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Editor’s Note: This story is taken from the new print edition of Working RE, which is mailing shortly. Below is a list of articles you’ll find included. Click here to guarantee delivery.
What Appraisers Can’t Do – From the Publisher
by David Brauner, Editor
Looking over the current issue it seems obvious what ails appraisers: the marketplace is not incentivizing quality work.
The system of appraisal orders by email blast used by some appraisal management companies (AMCs), as reported in Low Bid Appraisal Ordering (in upcoming issue), leads to lower quality appraisals. This is where orders go not to the best appraiser for the job but to the first one to accept it “at terms,” regardless of their qualifications.
This story illustrates the fast and cheap imperative that pervades the marketplace. This reality has chased many veteran appraisers from their livelihoods. They leave because they can’t do a thorough job on “compressed” fees and stay in business, and they’d rather walk away than cut corners. The result is that many quality appraisers have abandoned their life’s work in the last few years.
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Appraisers cannot make lenders demand high-quality appraisals. They can’t make AMCs search for the best instead of the cheapest, nor, for that matter, can they make regulators enforce the laws created to give them the protection to do an honest job.
Everyone says they want quality. Most appraisers feel it in their guts but the system is not rewarding the efforts of those who try to live up to the ideal. The system rewards the opposite. If the rules are made by the ones with the gold, then demand must come from the lenders. But lenders have to do more than give lip service to quality: they have to pay for it. There needs to be a system that rewards quality work with fair fees.
Lenders say they want quality but many turn a blind eye to the fast and cheap dynamic of the current marketplace. If you pay fairly, some veteran appraisers will return and new candidates will have some incentive to enter the profession, given all that is required. More supply will allow lenders/AMCs to nurture those appraisers who can produce quality work and weed out the ones who can’t.
To sum it up: if you stand behind the work of the vast majority of competent and stubbornly honest appraisers, and pay them fairly, in return you will get higher quality appraisal reports and more than enough choice recruits to keep the profession thriving for years to come. Unlike lenders, appraisers don’t need a bailout. To the contrary, all they need is to be paid fairly and left alone to do their jobs.
Working RE Fall 2013
Find these articles in the new edition of Working RE. OREP insureds enjoy the print magazine included with their member benefits.
- Lenders up to Old Tricks? Ex-Chief Appraiser Sues Stearns Lending
- Estimating External Obsolescence
- “Low Bid” Appraisal Ordering and Its Effect on Quality
- How to Find Success in Today’s Tough Market
- Appraiser Wins Judgment Against One-West Bank
- To Agents with Love (From Appraisers)
- Appraiser Independence Survey
- Home Inspector Sued by the Seller
- Should the Buyer’s Agent Attend the Home Inspections?
Click here to subscribe now. Subscription includes guarantee delivery of each print magazine, access to the Working RE Library online and discounts on webinars, continuing education and much more. Click to learn more.
Congratulations to the following appraisers who won a free Working RE paid subscription at the recent Appraisal Summit: Laurie Batterson, Dann Cann, Anthony S. Thompson, Douglas G. Winner and Gary Fenske.
We’re always listening: Send your story submission/idea to the Editor: dbrauner@orep.org.
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What Appraisers Can’t Do – From the Publisher
-by Jeff Pedersen
Great article. Looking forward to reading the “Low Bid Appraisal Ordering” article in the upcoming issue. For a while I’ve been angered by the predatory broadcast-order strategy of the worst AMCs. The worst AMCs use their trusted position as appraisal brokers to prey on desperate appraisers by skimming an unfair portion of the appraisal fee. The lender gets burned by the bad AMCs too: when the quality of the risk assessment that applies to the whole loan amount is reduced. Why increase the risk on $300k to save $300? That’s crazy.
-by Barry Noble
You hit the nail on the head. I just received order – offering $325 for assignment I would gladly and fairly do for $450. They are charging the client, “for the appraisal” $675. This is why the home owners and buyers think the appraisers are “greedy pigs”, not knowing what these AMCs are doing, that were created to protect the appraisers from undue influence of the lenders, and are just cash cows used by the lenders to harrass and influence the appraisers. A number of the bigger lenders have found ways to even own the AMCs, for better, hidden attempted Appraiser control. Yes, we’ve lost a lot of very good appraisers, but a few of us remain, and we fight tooth and nail for our Independence, Worth, Integrity and Ethics. But it is a painful, uphill battle, and we have NO CHAMPION, anywhere, anytime, anyhow to stand up and let us be heard.
-by Timothy P. McCabe
Lenders and AMC’s gain a false reassurance of quality by adding pages of stipulations to orders. While in a few instances stipulations may help, generally the good appraiser is already aware of issues and spends much more time writing addenda to explain why the stipulation does not apply (which inccidently and per USPAP technically requires revised assignment conditions from the Client unless the language of the conditions allows for deviation from the stipulation). Ironically, the appraiser’s focus turns to meeting and addressing stipulations rather solving the appraisal problem. And further, bad appraisers still have plenty of room to cut corners and miss value. At some point you would hope that the lending community recognizes that the solution is to simply hire good appraisers. Bank of America made a move in this direction a few years ago by holding events to meet appraisers. But even this seems tough, trying to judge the quality of an appraiser in one sitting. AMC’s need knowledgeable staff who can evaluate the quality of work and get to know, by name and location, the good appraisers in the marketplace and pay them appropriately. But this is contrary to what AMC’s do. They don’t know their appraisers, don’t recognize a good appraisal, rely on slightly-meaningful ranking systems and broadcast assigning and low fee schedule assigning. Quick and cheap appraisals that tell the lenders what they want to hear are the order of the day.
-by Dan Shoup
Lenders do not want quality appraisals. They want appraisals that satisfy underwriting. In most cases they do not keep the loans they make. Until that day they will have no incentive to be concerned with the quality of the appraisal beyond underwriting. Want lenders to hire good appraisers and pay for quality work? Make them keep their loans. Even then they will hire the appraisers who do quality work for the lowest price and in the least amount of time.
-by Gary Kristensen
I love the article. One area that I think is also being missed or could be expanded on is that quality work for lenders is often the work that gets the lowest rankings by AMCs and lenders. I’ve noticed that appraisers who point out issues with a property, get more requests for clarification, than appraisers who ignore or are blind to them. More requests for clarifications, means lower rankings and less work with many clients. Also, appraisers who do quality work will often have higher adjustments; because, they are actually adjusting for all of the factors. Even with extensive narration, those appraisers with larger adjustments will receive the most questions, even if they have a smaller range of indicators. http://www.AQualityAppraisal.com
-by lyn
Amen to everything said in this article.
-by Dodd & Associates, Inc.
This is a wonderfully written article and we agree with all that has been said. Zachary said it well, too. The AMCs are so intent on making their profit that the appraiser gets no compensation for completing a fair and honest appraisal. It is no wonder there are so few newcomers to the business, as it costs so much to keep up the continuing education and with gas prices, etc. the appraisers need to be compensated for all their hard work. Some make it seem like everything is so easy and all you have to do is push a button and do a little typing and you can produce a credible appraisal. That is never the case! Appraisers have to work hard and do a lot of research in their marketplaces to produce an honest appraisal. It can be very time consuming depending on the assignment. Bravo to those who are still out there and plugging away to make at living at this job! We here at Dodd & Associates, Inc. are continuing to struggle to make it all work and hope that there is light at the end of the tunnel for the future of reasonable fees and appraisers continuing in the profession.
-by George Hatch
Fees are a reflection of what the market will bear. Participants in the market drive the fees, one way or another. Oranges, gasoline, houses, appraisal services; it’s all the same. A market is a market even if the commodity is different.
What effectively passes for acceptable quality/content to intended users is also a reflection of what the market will bear. As with appraisers accepting fees, the lenders who are accepting these types of workproducts need to take some ownership of those decisions.
If credible is judged within the context of the intended use then on a practical basis there is no economic incentive for exceeding that point of diminishing returns. Indeed, it can be argued there’s not even any additional virtue to be claimed for exceeding expectations. If we’re going beyond for our own interests and to cover our own rear ends then we need to value that for what it is to us and reconcile ourselves that way.
People are withdrawing from the business because the money isn’t there. The money isn’t there because there are too many heads chasing too little work. This isn’t the first time this has happened in the appraisal business and it’s not even the first time it’s happened since licensing. Anyone who isn’t seeing that just isn’t paying attention.
The seeds for these struggles were sown back when some of our morons were adding trainees (and the productivity capacity for the profession) like there was no tomorrow – That’s who undermined our long term economic interests and handed the leverage for reducing fees to the lenders. And now they’re being advised to do it again under the guise of “the profession needs new blood to survive”.
Intelligent people are supposed to learn from their mistakes and not repeat them. They’re supposed to engage in some critical thinking of their own, not take instructions from on high that’s counter to basic common sense. I would think appraisers of all people would recognize the benefits of coming off of autopilot and doing their own thinking.
The market for appraisal services is responding to the realities of the supply and demand for services, just as any other market responds. Blaming it all on the lenders is not only foolish and incorrect, it’s also counterproductive. If our cheese has been moved, it was us who moved it.
-by Zackery A Powell
This article sums up exactly how I have been feeling about the way things are going . Particularly in respect to the companies that are selecting appraisers by the lowest bid approach, which seems like it should be illegal . This appears to be diectly correlated to lower quality appraisals being produced , and extremely counter productive to the recent push for for a fair and typical fee . If I bid $300 for an assignment, somebody will definitely be bidding $290 to get the job, and then $280, and so on until it gets so low that only someone willing to cut corners (data entry, quality control, etc) and turn out the most appraisals in the least amount of time can survive from the fees. This has been bugging me for awhile now and am glad to hear someone else echo this sentiment.
-Thanks for the article ,
Zackery A Powell