AMCs: Prepare for Appraisal System to Change, Fees to Rise

October 30th, 2012 | by Elizabeth Ecker Published in News, Reverse Mortgage | 19 Comments

Changes across the appraisal industry including a declining supply of appraisers in the market stand to put pressure on this segment of the mortgage process. Those in the industry say something has to give.

Barring change that could include an increase in fees paid to appraisers, turn times could rise substantially, making for an even longer process—application to closing, they say.

Both mortgage professionals as well as consumers need to prepare for these potential changes, says Erik Richard, CEO of reverse mortgage appraisal management company (AMC) Landmark Network.

“Supply of appraisers is low and demand is high and it will only get worse,” Richard says. “We already see a significant number of our orders get hit with fee increase requests from the field. Building this cost in upfront will speed up the appraisal process.”

The AMC fee has not increased of yet, Richard says, but others in the appraisal business agree that a rise in the cost to consumers is one very realistic outcome.

“Fees are going to go up, and we are actually switching to a flat fee model as there’s just too much going on for things to remain the same,” says Brian Coester, CEO of Coester VMS. “Appraisal fees are going up not just because of regulatory cost but the requirements that lenders have on appraisers.”

The pressure is twofold: There are not only fewer appraisers than there once were due to an aging work force, but heightened regulation is also putting some additional pressure on AMCs and individual appraisers.

Through Dodd-Frank’s implementation, states have new rules and regulations regarding appraisals, and no longer can trainees conduct appraiser work, and thus there are fewer trainees at the same time many longtime appraisers are retiring.

“If we can increase appraiser happiness with higher fees, we can start to change the narrative and squelch the appraiser complaints,” Richard says. “Higher fees also make it more likely appraisers will see [an upside] in the job and will allow current appraisers the margin to bring on trainees.”

The actual cost may remain in question, but the increase looks to be inevitable, says David Stroop, regional vice president for Mortgage Information Services.

“Prices will probably continue to rise,” he says. “There are a lot of factors for this, including new regulations and less appraisers, but there are others out there as well.”

The model is broken, Richard says, and needs a solution to prevent long-term effects.

“As an industry I think we should fix the pricing model,” he says. “It’s currently flawed and without a drastic fix we are certain to experience short term frustrations but the long view is far worse.”

Written by Elizabeth Ecker

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EricSD

I do not believe the AMC model is working at all. Since it’s inception there really have been nothing but problems. Adding this middle man has only benefited the AMC’s. The main reason for the number of appraiser’s leaving the industry is because they make a fraction of what they used to make because the AMC’s manage their pay. It was explained that by implementing this new system it was going to benefit the consumer. Obviously this has not happened. Increased cost, longer wait times, lower than expected appraisals have really hurt the borrower and the industry.
Mike Armentrout

“The model is broken”?…. I must say respectfully that the model never worked to begin with. (Post HVCC)
While appraisers will certainly welcome any increase in fees, it will unlikely alter the downward trend in the number of appraisers. If an appraiser needs or wants to hire, they will be hesitant to invest in someone to “ride along” as a trainee for two years only to have them get certified and opt for a full fee by simply signing up with an AMC. A license, E&O policy and a steady pulse now make anyone an appraisal company. Few local firms have the resources to offer additional perks to outweigh this. It’s the dichotomy of a national/global lending market that is still dependent on localized expertise for appraisals. Gone are the days when a firm could build a staff of qualified appraisers that specialized in specific markets, employed service efficiencies and all the while maintained quick turn times. The one man operation is the new standard and with current scope of work levels, turn times will remain long as appraisers are at critical mass in how many assignments they can complete.
hecmvet

How did our industry
come to allow only appraisers to continually increase their fees based simply
on ever increasing “level of difficulty”? It’s not like the level of
difficulty for every other step of the process hasn’t become nearly impossible
as well but we’re not allowed to increase fees to address it.

I wonder sometimes if
the industry wouldn’t be better off to give up on this so called Appraisal
Management Company requirement to eliminate this colossal third party
interference in the process and go back to less technically challenging
valuation rules and greater appraiser accountability.
Laurierd

I started in 1990—at $400 a piece. It has held pretty steady. Gas was below $2 and MLS fees weren’t in existence. No one knew what E&O was. The report was, at most, 12 pages long–two with information, rest were exhibits. Think it is pretty steady on the pricing. AMC’s add $75 to $300 per appraisal. And they have no requirements to be a phone monkey to order reports. Sad state of affairs.
John A. Smaldone

This is another example of how the “Financial Regulatory Reform Bill” (Dodd-Frank) is adversely effecting the market and our industry.

The CFPB, a bureau spun out of the Dodd-Frank Bill is creating burdensome regulations and changes that are harming our industry. The bureau through there over regulations is only causing more expenses and heartaches for our seniors as well as perpetrating useless and nonessential regulations just to justify there existence.

Having to use an AMC has been one of the industries nightmares. It has slowed the process, destroyed communications and they have been a hindrance on the industry verses an asset!

If we see the changes proposed in the appraisal system and a rise in fees, this will be a major set back for the entire lending industry. This is wrong and we need to stand our ground and protest loudly against this move!

John A. Smaldone
The_Cynic

Ray,

Are you saying that the AMC should charge just $2,000 per appraisal so that they maintain the same net revenue dollar split? I know you are saying that the AMC should only be taking about $70 of the revenue but their business structure probably demands closer to 30% of the total revenue or about $135 of the total revenue of $450.
Ray

Using your numbers, I’m saying that the appraiser should get 70% of the total cost of the appraisal. With the bidding process, the appraiser ends up getting about 33% of the money while doing 90% or more of the work.
The_Cynic

John,

How are AMCs in the HECM context related to the Dodd-Frank Act?
The_Cynic

Ray,

Other than demonstrating how high the appraisal cost would have to be ($2,000) for the AMC to keep the same revenue base (at $300 or $450-$150) and yet only receive 15% of the fee, I used your appraisal fee of $450. So I do not understand what you mean when you say “using YOUR numbers.” 30% of $450 is $135 and $450 is the appraisal fee you use in your comment.

But will the appraiser be sufficiently comped at $315? Back in 2007, most of the appraisers I used charged no less than $350 for an appraisal close by with ready comps.
theloanofficer

Get rid of the AMC’s and you will actually get quality appraisals again! This article states “Supply of appraisers is low” We’ll no kidding – no seasoned good appraiser would want to see the AMC charge $450 for the appraisal and get paid $150 for the work. An appraiser is going to issue a $150 appraisal report which is poorly done and ends up getting butchered by the underwriter causing the appraiser to perform more work without pay to satisfy the appraisal condition. This is the REAL reason appraisal fees are going up. Some call it requirements that lenders have on appraisers.

In addition, I don’t see how HVCC helps the borrower if their loan is declined at one lender and approved at another lender however; the new lender doesn’t accept appraisal transfers. Therefore, the borrower has to pay for another appraisal and now they’re in $900 in appraisal fees.
RLCarmichael

I’ve been in the business for nearly 30 years. AMCs came in using scare/bully tactics. They increased cost to the consumer while lowering the fees paid to the actual licensed professional appraiser. Even today, I still get request from AMC that want me to work for $175 when the market fees in this area ARE $400-450.

And most telling is that the AMCs don’t want us to attach our invoices to the appraisal. I wonder why that would be. Are they ashamed for anybody to know just how much they are screwing the appraiser out of?

And as far as the management part, most the management consists of emailing the request then emailing the appraisal. I just had an order which I declined and quoted market fee. A week later they agreed to my fee but I didn’t get the order email. Two more weeks and I get an email wanting to know if I have been able to get into the property.
RLCarmichael

The author went to an AMC for information. Enough said.
http://www.facebook.com/johnny.mosely.5 Johnny Mosely

$600 for singles $1,000 for multis – DONE DEAL!
dunnwrites

I saw this coming at least 3-4 years ago. Now you have to have a college degree, there are more classes and the state tests are way more difficult. We do not get paid good enough fee’s to hire a trainee and no college grads want to put up with the BS it takes to get a license. The old appraiser’s are retiring or dying and no new blood getting in the business. Fee’s are going to go up and soon the appraiser’s will call the shots instead of the AMC’s.
Finney2727

I agree with the article regarding an aging workforce. I am a 42 year appraiser which is young comparaed to most of my peers. Every appraiser event I attend is filled with grey hair and meeting an appraiser in their 20′s or 30′s is a rare occurrence and thats scary for the future of the industry. There is absoultly NO incentive for me to take on a trainee. Training someone with all I have learned over the past 15 years is daunting. There is NO profit in it and therefore no reason to do it.
NoVaStar_Appraisals

I am a Certified Residential Appraiser with multiple designations from independent appraisal organizations. When the UAD went into effect, i stopped accepting residential work. Because of my experience and expertise, I was able to move into other more lucrative appraisal fields. It was scary at first, but there isn’t a day that goes by now that I do not thank the Good Lord above for opening the window of opportunity.

Artiles like this one and the comments listed above from “Reality” just reinforce my decision. I wish my fellow appraisers still completing residential appraisals the best of luck. 1004MC, UAD and underwriter regulations are a thing of the past for me. Once again, I have discovered why I really enjoy being an appraiser. Appraising is fun! I haven’t felt that way for a very long, long time.
quahog123456

The appraisal requirement model does need to be changed. For example, let appraisers use MLS photos for comps. Is there really a “significant difference” in value if MLS comps are used compared to the appraiser driving all over the place? I say no. If the appraiser is familiar with the area MLS photos are just fine. Just think of the gasoline expense in your car wasted driving around shooting 3 comps and 2 listing comps plus the time.
Another issue is the FHA appraisals. Why risk appraiser’s safety by asking the appraiser to do a “head and shoulder” look in the attic? That means getting up on a ladder and taking a photo. Most attics cannot be viewed entirely to see everything FHA wants “inspected.” Get a home inspector to crawl the attic to inspect, not an appraiser. Both the mls photo requirement and the attic photo requirement while having some merit do not really significantly effect value. Do away with both and the enormous amount of time it requires.
http://profile.yahoo.com/DFOP4325TMZB44QRGIP5PXVBRE John

Regulations………regulations…….compliance……….compliance…………crap for fee’s for professional work. You fill in the blanks…………..
P_oed

I have been appraising for 27 years. HVCC and AMC’s destroyed my business. My typical fee prior to this was $325. AMC’s typically charge over $400 today and I receive 50% of that, if I am lucky.
Strongly agree with Jaebert. We should be charging $600+ for a standard URAR.