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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.
Revision Requests
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.
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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.
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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.
Quality
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.
Fees
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 dbrauner@orep.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.
Panelists
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).
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by csulamo
Where is the “terse” key on my keyboard? I cannot seem to find it. It’s sad that so much is read into things that are not necessarily there. Could it be possible the appraiser is answering from the field with limited reception and wanting to let the sender of the order know right away they cannot take it? Could they be being respectful of time constraints? And what of the AMC that is taking a large chunk of the fee and asking the unreasonable, wasting precious time trying to get an appraisal for a ridiculous fee and then wondering where all the “good” appraisers are. There is more than one side to the issues and this article is very one sided. Let me know if you find that “terse” button on the keyboard!
-by Adam
Amcs will never work out until their cost is paid by either the lender (which will never happen) or the consumer (yet again); NOT the appraiser. Amcs serve the lender, not the appraiser. The truth, from an appraiser’s perspective who does little to NO amc work, is that amcs are VERY low hanging fruit to be had in an appraisers business model (like the kind you find on the ground that’s been rotting for days). The kind of amc work that I choose to do is the kind that the preferred “double platinum, diamond, mctwist status appraisers” on an amc panel either cannot do or that the lender/amc absolutely knows that if they were to higher the mctwist decorated appraiser, they would eventually have to higher someone like me. This is where leverage plays a key role as an appraiser working in today’s environment.
The pressure from amcs for low fees has bled into the real world where the expectation is low fee……..I’m not interested and have looked elswhere for work (and have found it, real estate related). This has allowed me to better leverage the “who” I do work for as an appraiser. I’d advise others to do the same. My signature is not intended to come off as smug, it’s just reality. I reached a point of absolute disgust and decided that I’m “just not going to tolerate it anymore” and have survived; others are as well and others “can” if they apply themselves. It will not get better anytime soon as it is money that drives the train, in this and in just about any/everything. It motivated “my train” to switch tracks a bit so that I had a bit more control over the direction that I was heading.
All of the chatter about curing the problem has nothing to do with the problem as the problem “at hand” can be solved. BUT that would mean assuming risk’s that are now further “muddied” by a lenders use of an amc and losing a profit center. Neither of those are on the table and they are the only cure on the front end of this “cluster mess”.
Pay now or pay later comes to mind as does pennywise, pound foolish.
Signed,
An appraiser with an average fee for 10/2014 thus far (full time), residential side: $470 (yes, it is possible, just not possible with amc work).
-by Anonymous
As an appraiser of 52 years and an SRA, my major objection to AMC’s is not that they are good or bad, but the overall uncustomary and unreasonable fees they pay. Some pay C&R fees but most don’t. If the lenders use them to save setting up their own appraisal department, then they should be willing to pay their savings in the form of fees to the AMC and not by balancing their books on the back of appraisers. It is my impression that many of the major banks formed their own AMC’s as a profit center when the real culprit to this mess (Andrew Cuomo) started the suit for AIR. I will give an example. Landsafe (BofA) charges their customers $550 for the appraisal fee but pays the appraiser $305. Or, one local credit union had two persons in their appraisal ordering and review department and was paying the appraiser $400. Then they decided to go with an AMC. They still charge their customers $400 for the appraisal fee but the appraiser receives $300.
-The fact of the matter is that the appraisal profession is a losing business in today’s economic climate and that’s why we see many appraisers leaving the profession and no one coming in to take their place. Just ask yourself, would you obtain a 4 year degree, complete hundreds of hours of specialized education and 2,000 hours in training to have the opportunity to make almost minimum wage. The lenders are willing to pay what they perceive to be a customary and reasonable fee but what ends up on the appraisers pocket will place him on food stamps. There are numerous AMC’s that believe that C&R means $250 to $300. I was charging $300 in 1997.
It is for these reasons, I will not deal with AMC’s until they adhere to the Dodd-Frank Act of paying C&R fees to appraisers. Because appraisers are small in number, they don’t have a voice in the matter.
As proof of my allegations, I am attaching my actual operating expenses for last year as an example of why appraisers are a dying breed.
by endoftheroad
Yet more propaganda directed towards justifying the existence of AMC’s. AMC’s are just another appraisal control device and a parasitic burden to appraisers. There is no appraiser independence, “…Step out of line, the men come and take you away”
-by MKV
There are quality AMC’s…to the others I say this: I love the unilateral concern that appraisal quality is lacking….do you think it might have something to do with below market fees? Quality appraisers have plenty of work…there is no need to accept low fee (and increased scope of work) assignments from clients that need their hand held through the process and that treat every assignment as a rush order (since when did obtaining a mortgage become an emergency situation akin to heart surgery…stop calling at all hours of the night and weekends to place an appraisal order). Think about it…if you’re looking for an appraiser that is available immediately for an assignment, he/she is only available because there is no other work in the pipeline (hmm, why is it that an appraiser would have no work?). I, for one, don’t even have time to read through their 7 page (legal size) letters of engagement detailing client conditions and instructions. Again, if there is a need to provide that much instruction to the appraiser, it may speak to the quality of appraisers they’re attracting (also, is that a letter of engagement or a recipe for something other than an unbiased market value appraisal?). Truth be told…they’re getting what they’re willing to pay for…seasoned (and reasoned) appraisers simply don’t need it.
-by Terry Shannon
AMCs generally justify their existence claiming that they provide appraisers with their business. While true it is a straw man argument in that it assumes there would be no appraisal business in their absence. A world without AMCs would still require appraisals.
What it comes down to is that, IMO, there should be no such thing as a fee split. AMCs do not contribute to the production of an appraisal report. Appraisers perform all of the tasks and incur the liability in the completion and submission of their work. Virtually all of the services provided by AMCs accrue to the lender. If a lender chooses to employ the services of an AMC, that should be a totally separate transaction that should have no effect on an appraiser’s fee.
Secondly, I don’t know what world the writer lives in regarding AMC fees, but my experience with AMCs has been when asking for even $25 or $50 more for a particular assignment almost always results in not getting the order. Also, AMCs are now attempting to push back any gains appraisers have made in obtaining higher fees. A fellow from one of the more venerable AMCs called me a few weeks ago ostensibly to update my coverage area. Almost as a footnote he asked if I was firm in my fees suggesting that I should consider lowering them to be considered for future work. Another employee from the same AMC accused me of being greedy with my high fees. Really? Who is being greedy?
And last, it has also been my experience that AMCs virtually never take the appraiser’s side in revision requests. I receive revision requests which often includes the expectation that I am some kind of Svengali in my ability to make judgements about “the effect (this or that) has on the value or marketability of a property.” I have never experienced an AMC stepping in to say “Wait a minute. This request is unrealistic,” or anything else in my defense. They simply pass the requests along, without comment. Since AMCs rely on the lenders for their sustenance, it is rare indeed that they will advocate on the side of the appraiser.
-by Jim Smith
Excellent propaganda ….. nobody who understands the complete process will buy to these biased “details”.
-by David Miller
Interesting article, however an important topic of discussion was not covered, turn times. Regardless of the improvements in today’s technology,the time frame of a well written report exceeds the amc/ lender edict of 24 – 48 submission of report after inspection.
-by Debbie Biehl
Everyone wants to be a reviewer, or an underwriter. But the reality is; nobody wants to be a Fee appraiser for the little money they receive. I get calls from AMC’s, they call for turn time and fee. I never hear from them again. Its only a bidding war for a product that is over reviewed, by too many cooks that eventually spoil the broth.
-This is a money game only ! I go where I can get fees needed to stay in business.
This is no life for anyone. I do not even know how the people at the AMC’s can stand this business. Fast and Cheap, just like the junk restaurants. They stay in business, but their food is TOXIC. AMC’s are toxic for our profession. What is the purpose of giving an appraiser a good review? They can then steal more of our hard earned money.
“Bad Review” means less money for the appraiser. One report takes 12-18 hours to gather and type. If it is really a substance review, as the comps are crazy or fraudelent, then I can see a problem. Most of the Fraud is at the lender level as my last law class pointed out. Even Fannie Mae is finding out what a waste of time it is to be collecting all this data. Anyone see the new Collateral Evaluation product?
AMC’s operating Fast and Cheap, create the small errors by making someone fly through critical thinking exercises faster than they can type their name. The AMC’s have the order in their possession, up to two weeks before they can find someone to take it for nothing. At the end they pay more, micro manage appraisers and then beat them up because there are errors. You get what you pay for!!!
by Seymor@vision.com
Get to know the local office of your U.S. Attorney.Customary and reasonable fees
-are the law! They were written into Dodd-Frank (Federal Law). If appraisers reported the non-compliance of customary and reasonable fees to their US Attorney, $200 FNMA #1004s would stop.
by Richard
“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.”
You mean “why didn’t you bracket this and why didn’t you bracket that?” (like when your subject has an age of 50 and your comps have ages of 51, 53 and 55). Or, “please comment on impact of the highway” when the highway is 1/2 mile away. Or, “you have to place weight on at least one of the comps in your reconciliation,” when the adjusted value range is within 2%?
Is that the “rigorous” quality control that improves my product you are talking about?
-by Richard
Bottom line – $250 to do a UAD is outrageous. Appraisers accept the orders because they have to pay the rent/mortgage and put food on the table. In what is a perfect business to get your children into if they are quantitative and interested in real estate, no children are being asked to get into mom’s business or dad’s business because it would be cruel and unusual punishment. Appraiser’s don’t like to market? Maybe. But marketing is better than taking $250 fees. In fact, waiting tables is better than taking $250 fees.
-by Kevin in Florida
Unavoidable fact. All this time, effort and money still boils down to one painfully obvious conclusion; AMC’s are a broken business model; like ramming a round rod into a square hole. It just does not work! A bad idea from the start, entirely centered on the financial ruin of the best and brightest appraiser! Lenders are know licensed, at least in Florida, they now have a professional skin in the game. That is/was the fix.
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