50 states, and it’s legal. So why isn’t everybody jumping on the bandwagon?
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Q: What inspired you to start your non-AMC model?
Cedar: Back in the day, there wasn’t any licensing, but some states began to require it. They used it as an opportunity to charge a ton of money. Not only do you have licensing fees annually for every single state, but now vendor panel fees—it’s a lot of money. Prior to COVID I had gotten a letter in the mail from Virginia essentially telling me they were going to assess each of my appraisers for $50 each. We had 128 appraisers that were on our panel in Virginia at the time, so it would total $6,400. So, I called up to ask them about it, and they said, “Well, we need to make sure their licenses are in effect.” I tried to tell them that we already do that—as an AMC, that’s part of our job. In fact, every company, every bank in America, wants a copy of the appraisers’ license in an appraisal report. So, I asked them, “What else are you going to do with this $50?” They told me they were going to enforce E&O insurance. It was insanity! We do that already too! We have a copy of the E&O insurance in the report as well as the front document page.
I had to write out that $6,400 check to Virginia and we weren’t getting anything out of it. We had already paid around $3,500 a year to be licensed in the state and now we have this extra fee on top of it. They’re not the only states to do this or something similar. It just becomes a money grab. So, I came up with my business model to put a stop to these predatory fees.
Q: What are some additional benefits to your business model?
Our software is the only software that has direct access to the VA. The software integrates with their LMS system. Another bonus is it dramatically lowers the cost of the appraisal to the consumer. Additionally, the job will be completed faster for the consumer because they are dealing directly with the appraiser instead of the lender. If there’s a correction or a revision, usually the lender must contact us and send a request, which we then send to the appraiser. Then the appraiser has to return the corrected form to us, then we send it back to the lender.
There’s no reason for all those steps. What if it could go right from the lender to the appraiser? Well, our software allows for the lender and appraiser to communicate with each other directly. Plus, there are no more additional employees you have to hire in which to do this. There are no more computers that you have to buy—you don’t have to spend any money! It’s just simply the software will get set up by the software company.
Q: Is there anything else you would like our readers to know?
Cedar: There’s nothing to construct here. This would be a very simple integration and switch over from whatever it is you’re using now into this platform; it’s not complicated at all. I’m passionate about this and I would welcome anybody who reads this and says, “Oh, let me reach out and get more information about this.” Anyone can contact us at pamvalue.com to get any questions answered.
I don’t believe in jerking people around. These AMCs are hurting people. That’s why this is so worth it to me. I don’t want anyone to be taken advantage of. We partner with lenders and appraisers, and that’s what we want to keep building—a partnership.
About the Author
Kendra Budd is the Editor of Working RE Magazine and the Marketing Coordinator for OREP, a leading provider of appraiser E&O insurance—trusted by over 10,000 appraisers. She graduated with a BA in Theatre and English from Western Washington University, and with an MFA in Creative Writing from Full Sail University. She is currently based in Seattle, WA.
OREP Insurance Services, LLC. Calif. License #0K99465