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Editor’s Note: You may be interested to hear what (at least one) Appraisal Management Company (AMC) thinks about the effect of low-bid appraisal ordering on quality, the topic of last issue’s News Edition (Low Bid Appraisal Ordering and Its Effect on Quality). Appraiser George Mann posted the following comments to his blog. Given all that we hear about the overall low quality of appraisals, his response and rational for “low bid” ordering might surprise you.
“Low Bid” Appraisal – AMC Rebuttal
by George R. Mann, CRE, FRICS, MAI
December 9, 2013 – Post No. 34 – Some of you may have seen a recent article by Isaac Peck, Associate Editor of Working RE. His article was titled Low Bid Appraisal Ordering and Its Effect on Quality.
This is a well-written article and obviously presented some factual situations. However, as a review appraiser for almost 22 years, I feel obliged to present the other side of the coin. I have overseen the order and review of about 15,000 appraisal reports over the years. Whether I was an employee of a bank or acting as their Agent, I was/am essentially an AMC. We do the same thing whether we are employees or hired companies/contractors.
Some facts based on what I have seen over the past two decades:
1. Around 90% of appraisal assignments are awarded to the low bidder.
2. The vast majority of assignments, whether awarded to the low bidder or not, are acceptable.
Therefore, awarding to the low bidder should not adversely affect the quality of appraisals over the long run.
All of the good appraisers out there need to realize that almost every assignment they have won is because they were the low bidder! I doubt they would say their work product was inferior for all of those assignments.
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Let me provide some actual numbers from the past few months of awarding assignments in a specific market for a specific client. Amazingly, all of these appraisals have been reviewed and accepted without any significant revisions. All of them were awarded to the low bidders.
In October, we awarded 31 appraisals with fees totaling $77,600. If we had the philosophy that all low bids would result in poor quality appraisals and we went with the second lowest bids (who is to say all of them would result in better products?), the fees would have totaled $99,900! What kind of service would we be providing to our client (or employer) if we had them (or really the borrowers) pay $22,300 more for these appraisals that had no assurance of being any better than the low bid reports? That would be the kind of service that would drive you out of business (or fired, if an employee).
I once told an appraiser that we were concerned about engaging him because his fees were so much lower than others in the market. He retorted, quite strongly, as to what right I had to opine about how much money he thought his time was worth! Also, he said there are a lot of bad $5,000 (commercial) appraisal reports out there. You get what you pay for certainly doesn’t hold true in the appraisal arena.
While there is a lot of concern about AMCs saving $50 and getting a poor report that might be off by $50,000 on a house appraisal, this pales in comparison to the errors on the high end. We once had to lower a $500 million appraisal to $400 million. Just because the fee was $50,000 didn’t mean the report was good. How many erroneous residential appraisals are needed to get to this $100 million error for one assignment?
KC Conway, CRE, published a report a few years ago that showed that appraisals on average were in error by about 20% (my personal data over the years shows an average of 22%-23%, albeit my data isn’t a scientific study like Mr. Conway’s). These appraisals probably had fees ranging from around $5,000 to $50,000. There is no guaranty of quality as fees go higher.
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One common question I have been asked over the years was why do we go with low bids? There is a logic to this. If we have grouped a set of appraisers that we know are equal in competency, then the major decision maker becomes fee (and time in some situations). As with the 31 appraisals I mentioned above. We know all of the appraisers in this market. We know which appraisers are say Level A or Level B (we don’t go down to the Level C or lower quality appraisers). So when we have them bid we know the competency is about equal and the likelihood of approving their reports is very high. Where is the logic in not going with the low bid?
There will always be those situations like Mr. Peck encountered. Every industry probably has something similar. But, what about the 60% or 70% or 80% or 90% of all appraisals that are done right and selected because they were the low bid. Not enough stories are written about those.
Postscript: Mann owned and operated his own AMC for five years (Collateral Evaluation Services), selling his interest this year. He currently runs the AMC operation for Situs.com. He handles mostly commercial work but orders residential appraisals occasionally and says he finds no difference in the results between commercial and residential. “Even if we ordered mostly residential appraisals say, for a bank’s mortgage company, we would all (commercial AMCs) operate the same way. First, derive a list of quality appraisers. Second, bid to them and the low bid would win 90%+ of the time. And 95%+ of the appraisals would be acceptable on first review. But I get to select only the good appraisers. That is 95 percent of the battle,” Mann says. “As I have told appraisers for a decade or more, you can fire your clients. I have had many tell me later that that was the best advice they ever got.”
About the Author
George Mann is a member of the Counselors of Real Estate (CRE). During his 27-year career, he has been a fee appraiser, assessor, and reviewer. Mr. Mann has overseen the review of 15,000+ commercial appraisals across the USA and in eight foreign countries. His weekly blog can be viewed here.
AMCs, appraisers and other interested parties, please post your experiences below.
We’re always listening: Send your story submission/idea to the Editor: dbrauner@orep.org.
by art gaudette
Remember that Como of New York caused the HVCC. He is the guy who thought up the one half baked solution called– AMC,s.. Think about it, there is a good chance that he may run for president in maybe- 2016 or 2020. We need stupid folks like him to run our country, just like the present stupid folks who are running your nation.. People like— Janet Thepolitation, Harry Greed, Nancy Baloney,, Yaa! for the USA,,, its over folks
-by Mark
George,
-Personally, I don’t think you or your staff are qualified to review anything I appraise. I work mostly high end residential. What experience do you have in the hills of Malibu or Beverly Hills. How long did you work in those markets to understand their nuances. I thought reviewers needed experience and competency in the markets they work-otherwise, you guys are just glorified box checkers. Your reviews are basically worthless.
by George Mann
Roy and Donna,
-Not sure why someone with designations should be in the fee world any more than any other job. Although proud of my accomplishments, I have always said that I am the same person with or without the initials. I have had a successful career and would have had such without the initials. My reputation is not my initials. I got into this career to do different things and continue to learn. I was a fee appraiser my first 5 years. I did eminent domain work (every appraiser should have to do this and learn how to support everything they do in an appraisal!). I was an assessor. I became a bank reviewer in 1992 and worked my way up to Chief Appraiser at two $100 Billion banks. That is the top of that career path. I had never had my own company so I found a partner and for the last 5 years we started an AMC from scratch and after the first year we doubled revenue every year without any marketing – all client referrals came from our fee appraisers. My personal goal is to review worldwide and work to change the way we appraise in America and a few other major projects over the next 15-20 years (if I am lucky enough to be around that long). I have thus joined a large, international company that can help me achieve my goals and I can help them with their planned growth in my arena. I can say I make a lot more today than I did 25 years ago. As a normal career should go, I have continued to earn more as the years go on. It took a lot of sacrifice and hard work and sticking to my ethics to keep along that path. I won’t say I am making the ‘big bucks’ and not sure any more that is all life is about. I am part of the ‘Me Generation,’ but as many people told me when I was young, I would one day get older and find that money isn’t everything. But, no complaints here from an industry that treated me well. Starting about 10 years ago I decided to start giving back to the industry by teaching and writing. I believe our industry is ‘broke’ because we have simply followed sale prices up and down for 80 years and erroneously called that market value. We never controlled our industry and still don’t. If something is that broke, I believe a total change is needed. My thinking is outside the box as it must be and I am trying to figure out how this industry would be created from scratch today. Whining about how we got here and what is wrong today to me is a waste of time. Actively proposing changes and arranging to make them come to fruition is my goal. It certainly will not turn out 100% the way I envision. But, I do hope in the end the American appraisal industry can gain the respect that foreign surveyors (aka appraisers) enjoy. It may not be perfect around the world, but many foreign surveyors look at me baffled when I ask them about clients pressuring them for values, etc. They say we provide the appraisal and our value is simply accepted. Ah, what a wonderful day that will be when we get that in America. Long-winded answer to what I do think is a bit of a personal question, but hope that gives you some insight to the World of Mann:) The insults thrown around these blogs baffle me. To me the idea is to discuss topics openly. Agree to disagree. But, try to move things forward. Happy New Year to all.
by Brad Bassi
Mr. Mann I find the low bid comments by you and all the others as interesting. I am a certified residential appraiser, so I don’t deal in your world of commercial. My one concern over low bid appraisals on the residential side, is I see people accepting work for assignments that are at $250 or under. I even saw appraisers accepting assignments at $150. Now my background is business and I do understand the cost of doing business. I am not angry at anyone for accepting a job at some fee they feel is acceptable, my only concern is that I know what my cost of doing business entails. Between health insurance, premiums, EO insurance, fuel costs, marketing costs, fees to upload reports, car payments, form fees, cost of data, course class fees, the fun of spending $95 on a USPAP book, license fees, and all the other costs, if I accept business at $250 or less then I make little to no profit. My concern is that these appraisers who accept this type of work, tells me that either they are desperate for work ( and seem to think that if they take on business at a loss that they can make it up in volume) or they don’t understand the cost of doing business. This craziness of forcing appraisers to accept residential work for complex properties at or below $300 is bad for business, and eventually bad for the lender / AMC. The low fees are forced down on to the appraisal industry as the AMC is trying to cover their costs and stay in business, so they beat the heck out of the lowly appraiser. It appears they are forced into this position by the banks/lenders who know their cost of doing business. Course with recent examples of AMC’s going out of business and leaving the appraisers out in the cold, tells me that those AMC’s didn’t understand their costs either. Our industry is in trouble and I see one of the issues as not understanding your cost of doing business and having to deal with the 800 lb gorilla like Chase, B of A and Wells Fargo. What I believe happens, is appraisers who accept low paying jobs means they have to do more work in order to breakeven or pay the “rent”. This leads to less review of their own work, no confirmation calls to re agents, and a quick grab 3 comps and move on to the next assignment. Maybe they get the market value right maybe they don’t, but they also miss all the things they should be reporting to the lender as their eyes and ears in the field. I find this troubling, maybe you don’t or maybe you think the appraisers who are out there taking low bids all the time are in fact doing all the things that are required to complete your appraisal assignments, but based on what I see in my world, there is a large gap between the amount of effort and work that goes into completing an appraisal assignment and what they are being paid, eventually this will be a bigger issue. Good luck with your business venture and I wish you a successful 2014.
-by George Mann
David,
-Awesome post and it sounds like you are the Level A appraiser I turn to all of the time. I agree totally re the new generation of appraisers. And their weakness has been exposed in the past 5 years when their have been major Highest & Best Issues to consider. It is amazing how few understand functional and external (for several years EVERY property in the country and probably the world suffered from external obs.) obsolescence, what to do with above-market rents, as you mention too few physically measure the subject property, too few verify sales (I have long joked my tombstone will say ‘A Sale Is NOT A Sale Until It Is Verified!’), et al. As I had one appraiser tell me recently, we don’t have time to measure a property or verify sales or such! Really? And of course that is one appraiser I will remember to never use:)
by George Mann
Jack,
-Amen. Also, when they (and this is mostly commercial) stop bidding on an assignment based on the last assignment they bid on and lost. They bid $2000 for a small property and lose. So a similar property comes up and they bid $1900. How many attorneys do you think lower their $500 hourly rate to $475 because some potential client didn’t hire them? I’d say none. A professional charges a professional fee. So many people are worried about a shortage of appraisers in the future. Geez, is this not the ideal time to raise fees when demand is still the same but supply is at all-time lows? I hope the next (smaller) generation of appraisers learn to bid totally different from the past generation.
by George Mann
Robert,
-I do pay the appraiser his/her market rate ($400 in your example). I get paid less than the appraiser to do the review. Like the appraiser, I get paid nothing extra for dealing with corrections and revisions. We both have the same client and get paid when they pay us. I don’t see the difference in us. When I get hired by a client to order and review for them they get multiple bids from companies that provide this service. Why shouldn’t they get multiple bids from appraisers? Not that it should matter on this board, but a proud Democrat who loves Obamacare! That should get a few more childish insults on here:)
by George Mann
Mike,
-Not that I think designations have anything to do with this discussion, but I am an SRA and got that before my MAI. I have ordered and reviewed residential appraisals my entire 22+ years of reviewing. Most of the residential appraisals we typically get on the commercial side of a bank are for rental houses, model homes, and vacation homes. Done on the typical URAR though and reviewed accordingly. So, although, my residential experience is less than my commercial experience, I have seen enough residential appraisals, ordered enough at market rates (I have never set a fee or asked in advanced for a set fee schedule), to know a fair bit about such appraisals. But, no I never reviewed 35 appraisals per day like you! Wow, I feel for you re that volume. My staff has generally averaged 6-8 per day over the past 5-10 years. As for the bank studies from BofA and Citi (and no I do not have these with me after all of these years…albeit I think someone else did a similar study in the past 5 years that I read about somewhere) saying 95% of the appraisals they got came in at the sale price or higher, that is not me demeaning the industry. I simply raise what I think is a valid question – If I know the answer to a question for free 95% of the time, why would I pay $400 to get that answer? Again, simple economics. If I had to order 1,000,000 appraisals, and I could save the cost of 950,000 appraisals at $400 each, why wouldn’t I do that? Why wouldn’t I take all of that money and insure myself against the risk of the 50,000 appraisals that should be statistically ‘wrong’ (maybe just low is a better word)? That to me is why the pressure has been put on the residential arena over the past 20 years. I have not seen this occur in the commercial arena. My experience is rarely do commercial appraisals come in at the contract price. It seems that commercial appraisers will do anything they can to not conclude at the contract price. The perception is they are just hitting a number that was provided to them. Again, just sharing real-world experience. Not judging any participants in this. Sharing experiences like you lived thru at that insurance company is what is needed for us all to have important information and figure out how to improve things going forward.
by George Mann
Mike,
-We didn’t order the $500MM appraisal. Another bank had and we simply got to review it…and lower it. It was a firm I would never use, but…
My experience is when we get to make the approved appraisers list, 90%+ of the reports are acceptable…yes credible. To USPAP, FIRREA, and bank specific requirements. Any fee appraiser who has done work for a bank I have been at will surely tell you I have the most onerous appraisal requirements in the country. So the quality of appraisal has to be very high. We aren’t accepted junk…marginal….etc.
When we do not dictate the approved appraiser’s list, our experience is over 50% of the appraisals have significant issues that affect value (for several clients I have seen 100% of the appraisals be unacceptable!). This is what happens when you start to allow Level C appraisers to do work for you.
The concept of the value error percentage is a different issue and the article I mentioned explain there technique well. The projects I have worked on would need explaining that would probably warrant an article, also.
by Mike Ford
Thank you for clarifying your “vast majority of appraisals are acceptable” comments.
I too would prefer a return to the days when I had to meet a banks specific printed appraisal requirements, after having undergone a thorough vetting process. It eliminates confusion as to what the required scope is. They know what they want, and I know what they expect. IF I accept their work at any fee, I at least know the full extent of the trade off I am making in terms of compensated time.
PRIOR to HVCC, some of the best clients I ever worked for were B of A (Trust Department); FNMA (Direct from FNMA’s own Asset Management staff), even Chase, Citi, Wells Fargo, F&M, NFCU and many more. I even remember when WAMU had a respected in house appraisal department, and Countrywide was actually having higher end work reviewed by qualified reviewers.
The problem is that after Cuomo’s phony HVCC settlement, relationships I spent 27 years building, were eliminated over night. AMCs initially drove fees down to the ridiculous, and when forced to pay lip service to “reasonable and customary” fees and turn times, made token increases to raise them to where they were 20 years ago.
I just declined to do the few low fee sfrs and reviews I planned to do for an AMC, when they told me that in addition to accepting periodic low fee work, I would have had to also stipulate in writing that those fees and 1 to 2 day maximum, turn times were also “reasonable and customary”. THAT is coercion!
While I’d like to do a few SFRs to even out cash flow each month; as soon as I declined that ridiculous AMCs unreasonable turn times, I received six new commercial orders.
-I continue to respectfully disagree re low fees. I will still be in business long after many of those low baller, short cutting appraisers have been forced to surrender their licenses.
by George Mann
Divedude,
-I have always avoided the term AMC in what I do, but state laws classify us as such. A few reasons AMCs exist, just fyi:
1. Small banks cannot afford to hire professional licensed appraisers – sometimes they simply do not have the volume of appraisals to justify a full-time job.
2. People like me who don’t operate like the vast majority of residential AMCs, provide a lot of value-added services to banks. We interpret FIRREA and Dodd-Frank for them. Will meet with them at properties to discuss out workout options. Will help them with data when they are trying to make a decision. We are essentially their appraisal department but just aren’t employees.
Banks have long outsourced many functions – loan review, legal counsel, on and on. So doing this with a cost-only function like an appraisal department is not unusual.
Over the years I have found two different philosophies in banks – 1) They prefer to have everything internal so they can control it, or 2) They prefer to keep their employee count low and outsource everything they can. The same bank can change philosophies when senior management changes.
I have never seen the benefit of an AMC just being an order-taker (like a stock broker). But, then again, many AMCs do not have the experience my staff has had with being Regional Managers or Chief Appraisers at community and national banks. So, they cannot help with legal interpretations, etc. That is their choice on running their business and many clients want their basic level of services.
by George Mann
Sandra,
-Before you throw accusations around you should check the facts yourself. I probably have not reviewed the most appraisals in the country, but am up there with those that have. I have certainly wrote and taught more about appraisal review and what clients want from appraisers than anyone else in the country. I know the appraisal, review, and banking industries and regulations as well as anyone. Doesn’t make me right 100% of the time. But, I don’t speak from lack of knowledge and experience. Appraisal fees have gone down ever since I got in the industry in 1986. Well, let me say commercial appraisal fees have. I recall when I started residential fees in Florida were in the $150-$200 range and have gone up steadily to the $350-$400 I now see in most markets (albeit I am buying a house and I love that the bank is charging me $500 for the appraisal but when they sent me the appraisal it had a $400 invoice on it! Classic…). No, I am not saying residential appraisers are getting paid enough or too much. Just the numbers I have experienced in real life. I recall getting paid $10,000 to appraise hotels in the 1980s that I now pay $4000 for. Of course, so much is on the internet now versus having to go to the courthouse and make a million calls and such back then that took so much time.
by George Mann
Tom,
-I 100% agree that the AMC model should be Cost plus. For all of the other commenters who throw accusations around that I (or others) are getting kickbacks or paid this or that, I am totally opposed to any of that. For the 15,000+ appraisals I have overseen the ordering of for the past 22+ years, 100% of the time the appraiser has set the fee and got paid all of it. My staff either got paid a salary or a fee when I had my own company. Cost plus has always been my system. There are good clients and bad clients. My point in the article was mainly that. Don’t just say AMC and think bad. Maybe mostly bad – mainly in the residential arena. I can only hope appraisers would drift to the good clients and stop working for the bad clients. Just like I am sure appraisers wish clients would drift towards the good appraisers and stop using the bad appraisers.
by George Mann
I hear you Joshua, but not the case with the places I have been. We certainly use a very select group of good appraisers in each market. The poor quality appraisers cost us a lot of wasted time and thus we would lose money dealing with them. You don’t do this nationwide for 20+ years and talk with your peer licensed appraisal reviewers and not know who is good and bad. But, yes I agree a lot of AMCs without experienced appraisers as reviewers have no clue who is A or B or C.
-by George Mann
Yes Carolyn, I have gotten several bids from roofers when I put on a new roof a few years ago. Same for some landscape work. Same for a new A/C system. Same for auto and life insurance. Same for bank accounts. Yes, when I had my own company and we hired a CPA, an attorney, and a marketing company we got several bids and qualifications. Bidding or shopping for best price is likely the norm across the board in this country. For appraisers not to want to be part of a bidding system, why not? What makes us more special than all of the other industries that go thru a bidding process? Almost every commercial property ever built in this country has had several contractor bids and low bid usually was chosen. It would be nice to just quote a price and the market have to accept it. That isn’t America though, maybe Russia or some such country.
-by George Mann
Amen Dustin….As I have told students for a decade or more – You can fire a client! It’s a free world. Take charge of your business and career. Whining doesn’t help. Action does. In the RTC days there were certain companies that only went with the lowest bid in the market – we never even bid for them. Then there were others who really wanted a good appraisal so they knew what to do with the property. We worked for them as they did not go with the lowest bidder in a market and we did not have to bid against inferior appraisers. However, I am not ignorant enough to think that almost every assignment we were awarded we were the low bidder! We still did awesome work. It was our problem if we underbid – not the client’s!
-by George Mann
No Cara. Our reviewers all have 20-35+ years combined experience as appraisers and reviewers. We strive to get the best appraisals possible as we do not get any extra money to deal with revisions, corrections, more info from the appraiser, etc. Good appraisals save us time. Bad appraisals cost us money. Our incentive is to only hire the best appraisers. And we have never taken a $1 from any appraiser’s fee.
-by George Mann
Yes John Center, albeit I didn’t personally:) And to think the client who did went with the low bid. They should have went with the $75,000 bid I guess. I’ve reviewed some $1-$2 Billion plus properties so there are some high appraisal fees in this world. I would bet the appraisers who got those fees might still say they did not get paid enough!
-by George Mann
Thanks Erik for the adult reply. Why is it my fault when I engage EVERY appraisal at the market rate provided by appraisers? I use the best appraisers in each market (and yes I sure as hell know who is good and who is bad after all of these decades). I do not use the bad appraisers (or at least not after one bad encounter). So the market dictates the fee. What am I to do pay more for the heck of it? If you throw an extra $1000 at the car dealer when you buy a car or at a roofer when you get a new roof, good for you. But, I nor my employer are up for throwing extra money around without justification.
-by George Mann
Nah, I predicted The Great Depression II very well and lived thru it while working inside a bank. My point is that there are a lot bigger losses on the commercial side so some perspective is needed as to smaller residential losses. Not, that any of it should be occurring to the extreme it has during the past few downturns.
-by George Mann
Jeff,
You sum up what I tried to say a lot better than I did. Ann O’Rourke also has a well written comment below.
There is obviously a huge difference between commercial and residential AMCs. To clarify some false accusations in all of the comments:
1. Whether I worked at a bank or for a bank as an AMC, I have NEVER taken a dollar of the appraisal fee. EVERY assignment is awarded at market rates provided by what I (and my peer reviewers) would gladly contend are the best appraisers in every market.
-2. Me and my reviewers usually have 20-35+ years of combined appraisal and review experience. Many have at least one designation and are licensed in multiple states. We know quality as good as anyone in the country. Also, many staff reviewers perform evaluations and consult on internal issues, so they are usually active in appraising albeit not typically having to write the full narrative report for their employer.
3. My preference to work for a company (albeit the past 5 years I had my own company) is simply personal. I prefer to review and help appraisers improve their work and learn better what clients need. That is also why I have been teaching appraisal review for 10+ years and am likely the most prolific author on appraisal review and federal appraisal regulations in the country. Just trying to give back to the industry. As for why I left my company, I now have the opportunity to review internationally and needed a huge technology platform to do a few major things that hopefully will become public in 2014. My former company did just fine doubling revenue every year without any marketing at all – all client referrals came from good appraisers who wanted us to get into the banks that were using the low quality appraisers and not giving them work.
3. As for the appraisals of 2001-2008 – my campaign to ban the Sales Comparison Approach and my constant writing that sales prices do not reflect value say what I think of American appraisals. Those (and still today current appraisals) were simply Market Price Reports and not reflective of the true value of the underlying properties. However, until we totally change how we appraise in America, we must review the appraisals based on current sales, income expectations, supply & demand, et al. Us reviewers could not reject every appraisal in America right now (or back then) because we contend that current sale prices do not reflect market value. I will be working on changing how we appraise for the remainder of my career. That is a separate topic.
4. One commenter emailed me directly and may have summed up what I am trying to say in a much better way – Low Bid does not mean that the quality is bad, but LOWEST BID probably does. If I am bidding to the 3 best appraisers in a market and they bid $2000, $2250, and $3000, obviously the $2000 is going to be chosen at least 90% of the time (exceptions would be if the higher bidders provided info that would indicate to us they would do a better job because they have access to some unique information). Now a lot of AMCs may bid to ALL appraisers in a market and it is likely they could get this same job done for $1000 or $1500 or such. I have done the right thing by narrowing the group of appraisers who get to bid to the quality appraisers. I still pay the low fee. I just don’t pay the lowest fee available in the market because I don’t want to get a bad report – Reviewers do not get paid any extra to get reports revised! Early on in my review career I learned that the most effective way to do away with the bad appraisers was economically – do not use them! I have a lot of actual stats about fees and % of acceptable appraisals when you order from ‘all’ appraisers in a market versus ordering from a selected group of higher quality appraisers. I won’t go into all of that, but my statements come from actual data across the nation over 20+ years. No off the cuff made up generalizations.
Glad to see all of the comments. Good to hear from some others who order and review appraisals and also use the better appraisers and do not take any of the appraisal fee. Good clients exist. Bad clients exist. As I have had many appraisers come up to me and say their favorite quote of mine is “You can fire a client!” I did when I was a fee appraiser. I did when I ran an AMC (one client was 40% of our revenue, but they wanted us to use poor quality appraisers and we refused….that hurts when you lose 40% of your income instantly! But, we more than replaced that bad client with good clients and the staff was much happier). Take charge of your business and career!
by Robert Johnson
I doubt Mr. Mann, like the AMC he works for knows the concept of a fair and reasonable fee. A fair and reasonable fee was supposed to be part of the law that created a large AMC industry that had trouble even surviving in the free market before this law. It is now an industry which has quickly figured out how to increase profits and steal a larger portion of the appraiser’s fee by catering to bottom feeders. This is also the same industry that our trade magazines have no problem profiting from by selling them ad space while telling us now bad things are in the appraisal industry due to AMCs.
However I do agree with Mr. Mann that the quality of the reports produced by these bottom feeders is probably not lacking since ALL appraisers must comply with USPAP and ALL appraisers must fork out big money for E&O insurance in order to get business. E&O insurance that will be dropped the first time a claim is made against an appraiser who has decided to cut corners because of low fees and ridiculous demands. At that point the appraiser becomes virtually uninsurable and is forced out of the industry. Couple that with the threat of fines, suspension, and possible loss of license it’s not hard to believe the quality of the report is not lacking due to lower fees. You can bet the AMCs and Mr. Mann are fully aware of that.
Essentially what Mr. Mann is pointing out is that appraisers are willingly engaging in a practice that is akin to committing slow suicide by enabling the very AMCs who force them to compete with the lowest common denominators within their industry. He obviously has no problem with standing by and watching this suicide as long as their reports meet a certain minimum standard and he is not forced to compete on the same level for his paycheck. Hence the reason an appraiser with his credentials is critiquing the rest of us from the sidelines.
-by G. Matson
In 1980 when I began appraising I would say $250 was a likely fee for an appraiser on a home in the $ 1-$ 400,000, roughly. 33 years later I’m still expected to appreciate a $250 fee for a home in the $1 to $500,000+ range, roughly. Of course that’s IF I get the appraisal that is blasted out to (how many appraisers?), with no way of knowing unless I sit in front of my email program all day.
Let’s see, I just read that a mortgage broker on a $200,000 loan makes roughly ½ the origination fee or $1,000. A real estate broker on a $200,000 home he sells, though the fees vary, reasonably ½ of the 7% commission of $14,000 or $7,000 to the Broker.
What does that tell me? Well after 33 years of Residential Real Estate Appraising. I’m expected to work for the same fee I earned as a trainee without any longer being able to secure my own clients….
On and on, ad nauseum! We all know all the other hits this career taken.
I wish to thank first the Big Bankers and the Politicians who support them, the Greedy Mortgage Brokers and Real Estate Sales Professionals who all conspired to rid the world of Independent Real Estate Appraisers who couldn’t be greedy if they tried.
Mark my words, every time these folks have taken it to the public because of their greed like the Saving and Loans debacle around 1991 and the money grab around 2005 then blame it on the fee appraiser, it will happen again. They won’t be happy until they have run every Independent Appraiser out of business and have complete control of the process themselves. It almost happened this time but surly will break the back of Capitalisms in this country the next time. With any luck I won’t see it, I only fear for my son, my grandchildren and my great grandson? Yours too.
For sure I am no mental giant, I never expected to make a lot of money, I only wanted to make an honest living on my own without being under some entity’s thumb and be able to work in my “Golden Years” having earned the right to do so. That arbitrarily has been taken away.
Sour Grapes? You Bet! This is my swan song. It breaks my heart to throw in the towel and admit defeat but I can no longer sustain the losses. My country has let me down, 4 generations of military in my family to support what? A busted system where all the greedy reign supreme!
So after lasting 33 years I toss it in, I quit. Bankrupt and broke I now join the ranks of most of the other experienced appraisers I’ve known andthe un or under employed, go on social security and take what handouts the powers that be will pay for in the few years I have left.
So long and thanks for all the fish!
-by Roy@Centenal.com
Mr Mann (the author of this article) I ditto Donna when she says “with all the initials after your name” why do you have an office job with a management company? Why aren’t you out there making the “big bucks”? You owned a management company at the height of AMCs. Why did you sell it?
-by David
Can one really survive on $350 per credible appraisal? After medical insurance, retirement, vacation and other benefits one could get in a normal company job, I calculate $750 per basic valuation to cover costs. Now if we get rid of the dufus AMC and their 50% cut, we could survive. At national meeting I hear that residential appraisers in some areas accept $300 and $,500 to $2,000 for commercial work. In southern California I would be on welfare and what are others getting per hour for litigation work and appraisals around the country??
-by Mike Weinert
The average fee for the 31 appraisals is $2500, obviously these are commercial appraisals. Low bid residential appraisal are completly different, often rushed, substituting volume for quality.
-This is not really a valid comparison.
by David
Right on the money Cara
-by Mike Ford
“Let me provide some actual numbers from the past few months of awarding assignments …”
‘Awarding’ assignments pretty much says it all, doesn’t it? From 1986 onward, I worked very hard establishing a good reputation with Banks, S&Ls, FNMA itself, RTC, Nations largest FCU where I used to work, and a variety of hard money lenders. I devoted over 20 years to that effort until with the stroke of a pen it was all undone overnight by HVCC.
I used to respond to inquiries by phone (GOOD clients always called) from all. When work was slow, I could contact them. In all cases my fees were about 10% higher than most of my competition ad the clients had NO PROBLEM paying that higher fee because they knew the service quality level they would get would be exceptional. We could honestly negotiate fees over the phone with legitimate back and forth in the process based on the needs of the client and my anticipated work as an appraiser. The people that ordered the appraisal were often chief appraisers (complex property) or knowledgeable clerical staff, based in the United States. At the end of the call, I knew whether I had the job or not. MANY times on jobs I did not get due to fees, I would get a call back one or two months down the road after the discount appraiser had demonstrated their lack of competency. I RARELY had to wait for a check as 95% of assignments fees were collected at the door, at the time of appraisal. Owners usually paid the fee. On commercial assignments where the fee was over $2500, Id take half up front with the balance due on notification of completion BUT PRIOR to delivery.
I don’t want clients that “award” assignments. I want clients that understand what they are ordering, and discuss their specific procedural and report requirements and the nuances of the property up front so that we are all acting in an informed manner.
Negotiated fees require appraisal knowledge on BOTH sides.
-by David
I really liked all of your thoughts and perceptions and obviously you have spent time and thought on being a professional. I agree that a 20% error is a joke. The big shops require appraisers to do 6 to 9 appraisals a month and send their troops to every county in the state. I am lucky to do one basic commercial appraisal in 9 days locally and I know every sale and rent comp in my market and update weekly. I have spent as much as two months on one appraisal with a support team. So many AMC bosses and employees have so little real field experience, that they are blind to the reality of the quality of the reports they receive. For 30 years I have been in the trenches as a field appraiser, working a smaller area, but knowing my specific market in every detail. Not a single time in 30 years did someone find in my reports an additional sale or rent comparable that was relevant and never once did I have a value change or cut. Not a single client lost a dime in the down-turn on my valuations. By doing the hard work and spending time on a report, real quality can be realized. As a side note, the biggest problem with the new generation of appraisers is that can’t discern the issues with a property they are appraising i.e. Curable physical issues, easement problems, lease issues, contamination and proper inspoections. A lot of mistakes happen because of proper non-diclosure of property problems.
-by David
Is medicocrity so prevelant in the Business that an AMC can no longer discern quality?The very best banks and AMC’s who know the local market very well, also know who are the top appraisers in that area. This is rare because most AMC players have little clue about the best appraisers and quality for a specific local area. I have been in the profession for 30 years as an MAI and SRA and do a lot of litigation work and high profile properties, and have worked for every type of lender. The real question – Is an AMC truly getting good quality regardless of the fee and can they discern the differences in quality? Out of say 50 appraisers in my area, there are eight good appraisers and all the rest are pure crap. There are so many mediocre appraisers, that the bar is now set so low, that a fair versus poor appraiser is hard to determine, thus is a few bucks worth hiring the fair appraiser. The quality of Appraisal Insititute classes is sometimes appalling and so are the on-line and other teaching insititutions fall very short. A huge percentage of appraisers now treat appraising as a business and few as a profession. Most do not care about spending quality time researching data and asking questions. I have met quality residential and commercial appraisers at conventions and meetings, and our fees are at the very top end of the market. Some of these professionals have now left the market for greener pastures because the clients do not get it, which further lowers the pool of good appraisers. I can see one point to the article. If 95% of the market is mediocre and below, why spend the extra money. I have fewer clients, but they are well educated as to what is the value to a very high quality appraisal. In California I have calculated that the simplest SFR valuation would need to be @ $750 to cover expenses and retirement. Complex needs to be $2,000 to $5,000 for SFR. In 1984 I was getting $400 for a tract home on a two page form and could make a living at gas pricing and housing in 1984. My minimum commercial for a very basic property is $4,000 and that is not enough to cover my expenses, thus I have moved to a litigation practice. I think the true professional appraiser is worth every top dollar he or she earns, but it is tough to fight against the 95% mediocre and poor appraisers who have never had a quality education or mentoring program to take themselves to the next level. If one can’t say no a lot to clients and find a quality client, there are better opportunities like working for an AMC or bank for a salary. Heads up AMC and lenders, many of your in-house people are also poor appraisers and mediocre employees who could not tell the difference from a quality professional to a fool appraiser with a business model. My advice to all of the hard working professionals..try and find the clioents who care and understand your quality and move into litigation work at an hourly rate. There are so many weak appraisers in litigation, that your quality will come out in court, and you can be paid a fair wage for winning a lot.
-by Donna@amqual.com
Mr. Mann: What’s a guy like you, with all your credentials, MAI, CRE, etc. doing working for an AMC? Why did you sell your AMC? Seems you talk with “fork-tongue”. A guy having all those initials at the end shouldn’t have an office job.
-by Fox News
Since most of the comments that I take exception to seem to be designates from you all know where let me concentrate my retort towards them.
I luv the Appraisal Institute and all of the self-appointed doyens of the Appraisal Industry they add a bit of color to an otherwise dreary profession. I have been in the biz for over 33 years and work both the residential and commercial sides of the street. Most of my career has been spent in litigation. I do not belong to any Appraisal Association so I do not have any point to make “on behave off”. To read some of the comments one would think that there are 2 Appraisal Professions….one consisting of the residential appraiser’s, the scorned criminal element of the profession….another consisting of the almost angelic commercial appraiser’s who exist totally above the fray free from corruption or incompetency.
Nothing could be further from the truth.
I have been on the opposing side in numerous trials/mediations from my designated Institute brothers and have also reviewed much off their work and have not found anything outstanding from most of these folk.
However, that being said, let me further clarify my position. I lived and practiced in Hawaii during the 90’s and sat on the appraisal board during the Hawaiian transition from leasehold to fee simple. During that time I worked with some brilliant designated appraiser’s, some of whom I still keep in touch with. But there were some equally gifted appraiser’s who, like myself, have never felt the need to belong to an association and have definitely not suffered because of it.
However, there are a core of Institute members who, like FOX NEWS, have a distorted view of reality. These folks can’t get enough of Institute Kool-Aid and I think a few of them, including the author of this retort, have penned their opinions concerning his article. The only difference between the residential and commercial side of the Appraisal Industry is exposure. Shortly after the S&L debacle the collective commercial community stuck their heads in the ground and have not stood up for anything – except to promote designations – since then. Was this a cowardly move….definitely…was it a good business decision…absolutely!!! Unfortunately the residential people not only stood up but have screamed holy hell for almost 20 years and it has caused them nothing but trouble ever since. Every piece of legislation supposedly enacted to rein in the lender’s has backfired every time. This ever increasing back breaking bureaucracy in one of the major reasons for the downfall of the Appraisal Profession.
I have seem endless examples of commercial “designated” work that was nothing less than a fairy tale done solely to appease the lender. Why is none of this work made public via the States Regulatory Boards?? Since 99.9% of the Boards members are Institute designates and since like, FOX NEWS and the BUFFALO BILLS, the Institute really knows how to “CIRCLE THE WAGONS” this silence is not surprising at all!!
In conclusion, there is equal corruption, incompetence and stealing of livelihoods via AMC’s on both sides the only difference is exposure.
Peace!!
-by Alfred@serpro.net
There isn’t an reviewer alive that can review the MC addendum.
-Why? Because you don’t know the comps I used! You don’t have the addresses.
My comp isn’t your comp! And climate change ( a bad winter) in the Northeast can cause a slow-down that will skew any 12 month trend. I had a review appraiser for an AMC in a CE class who asked the appraiser about how to review the MC addendum because she wanted to scold someone .All the appraisers with 20+ years experience bust out laughing.
asking the instructor how to review an MC
every 12 month trend.
by Mike Ford
Jim, not if you had to (1) buy five zone Costar Comp subscriptions for one county and then had to buy five more counties (used to be $2500 per zone-do the math).(2) provide a narrative report, (3) have it done in 7 days.
-by Mike Ford
John they paid $50K for a $500 MILLION appraisal and then the guy screwed up by $100 million (or so they claim)!
-by Mike Ford
ROTFLMAO! Thanks Dan, and Merry Christmas to you and yours
-by Mike Ford
Sandra, I agree re past relationships. Worst mistake GSEs did was to let Andrew Cuomo buffalo them into adopting HVCC just because he negotiated a settlement with WAMU and Countrywide.
In fairness, Mr. Mann is primarily a commercial appraiser and AMC (MAI, remember?). His experience and fees are completely different from what the typical residential appraiser faces every day. He DOES demean the validity of residential appraisers work-and that type of arrogance is not uncommon among some MAIs, but not all of them. Education is not his problem. Destroying his own industry is.
-by Mike Ford
Wildman-excellent comments. The truth is that banks don’t care about appraisal quality. Seriously. When they bundle loans that are in turn sold as securities, what do they care about accuracy as long as they can show that they dotted the i’s and crossed the t’s so that they don’t have to buy the loan back when it goes bad?
They have ALREADY forgotten the lessons of Countrywide/BofA and WAMU. Time to lay the foundation for the NEXT financial meltdown-just as they did after the S&L crisis. Remember when FIRREA was passed, they managed to get the 2nd TD drive by limits raised to $250,000 from $25,000 before the final version was even printed! They are doing the same thing now with UAD and 1004MCs. Ostensibly to provide uniformity-what they have really done is rendered the neighborhood analysis portion of residential appraisal reports to be meaningless. UAD is in the process of rendering the sales comparison meaningless now. MY UADs have 4 to 6 pages of text addendum explanations. MOST UAD reports I review have from one to NONE!
-by Mike Ford
Pat, MAIs making decent money don’t retire. Aside from the income there is the issue of ego. Most of us have it to some extent or we wouldn’t have stayed in this business after 2009.
-by Mike Ford
Robert, did you even READ the article? His LOW bids averaged over $2,000 +-. He is primarily a commercial AMC. Your political biases don’t add to the discourse.
-by Mike Ford
Chris, Commercial AMCs often charge up to 50% of the gross fee so it is a double whammy when they in turn bid low. In fairness, they also usually provide the multi county data services, that used to cost as much as $10,000 or $15,000 a year; and will also sometimes pull preliminary comparable rental, sales and land data for you. Are they hurting the fee appraiser? Definitely. Are they being parasitic? A little.
I’d rather a commercial AMC take 50% and do all my preliminary research, and give me the narrative templates and spreadsheets, than to take 50% hits on SFRs or 2-4 units. In FNMA loan limit ranges, I’m ok with the amc taking 10% of a $450 sfr URAR fee. What I do NOT accept is them taking $150 of it and thinking they will get a certified appraiser for $300.
-by Mike Ford
Well said Jeff. Oddly, I disagreed with Mr. Mann but found your explanation more credible since you were not injecting commercial findings into the residential arenas.
-by Mike Ford
Ron, good for you! bad appraisals NEED to be turned in. You and I know the difference between nit picking, and just plain bad work. It is the latter that needs to be turned in.
-by Mike Ford
Jerry, no doubt in many cases you are right. On the other hand it DOEs tie to fees in my opinion. A GOOD appraiser makes themselves competent. Taking the additional time to meet area agents; and study the community history, general plan, zoning plan and any current special plans or ordinances that may impact value and marketability is also a function of cost or fees. You can’t reasonably do that for most $300 to $400 assignments, so in those cases you are correct. Government employee appraisers on salary (quite generous salaries in fact) DO have the time to acquire local expertise.
-I agree with your thoughts on national AMCs though. They cannot possibly know who really had local competence and who does not. Frankly in most cases the AMC screening is more of a pretense; considerations are: 1. fee, 2. turn time, 3 ease of working with them, 4 ability to keep good reviews or prevail in review disputes. Local competence is by claim rather than demonstration.
by Mike Ford
Mr. Mann’s 90% “acceptable” rating does not jibe with my own experience; the FDIC experience with Countrywide and WAMU, or industry wide experience. “Acceptable” to most of us means the appraisal report is 100% USPAP compliant, since USPAP are the MINIMUM standards. It does not even jibe with his own ratios cited further within his article.
At the advent of USPAP (effectively 1991 in California since it took us that long to get our FIRREA 1989 mandated licensing implemented), the industry wide ‘norm’ was about 25% deficient appraisals. Value errors (as distinct from USPAP technical compliance) ranged from about 15% to 25%, where an error of 10% or more was evident. From 1991 through 1993 I desk reviewed a high volume of appraisals of from 25 to 40 a day; every day. When even those cursory reviews identified serial technical errors and value errors approaching 38%, I was DIRECTED by my large title company employer, NOT to reject more than 25% at all, and the ‘suggestion’ was that less than 25% would be ideal. MY standards were considered too high (merely USPAP and a pretty liberal leeway with respect to conceding all unresolved doubt in favor of the appraiser). I reviewed 8 in house appraisers and the work of dozens of outside fee appraisers. 75% of the work involved 704 drive-bys, which really were pretty hard to screw up.
I later became chief appraiser for a multi state appraisal firm doing huge volume for what is now THE lowest paying AMC in the country; with the most ridiculous current turn time requirements. Back in early 1993 they paid “reasonable” fees, and willingly accepted justified reasons for delayed reports. The ratio of ‘bad’ reports still ran about 25% from all sources of appraisers. Those that originated in house, I had corrected before they were every transmitted to the client, so its possible the client actually thought only 10% or so were bad (outside sources supplied by them, to me).
For awhile (circa 1995-2000) there appeared to be a conscious effort on the part of most appraisers to produce good, quality work. The deficient percentage MAY have dropped to 15%, though I personally don’t think so. I think ‘we’ were simply more broad minded as reviewers then.
In all of my fee & supervisory staff appraisal work since then; AND during my tenure as a Sr. Appraiser in the Treasury Department, I observed deficient appraisal percentages of from 25% to as high as 75% in post 2005 appraisal review work. That included SFRs from the $400,000 to tens of millions, and bulk commercial packages in the lower hundreds of millions of dollars.
Individual property sales of $500 million are quite rare. ANYONE that ordered that kind of an appraisal from an AMC was a damn fool! People, when you are risking half a billion dollars, do NOT delegate the selection of the appraiser to someone else. DO YOUR OWN HOMEWORK!!! (I have to wonder if that was one of Mr. Mann’s A or B list appraisers?)
During my entire 27 year full time appraisal career, I also observed that staff institutional appraisers concept of quality and USPAP compliance was almost non existent. S & L and Bank appraisers routinely claimed to do 3 or more full SFR appraisals per day; and many commercial appraisers claimed 4 days was their norm for a complete commercial appraisal reported in narrative format.
If most of Mr. Mann’s career was spent in the banking industry staff side, then it would not surprise me that he thinks 90% of all appraisals are “acceptable”, though what his metric is cannot possibly be full USPAP compliance. He indicates an extensive AMC background, but concedes residential work is only incidental to his commercial work.
For Mr. Mann to tell me that the work quality of the low fee and high fee appraisals shows no measurable difference in “acceptability” makes me question HIS credibility. I use credibility in the appraisal sense; “worthy of belief.”
Mr. Mann cites bulk fees that are clearly commercial appraisal rates. Talking about commercial fees in the same vein as residential fees is grossly misleading. Commercial work requires General Certified Appraisers who presumably have more than ‘average’ experience; though frankly I find as many bad AGs and ARs as I do regular licensed appraisers. Same applies to designations historically given a presumption of expertise.
He cites a $500,000,000 appraisal with a $100,000,000 error in order to minimize the importance of $50,000 residential errors. Carrying his logic to the extreme, why not just use Zillow then? After all, MOST of the errors might possibly be only $50,000…or so. Hardly worth troubling oneself over.
Am I the only one that noted he cites a commercial real estate source as reporting 20% commercial appraisals to be “in error”; and his own data suggests 22% to 23%, yet he claims 90% are “acceptable”?
EVERYTHING I learned in my career of appraising says a 20% value error rate is UNACCEPTABLE. I find the $500 million property appraisal cited that later proved to be only worth $400 million, to be UNACCEPTABLE. what’s amazing to me is that whoever “had to lower the appraisal” by a hundred million dollars, is even still in business! That must have been one hell of a lawsuit.
Just because AMCs no longer care about USPAP; and lenders certainly do not care as long as it still ‘slips by’ FNMA, it does not mean that those appraisals are “acceptable”. The overall quality of most work today is horrible compared to years past. Neighborhood market data “analysis” has become an exercise in automated form filling, rather than an actual meaningful analysis. The micro management inherent in the UAD format discourages appraisers from identifying ANY differences between comparable and the subject simply because ALL such differences have to be explained in addenda-even items that used to be self explanatory. The amount of time required to complete a UAD format, USPAP compliant URAR plus 1004MC where the AMC indicates “the client” also requires one active, plus one pending comparable in addition to 3 closed sales within 90 days optimistically takes one full 8 to 12 hour day-even if that ‘day’ is spread over 2 or 3 days while waiting for agent return phone calls.
The good appraisers will continue to provide good work , even if the fee is too low, once they agree to it. They are the exceptions. Sadly, the following is more and more common.
Many of the regular low fee AMC appraisers will continue to use relatives to go out to inspect the property; use pictures takers for 2055’s and ‘create’ appraisals from their desks; or have other licensed and unlicensed trainees do their field work. MAJOR National AMCS providing residential and commercial services will continue to routinely provide appraisals co signed by a supervisory appraiser who rarely sees the reports his name is stamped to. These same low fee appraisers will continue to report 1/2 bath adjustments at $2,500 and full baths at $5,000, with bedrooms at $10,000 and common rooms at from $5,000 to $10,000 ‘based on market data’ that no one seems to be able to replicate via paired sales OR through interviews with actual market participants (sellers and buyers). Some will continue to report paired sales, though they can never identify the sales used for the pairings.
No doubt their reports will also be seen as “acceptable” to AMCs and their clients…right up until FNAM requires loan buy backs due to bad appraisals.
FNMA points out ONE of the things their UAD system does is to identify appraisers completing inspections on three or more properties a day, every day, where distances between the properties make it unlikely they ever saw them. The fact they consider a need for this type of information suggests it is not all that rare of an event.
The feds will continue to waste (or lose) billions on meaningless micromanagement solutions, where in reality there are only two things they need to do:
(1) Insure 1-4 unit fees paid to the appraiser are never less than the VA schedule of fees, and;
(2) Insist that a full 10% of all SFR appraisals be field reviewed. Period. Not cross checked by Zillow; or AVM or appraiser assisted avms; nor desk reviewed; but full blown field reviews. Personally, I think the reviewed percentage for income property should be higher, and those fees should be commensurate with the original appraisal fees since the reviewer has to do a review AND new appraisal if he or she disagrees.
A third idea would be to prohibit AMCs from charging fees that are more than 10% of the appraisal fee; but even then, that fee should not come out of the appraisers end. Started under HVCC, it is now nothing more than a cheap way for banks to avoid having their own appraisal review and ordering departments anymore.
Lastly Mr. Mann cited 31 appraisals ordered at low bids of $2,503 on average; with second low bids that averaged $3,223. I think I now know who has been undercutting my commercial bids for the past three years (or at least helping to drive down the reasonable and customary fees) ! Just kidding-I already know which AMC is undercutting commercial fees affecting me out here……..Seems odd though that two separate national AMCs would be charging about the same low fees doesn’t it?
-by SteveJohnson
Hello. I work for a large AMC. Sometimes I feel bad for appraisers because I know how difficult they must have it. However, when I see my Xmas bonus and the enormous profits my Co. generates I quickly forget about “appraiser whining” (as my associate Erik Grosskopf and I refer and laugh about it around our office). Am I ashamed? No. I put myself in a favorable position. Appraisers typically aren’t too educated and don’t seem to mind “taking one for the team”.
-My AMC typically takes at least 50% of the Appraisal Fee. We are a large AMC and have a wide variety of assignment types. We do adjust fees for more complex, atypical assignments, but guess what? We make the borrower pay more money if appraisers request a Fee Increase (rarely, almost never, does it come from our side of the Fee Cut). Or, we simply re-assign a complex assignment to an unkowing appraiser willing to work for less. Our company employs a metric rating our Fee Appraisers on the amount of time from Assignment, to Report Submission. So when an Appraiser does request a Fee Increase their rating takes a hit, and they receive less work. We do this as a way to “persuade” our appraisers not to veer away from our established Fee Structure.
We basically are an option for newly licensed appraisers. Once an appraiser is ready to strike out on their own, my Co. actually offers a slight increase in fees by comparison to Split-Fee appraisal firms. How are AMCs any different then Split-Fee appraisal firms?
Think of we, the AMCs, as an evolved Split-Fee arrangement. Thanks to our hard working appraisers, we are making money hand over fist! When work slows down we simply pay appraisers LESS! The hungrier the appraiser, the more we NEED to make off each Appraisal Fee. We lay people off too! It’s necessary to increase our CUT of the Appraisal Fee in order to maintain our overhead. We have about seven floors in a High-Rise, downtown, phone room operators, Sales Team, I.T., et.
Sometimes I wonder why Appraisers don’t unionize, but then I remember reviewing Appraisers’ applications for employment (let’s just say the Appraisal Trade isn’t an educated bunch -at least until 2015).
I find it hilarious Co.’s like mine aren’t required to pay at least HALF of any loan gone bad. We have recently required our appraisers carry more E and O insurance, and we have appraisers champing at the bit to work for us! Maybe we (AMCs) should carry insurance just like appraisers. I’ve seen how my Co. can influence appraisers. My AMC influences appraisers every single day we open our doors! Not kidding. I’m amazed at how my AMC decreases any of our clients’ liability simply by suggesting an appraiser add a few sentences to their report, make an adjustment, et. Appraisers may not be too bright, but they are an obedient bunch. (no offense)
Our company has seen record profits over the last few years. Thank you Appraisers, b/c if it weren’t for you, I wouldn’t have received my handsome Xmas Bonus! My family thanks you b/c I’m taking them to Hawaii!
Although I sometimes, briefly, feel bad for appraisers I would never pay them more. In fact, our business plan includes an incremental decrease in fees for our appraisals as housing inventory dwindles and the refinance market dries. Think of our business any, as Darwinian, Capitalism at its finest. Survival of the fittest! We make extraordinary profits because we are one step ahead of Appraisers (and the yokels we hire to bother you via telephone).
Have a Blessed Holiday.
by Downward spiral
God I certainly hope this commet was a joke !!!!
-by Richard M. Hurtig
Nice try but let’s dispel with some of the nonsense:
First, the idea that always assigning work to the lowest bidder has no impact on quality is absurd. Regardless of the level of competency it’s a matter of simple economics. Prior to the AMC hijacking of our industry average fees for a residential assignment were about $300 – $350. Since May 2009, the major AMC’s racketeered appraisers by pushing fees as low as possible and got away with it because they have an unrestricted, unregulated monopoly over the supply of work. This enabled companies like LSI, Corelogic, Rels, Streetlinks and hundreds of others to extort appraisers for as low as $150. So if compensation went down by 30% to 50%, the only way to compensate for the loss in earnings was to take on more volume. The requirements for a URAR have tripled since, so it is three times the work for half the money and the fundamentals of field work, driving distances, etc. have not changed but rather demand more time. Competent or not, any appraiser who has to double his normal volume with triple workload will inevitably either be overwhelmed and make mistakes or inevitably cut corners to get it done. Not to mention the constant pressure exerted by AMC’s for faster turn times and pointless updates and “revisions”. The net result of low bidding extortion is either someone with dubious competency doing the work, or if they manage to get a qualified guy, he won’t really put that much thought and effort in producing the highest quality work he/she can simply because there is not enough time to do the job properly. Of course, the reality is that most experienced appraisers would rather go bag groceries at a supermarket than give away their work at these low fees.
As for the alleged $22,000 that would have cost the client if the AMC had gone with the second lowest bidder: That is a flat out LIE!!!. AMC’s have INCREASED the cost of appraisal products while LOWERING compensation to the appraisers who actually do the work. Consumers are being charged $450-$500 for appraisals that any honest appraiser would have charged $300-$350 (This may vary obviously, but I am using South Florida rates as an example.) Bottom line, it’s not the appraisers who would cost the consumer more money, it’s the AMC’s padding the fees and pocketing the difference, hiding that disclosure and giving the public the impression that it is the appraisers who are charging the full amount. AMC’s are not passing the “savings” from low bids to the consumer/client. They just charge the same and pocket the difference. Nice try at semantics, but we are all well aware of the AMC game.
As for the central point that seems to elude Mr. Mann: The AMC business model is fundamentally dishonest. You have been arbitrarily empowered to steal from the appraisers who actually do the work and the consumer who is unaware that you are pocketing a percentage of what he/she believes is paid to the appraisal professional. There is no reason why we the appraisers should pay for AMC’s operating costs and profits. If you cannot make enough profit to run your AMC that is not the appraiser’s problem, it is yours. AMC’s control the supply of work and because they are unregulated and appraisers have no power or representation, you are able to racketeer us to lower our fees. Prior to AMC’s being forced on our industry, when appraisers could compete openly in the market based on the quality of their work, few of us worked with AMC’s because it is a business model that makes absolutely no sense. Who in the world wants to work more for less money? AMC’s get away with this because they have been empowered by people who have little understanding or interest in the appraisal process or the consequences of bad valuation products.
Lastly, if Mr. Mann after being a “review appraiser of 22 years” believes that the vast majority of appraisals were “acceptable” perhaps he might want to take a refresher course on appraisal review processes. I wonder what on earth he was reviewing during the 2001-2007 period. Many of us have been in the industry just as long or longer than that and it is a daily occurrence that we see some of the most awful appraisals, most of which are completed by inexperienced appraisers willing to take the AMC’s lowball work. Of course, those bad appraisals were deemed “acceptable” by some AMC “reviewer”.
Nice try Mr. Mann. Unfortunately for you, words cannot obscure the facts. AMC’s are a dishonest business model and an unnecessary parasite in our industry. The rest is just bloviating and semantics.
-by Affan'Gul
It’s the exact opposite. They unscrupulous, shoddy and inexperienced rise to the top.
-by Rachel Massey
Mr. Mann states that price does not necessarily equal value and quality on the appraisal side. I do see his argument, but think where the logic fails is the sample.
For instance, I firmly believe that an appraiser who takes great pride in their work will do an excellent job, no matter what they negotiate for a fee. On the flip-side, an appraiser who does not care about the quality of their work product will not suddenly step up to the plate and pitch a perfect game just because they are being paid more. So, it could well be true that from the sample he has seen, there is no correlation between fee paid and quality; the appraisers who take tremendous pride in their work may simply never come up to bat.
If an appraiser takes great pride and care, chances are they value their time and energy to the point that they won’t work for a low fee, and never get tested in this type of lending environment.
Until a large cross section of appraisals are examined, including those of the cream of the crop, all that is being compared is the work of people who may simply not do the best work, regardless of fee paid.
-by Jack@service.com
Mr Mann, my neighbor needed the exterior of his house painted badly.
-He went with the LOWEST BIDDER. Guess what? The painter used the cheapest paint, never scraped properly, never edged properly and never cleaned up thoroughly. It looks liked the house never was painted. We haven’t stop laughing.
by Jerry Jeschke
I think the issue here is not the issue of low bidder but the issue of competency. I understand both sides of the argument and I would say that most of the time, my clients choose me from their list that they approved, get me to submit a bid then decide whether or not to select me or another bidder who may or may not have charged less (sometimes timing is more of a consideration than price). I think that appraiser’s problem with AMC’s is that they are pitting appraisers in a certain area who don’t necessarily need to leave their geographic area (and area where they are geographically competent) against geographically unqualified appraisers who are willing to charge less. To say that an AMC that services a wide area (like the entire United States or the entire midwest) is sufficiently familiar with each appraiser on their list to determine their geographic competency seems a bit far reaching. I am certain I could produce an appraisal report that would be convincing and completely incorrect in some area that I am not competent based on some minor market detail that I had no idea existed. Since the reviewer for the AMC that ordered the appraisal hired me, one would presume they would not be competent to review my appraisal resulting in a poor quality appraisal being deemed acceptable. Although I don’t really like the idea of an AMC (they unnecessarily complicate the appraisal process and don’t necessarily isolate the appraiser fromt the user of the report as congress anticipated), I don’t think they are the problem. Rather, my guess is that some appraisers that are not geographically competent are accepting assignments for which they are not qualified.
-by Ron N.
I would have to say, then a lot of reviewers are not doing their job. Perhaps some reviewers are employees of the lender or AMC. Folks have given me copies of some apprraisals for a Major lender, by their Staff appraisers or contracted appraisers. They were just horrible. Not little errors like many of us make once in a while. Page after page of errors. Sales numbers, Stats, MC report numbers, nothing matched. Comparables of the very very wrong style of homes, easily matched pairs for some adjustments yet the adjustments were not close at all, and more. And yes, they were so bad I turned them in. Work like that gives us all a bad name.
-by cew
my appraisers seem to over bit and they have less experience than I do
-by Carolyn@Call.com
I wonder if Mr. Mann asks for bids from his local doctors, dentists, lawyers and bartender before he gets a procedure?
-by Henry
Lately appraisers have offers with low bid fees, but I just curious, if AMC reduce their fees to the borrower? May be I am wrong to look into someone pocket, but they keep my portion. It makes me mad. This is most unfair situation when AMC charge the same I guess) and cut off the piece from appraisers, who needs to travel, keep the responsibility for 5 years, pays all expenses required by the business and do all work. AMC is just middleman without any responsibilities and ability to cut the pie. Why appraiser does not keep the pie and pay to AMC what they deserve?
-by S. Ever
Economics 101: Pure Price Competition.
-The original proposed Frank Dodd legislation was watered down by the all powerful banking lobby via the Federal Reserve (headed by nine member banks) with the willful intent of exposing our profession to economic forces that will cause an erosion of the quality of persons attracted to our profession. The intent is to make a human created product with all its inherent appraisal ordering inefficiencies interchangeable with AVM, thereby, optimizing returns to financial institutions. What is the clear lesson of the previous financial meltdown is that deliberately simplifying models of financial networks increases the risk to the system as a whole. Recognizing the importance of appraisal quality through uncorrupted regulation rather than riding the system of appraisers will increase long term financial stability to the overall economy.
Exposing Appraisers to a flood of AMC calls extracting the lowest possible fee by its very nature also reduces differentiation of valuations produced by the experienced professional appraiser vs. incompetent dishonest ones. Obviously the purchase of appraisal review products using the same pure pricing structure will only tend to further mask quality inadequacies.
AMC should not be allowed a business model dependent upon reducing appraisal fees and should rather charge only a set fee to be paid by the assigning lending institution. In that this obvious fix has not been implemented is proof of the disproportionate and corrupting influence the lenders have over their own industry. The author motivations and I suspect also his appraisal products are highly suspect in my opinion
by Divedude
By Mr Mann’s own admission, the vast majority of appraisals are acceptable. This to me minimizes the need for AMCs’ altogether. At a time when the industry is slowing down and the projected one third reduction in loan originations in 2014, it’s time to eliminate any non essenntial elements of the mortgage process like in any smart business. I’ve been appraising for 22 years and most of that without AMCs’. I dealt directly with lenders without the gap in communication and the screw job that AMCs’ present. If more consumers knew the dynamic of an AMC and what they could save without them in the mix, banks would be pressured to eliminate their use. It occurs to me that the first lender that announces the elimnation of AMCs’ from their loan transactions would emerge as the good guy.
-by Clear Thinker
The supply of appraisers is dwindling as we speak. There is no new blood coming in. Unless you are in danger of having your lights and power turned off this week, do not accept ridiculous fees; counteroffer at every opportunity; politely decline and ask to reassign if it does not meet reasonable and customary. Cherry pick borderline acceptable fees if it is a 1,200 foot townhome two miles away with limitless comps. Appraisers are slowly gaining the upper-hand as this field empties from age and attrition, but that leverage is no good unless you hold yourself to a higher standard. Ask for complex appraisal increases. If you are any good, you will get them more times than not. Big deal if you don’t. If we individually make our own stands it will pay off for all of us in the long run. The bottom feeders will always be out there, sure, but let them work themselves to death for a pittance if they choose. We can’t save everyone but we can make it collectively better for the rest of us by having a little more backbone as to our own value.
-by Jim Zerbi
Mr. Mann has been reviewing appraisals for 22 years. The majority of reports he reviewed he found acceptable. So…perhaps Mr. Mann finding so many of these reports acceptable significantly contributed to financial melt down of 2007-2008. He apparently did not find any of those reports done 2000 to 2008 troubling as they appeared to be inflating value? If this is true, then just how good a judge of appraisals is he?
-by Mike Ford
Jim, in fairness he is a commercial appraiser and on top of that a business entrepreneur in the business of selling management services. I doubt he has done very many FNMA loan limit residential appraisal reviews at all. I’d be more concerned about his estimating 90% ‘acceptable’ but then concurring that 20% to 23% have ‘errors’ (undefined). The inference was that the results were in error-not minor technical errors. He is just what he appears to be in my opinion; a highly capable communicator, fighting for HIS business just as appraisers fight for theirs. BTW-MAIs don’t usually make the best residential appraisers.
-by Jeff Shillings/Haginas & Shillings
As the owner of a commercial appraisal ordering and review firm similar to Mr. Mann’s – we have provided this service for 15+ years and have ordered ten’s of thousands of commercial appraisals – his article makes perfect sense, and takes the words right out of my mouth. This applies to the commercial arena only. What you have to understand is that bids are solicited on a job-by-job basis and targeted towards, say, 6 or 8 firms of comparable capabilities, and all being qualified for the assignment. The fee generated is the best bid on that day, and it is whatever price the market will bear. We have zero influence on the bid amounts. The over-arching consideration is quality first and only qualified firms are on the bid list. We do not have an “open” appraisal panel or a rotation for assignments, so the quality issue is dealt with at that point of the process. Poor quality or service providers are not on the list to begin with!
The ruinous practice that many of you are dealing with are “open” panels (exclusively residential AMC’s) where you simply sign up and get into the rotation at a predetermined fee. For those that are being forced to compete with substandard appraisers at controlled, lowball fees, I sympathize with you. You have to realize the perspective from the commercial side is a completely different animal.
And for what it’s worth, our review staff are all designated appraisers who have spent considerable time in the trenches. No “administrators” looking to check boxes. There is a right way and a wrong way to go about this business, and the residential AMC’s are on the wrong side and legislation may change it, but it won’t fix it!
Jeff Shillings, MAI
-Haginas & Shillings
Houston, Texas
by Matthew Johnson
I definitely understand what Mr. Mann means by using the lowest bid from the qualified appraisal pool. I understand that the group of appraisers for a specific area, or appraisal type, have already been through a screening process and are considered competent. I also understand that paying more isn’t always getting better quality. My only concern through all of this is: Please define a “good” appraisal and “poor” appraisal. Is the appraisal defined by if it was accepted through the secondary market guidelines, AMC guidelines (which in some cases contradict the secondary market’s “recommended” guidelines), etc.? Or by the content in the report? A good report may fall outside of guidelines, which would require additional narrative and possibly an additional review appraisal; but a bad report could glide through the process, if it “met” the criteria. The only way to check on a potential bad report, at that point, would be to wait until the home transfers again, has a refinance, or goes into foreclosure.
As for the price of the appraisal, it is best to check around (as you would with any profession). Compare the overall prices in the immediate area, and compare the knowledge the appraiser shows for what you need. The hardest thing for a potential client, is knowing who to have public trust in. I find that good appraisers will make the time to explain and communicate with the client, and not treat the reports as a “production line”. Bad appraisers tend to avoid clients, because they may have been fraudulent, or ignorant to what they were doing.
We all make, or have made, spelling errors and an occasional embarrassing “clone-over” error (we are human!); but when it comes down to determining if an error is fraudulent or ignorance, we run into a very grey area. Most of the time, there are no checks or balances with fraud or ignorance because it might not be something on the surface. Not only that, but most appraisal reviews through GSE’s are done on copies of reports presented in black and white, along with a drive-by of the property. The scope of work for the review is limited and the full interior/exterior inspection could tell a substantially different story. It’s similar to explaining the valuation process between an appraiser and an assessor. Both are usually correct in their valuing process, but their scope is different based on the information they have available.
The bottom line seems to be a matter of the basics of USPAP. Finding an appraiser that the public trusts and is of good moral character seems like such a joke when you first heard it during the qualifying education years. But when you look at it years later, you really see how true the requirement is. There is no doubt in my mind, that there are older competent appraisers out there that have left the profession because of where it is heading. I also believe that in the future we will have a very important decision to make as a profession. As more and more appraisers leave the profession and the “Baby Boomer” generation retires, there will be an enormous gaping hole in the profession. With this enormous gap, comes an enormous demand that won’t be filled. With all of the subjective and objective blurs, timing concerns, and overall fees being an issue (along with increasing credentials needed to be in the profession, especially starting in 2015), will there be a huge transition in the profession? I would think fees are the least of our concerns. My biggest fear is: Will the appraisal profession survive, after the loss of the “Baby Boomer” generation to retirement??
Kudos to both articles and good opinions both ways! Overall, I have to agree with the original argument, since there is limited accountability in place. This definitely favors fraud and bad appraisers. They key is again: please define “bad” and “good”.
-by Clear Thinker
Appraisers too busy with full fee work. Appraisers disgusted by low fee bids. Trainees with nothing to do. A get what you pay for world. Hmmm. AMCs willing to prosper in ignorant bliss? Hey, I am just speculating.
-by chris
Funny, there is no mention of how this guy supports a low fee around $200.00 or less and then rapes the homeowner for up to $800.00 for a residential appraisal. I have been questioned more than once by homeowners wanting to know why I am charging so much. You cannot justify this kind of fee for your services. What has the AMC provided for that kind of money if the end product is solely based on our appraisals.
-What a jack ass.
by Pat Bange, SRA
I also remember when this AMC thing started, your comment was that it would “weed out all the bad appraisers”. In the residential world that has not necessarily been the case. Just like people that have spent years on education do not work for minimum wage, they don’t work for less than they made 15 years ago, but have the ability to leave for greener pastures or if necessary hang on a short time and retire. That leaves the other group.
-by Pat Bange, SRA
H!! I knew who was writing this article even before I got to the author’s name. You and I have gone around before and it’s my opinion you are a threat to the appraisal and lending industry. Isn’t it about time for you to retire?
-by Stephen Meyer
That article has nothing to do with the reality of residential appraising and AMC’s. The author is clearly delusional.
-by Robert Conners
Your article does not make any sense at all. You should not even be allowed to write for this magazine. Just pay the appraiser the standard fee of $400.00. No more bidding. You are probably a Republican. Someone who just cares about himself. (selfish)
-by Armando Ortiz
This is the voice of the typical arrogant bureaucrat. He sees nothing but good in squeezing every last drop of utility out of appraisers, that to him and his ilk are nothing more than a particularly bothersome commodity. He speaks for the corporate user of the work that we produce, who feels zero empathy for the producer. They have no compunction whatsoever about squeezing appraisers to the point of ruin. Until we unionize and turn their production bottleneck against them and to turn it to our own benefit, we will continue to be exploited. It is shameful. Make no mistake appraiser, this debate is not about competence, it is not about the economic benefit to the consumer, it is about POWER pure and simple. The corporate clients have the power, and they use it remorselessly against our noble profession. Stand up and Unionize. it is the only answer.
-by Wildman 77
left out this pargraph:
BS that all this is. For residential work you pay for what you get. Its not about the low bids. It should also include the quick turn times requested. With the additional work requested (scope creep) our fees and work model for residential appraisers are not in line with inflation. While we eliminated some costs we have added many others. AMC are a mistake a fabric from the largest banks that bankroll them. Time with tell. You cannot drive between 75 to 200 miles on assignments and get paid $200 to $300. $350 is not enough. Just do your balance sheet and you will see that. When its all said and done my kid makes more money at Wendy’s and thats not a joke. Its sad. If all of you appraisers hear this. Its time to say no to low fees. We need to strike and walk away for one week and let the system back up. If not enough one month. Our numbers are getting lower as we pass time. I know I cannot afford to train anyone. With the new rules I cannot tell any college graduate to seek a career in our field. This job offer no rewards rewards. You are good until the next appraisal just like it was with mortgage borkers. Go to your doctor and ask him to lower his fee or perhaps get the lowest bid. Frankenstein is now born. Did you ever got to the doctor or lab and get stuck with a fee even though you made a copayment. I have and has high as $3,000. Hopitalization works in reverse. We cannot. USPAP prevents this. The writer of this article is thinking big business after all why did he sell his interest in the company. He is motiviated and biased to say what he says. We as appraisers were independent. We were small business going on with life feeding our families.
One more note an appraisal is the “most probable price”. I think everyone forgets this. We cannot predict what a buyer does with EXACTNESS or certaInty. SUPPLY AND DEMAND THE MARKETPLACE. NO TWO PROPERTIES ARE EXACTLY ALIKE. Things change with time. Some quicker some slower. The data collected is flawed especially for older homes. Flawed in that mls data is corrupted. Public data is also corrupted but yet we use it and rely on it. I challenge anyone out there to dispute this. An appraisal should be based on a range of values and stastically speaking “most probable price”. Paired analysis is not a perfect science. Its guess work. What they teach in books cannot be proven in any conventional appraisal assignment I have seen by me or others I have reviewed. So get your cheap appraisers. Time will tell who is right and wrong. For anyone reading this quote me for “I told you so”. My wife hates me for it. for the cheap appraiser who is killing our industry you will get yours in time so enjoy it while you can. All others please strike. Lets shut down the banking industry. Remember we have no benefits and now low fees what other incentive do you want
-by Ann O'Rourke
Mann’s article does not apply to residential AMCs. There is a huge difference between residential and commercial appraisal lender work. I have done both. When ordering commercial appraisals for a bank you have a small, selected list of appraisers you know and usually have used before. When you are paying $2,500 and up you want to know who is getting the assignment. Reviews are done by appraisers, not software or unlicensed persons. Residential used to be like this before AMCs and is still like this for local lenders. National AMCs do not have this. It is not possible. The gap between residential and commercial appraisal is widening. I recently spoke at an appraisal workshop about this topic. Commercial appraisers are considered professionals. Residential are considered all the same and definitely not professionals. I call it a chasm, disconnect, widening gap, etc. Another unintended consequence of licensing.
-by Joe Heron
Mr. Vann, my take on your claim of reviewing some 15,000 appraisals during your career, is that, perhaps you ought to try doing some appraisals. Your problem is lack of experience. The way I read your column is that you are more an advocate for the lender and a ‘let’s get the cheapest appraiser’ kind of guy. Your report, claiming that appraisals are off on average by 20-23 percent sounds about right for commercial appraisals, and I believe your claim that 90% of “low bid” appraisals are acceptable. That doesn’t mean they are credible.
This is the way that I see the cheap AMC working. In the first place if an appraiser doesn’t comply with the AMC fee, established by some bogus survey, then forget about getting any work from that company. I wonder how a class action suit would turn out against a charge of price fixing by some of the largest AMC’s in the land. It seems kind of convenient that many of them have the same pay structure, and the same rules of punishment for those that don’t cooperate. The independent fee appraiser is forced to accept or go out of business. Getting back to the 90% acceptable rate, I surmise that this is supposed to justify paying demeaning fees to appraisers. You need to get out from behind the desk and go on the road to do some appraisals and see just how much time and effort a good appraiser will put into a single report.
Among the mix of low fee appraisers on your roster, I’m sure there are some with years of experience. The problem for you is that these are the very appraisers that know how to cut corners, in such a manner that you would never know the shortcuts they take. They know how to make the report “acceptable”. You force the appraiser into this modus operando with degrading fees. I’ve been appraising for 25 years. I’ve seen many highly experienced appraisers, bright individuals, with all kinds of credentials. The problem with some of them is that they fall flat on their face when it comes time to get out of the office and do the road work then put the appraisal together in a coherent way. They’re great at doing a review pointing out all the things that are wrong with someone else’s report. Another part of the equation in your 90% acceptable rate is the meager fee you pay appraisers for review work. Do you really think that you are getting a first class, top grade, credible desk review for $75-$90? This report only becomes acceptable so that the deal gets made. It passes muster because the appraiser can’t possible spend the proper time necessary to do a good quality thorough job at $10/ hour. IMO, the whole review process is flawed. It is set up to make the deal fly while you sit there insulting appraisers with low wages. The free market is not free in the appraisal business because of attitudes like yours and the rest of the cheap AMC’s. You all have the low-ball fees going your way for now but it is not going to last much longer. Appraisers are beginning to figure it out.
-by Sabu
Wow, is this article a joke? Otherwise, it is a propaganda bit full of deception and lies.
1. The author used the word “acceptable”. Yes, these appraisals meet the basic QC requirements for the bank to pawn the loan off onto the taxpayer (sell to Fannie Mae). My experience in doing field reviews says that a lot of the reports would not be acceptable if they underwent a real appraisal review, nor would they stand up in a court of law. I’ll tell you one thing, there are no portfolio lenders in American sending out appraisals to the lowest bidder.
2. The author implies that the difference between the lowest accepted bid and the next bid might be $50. The reality is that they are broadcasting orders at $200 or more below the customary fee, and these are being snatched up immediately by the worst quality bottom feeding appraisers.
3. The author argues that paying more for an appraisal does not ensure better quality. Nobody is asking the AMCs to pay more for appraisals, they are asking that they assign the order to the most qualified appraiser! The inconvenient truth is that the most qualified appraiser is going to demand a reasonable fee for their work.
4. Now we come to the biggest, filthiest lie of them all. That these AMCs are saving their clients money. The cost to the end user has skyrocketed since HVCC. The AMC is charging the borrower or lender the customary fee plus a management fee, regardless. Any money they might save during the bidding process goes straight into their pockets. Even more scandalous when you consider that many of these AMCs are owned by the lender.
Just another example of the GREED in the financial industry putting the hurt on the average American.
-by Wildman 77
Things change with time. Some quicker some slower. The data collected is flawed especially for older homes. Flawed in that mls data is corrupted. Public data is also corrupted but yet we use it and rely on it. I challenge anyone out there to dispute this. An appraisal should be based on a range of values and stastically speaking “most probable price”. Paired analysis is not a perfect science. Its guess work. What they teach in books cannot be proven in any conventional appraisal assignment I have seen by me or others I have reviewed. So get your cheap appraisers. Time will tell who is right and wrong. For anyone reading this quote me for “I told you so”. My wife hates me for it. for the cheap appraiser who is killing our industry you will get yours in time so enjoy it while you can. All others please strike. Lets shut down the banking industry. Remember we have no benefits and now low fees what other incentive do you want.
-by Sandra Fowler
This is one of the most arrogant columns I have ever read. This doesn’t even sound like anyone that knows what they are even talking about. I have been appraising since 1989 and let me tell you buddy I and I alone built the business I had through building good relationships because of my ethics, my ability to write an appraisal being truthful in the appraisal and write an appraisal that can pass underwriting guidelines by including all necessary remarks, I had good turn times and my loan officers liked me and I was paid what I wanted they asked me what I wanted not the other way around and I was getting 450 to 650 a job. until your government made laws that took my life work away from me and now I get what they send me, when they send it and they pay from 125 to 250 per job. Go back and study some more before you try to write an article on something you know nothing about.
-by ScottyK
Totally “Ironic”. There is a 100% correlation between low bidders and quality of work. The automated bidders from blasts have $6 hour cubicle monkeys clicking buttons, accepting work and then send typically provisional appraiser to inspect properties, followed up by form fillers in office, signed off by a hack appraiser. This process is perfect set up for an appraisal mill shop (Bucket Shops). Forget about properly identifying property specifics and detail scope of work to accurately bid an assignment to do a credible report. The logic that was so typical on Wall Street mortgage backed trading groups, ( IBGYBG ) I’ll Be Gone, You’ll Be Gone!!!! , can be applied to the same idiots accepting work in this manner. They are picking “Pennies Up in Front of a Steam Roller”
-For the past ten years I have specialized in complex estate properties typically over $2 Million in Tri-state area including Manhattan. I laugh at any appraiser who entertains doing work with AMC’s or a client under such conditions. This is not a Master -Servant relationship, this is a customer client relationship, in which the customer is hopefully reducing risk. Banks are learning this fast, no longer can risk be kicked down the road and be insulated from huge losses. They best wise up and invest in boots on the ground by spending more time and money touching and feeling the assets they lend on in these very troubled markets. My clients and good institutions know this and are quite happy to have detailed discussions on property complexity and associated fees. The investment side is also wising up to this. It knows to have a viable mortgage back security market in future, it must improve QC by employing qualified individuals.
As far as Mr. Mann is concerned not sure what type bank/AMC he worked for in his reported years of experience or the degrees of complexity for said appraisals that support his claims on “Low Bidders” being equal. It seems clear his reviewers were as ignorant as original appraisers, because it is clear his low fee appraiser aren’t going to be around for long. I strongly suggest he view state appraisal rolls and annual increase in enforcement claims against appraisers. But I sure would love to know where I could find all the properties associated with the low fee appraisals he claims and write a massive short credit default swap on all of them. It would be like fishing for turds in a portable toilet, wouldn’t be a matter if I would catch any, it would be the ultimate amazement and satisfaction how quickly I had caught enough.
by Lee
I love the words used: won and awarded. How about we stop accepting your “prizes” and see how long your business model survives. This is all we would have to do, not one appraiser accepts an AMC order for one month, they would all be out of business. We need to take our businesses back.
-by William
I have been in the business for 14 years and at the beginning of my trainee period, our lowest fee was $300. At that time gas was below $1 a gallon, lower MLS fees, E&O, etc. Mr. Mann comments on lower fees not necessarily mean inferior quality of the appraisal report. While there may be an exception to the rule, I find it hard to believe an appraiser putting in the time for an accurate report. I am a certified residential appraiser and I do know that there are AMC’s that charge $600 or more to the lender, who in turn charge the borrower and the AMC is only willing to pay the appraiser $250. (I had a borrower upset that I could not provide them with a copy of the report and was told “I paid $650, I should get a copy!” My fee was $400) AMC are in this for a profit, but that should not be on the backs of the borrower and/or appraiser. If all low bid appraisers would start charging what they are worth and take the time to develop a credible report, this would not be an issue. I highly doubt that Mr. Mann would work for these lower fees, and as an appraiser, should be ashamed for expecting anybody else to do so. As stated in his article, he has been a review appraiser for almost 22 years. To me, this implies that he has not been in the field in that time and is unaware of the issues at hand. Furthermore, I would assume that as a review appraiser, he has not the geographical competency nor tools (MLS, market, etc.) to deduce that the reports that he is reviewing are quality reports or not.
-by Jack Kemper
Appraisers will overcome this situation only when there is agreement amongst them not to work for any given AMC that is low-balling their appraisal fees.
-by Steven S
I agree with Janet W. I have 20+ years as a Certified/FHA approved appraiser. I have received 3 AMC assignments in the past 4 months, I am approved with most every bank in the country. I have renewed my Certified License, took continuing education that took me away from other duties, renewed my costly software(all very expensive items to renew each year) and now my E & O insurance renewal is due. I am broke, after 20 years in this industry, bitter and sad. I have borrowed more then my share from family & friends I cant pay back. I loved what I did for years helping people solve their lending issues with an appraisal of the property, now am sick at what has transpired in the past few years with HVCC & then the Dodd-Frank act wiping out all my hard work and loyal clients. While trying to reform the system, they rewarded the ones who know nothing and have hurt the ones who know the most. When I solicited brokers for clients for years, I averaged 8-10 assignments per week and was very busy, contributed to charities, salaries, taxes and society. I used to have an office with 6 appraisers and two staff. I created jobs and taxes. Recession cost me my office, staff, my home I had put $90,000 down payment on, my credit, my wife and my dignity. Even my bank took away my overdraft that was so needed to make ends meet as the recession took hold. I am now on the verge of losing my small apartment of which I have my appraisal office in a room, driving a 9 yr old car with 300,000 miles on it(cant afford a new or used one, don’t have credit anymore to get a used one). I am about to end my 20+ year career as a professional, Certified RE Appraiser. How many countless others are exiting this once proud profession without training the next generation of Appraisers. I am told the education requirements, the testing requirements and the time to apprentice are so ridiculous, no one in their right mind would get into this downhill spiral of a profession, it is soon to go extinct. Then who will be the banks watchdogs for lending? Their own in house appraisers cant be unbiased. They work for the bank. If the numbers don’t agree, rework them until they do, the BANK needs the business of loaning to make profits for their shareholders. All the decline of Mortgage Brokers, Appraisers etc will have a domino effect on lending, banks, ancillary services such as builders, developers, window installers, roofers, painters, flooring & plumbers, electrical & handymen. As the money dries up, so do the jobs, so do the ability to pay taxes, to buy food, to buy commodities that drive the economy. Welfare state being created by mindless politics. So as the housing market goes, so goes the economy, prices rise as fewer people can afford to pay for other then necessities and the domino effect continues to make welfare more common further putting the recovery in peril. The Dodd-Frank act may have created more transparency, yet is eroding the whole system, causing unemployment, welfare & tax base erosion. Its sad but true, too much gov’t interaction is causing more pain, loss and detriment to the economy. Exit stage right, watch out banking system, all **** is about to hit the fan.
-by James Eric
“as a review appraiser for almost 22 years, I have overseen the order and review of about 15,000 appraisal reports whether I was an employee of a bank or acting as their Agent, I was/am essentially an AMC.” Essentially an AMC ? HUH ? Review appraisers are considered AMC’s ? This is a joke as is much the remaining editorial penned by a commercial appraiser.
-by John
This rebuttal about choosing the low bidder is relating only to commercial assignments that this person orders while the original artical is speaking strictly of residential appraisers. As has been mentioned, the average fee for a commercial assignment they ordered during the month was about $2,500 so there is some wiggle room for lower bids that still allow the appraiser to do a good job and make money. For residential appraisals the margin is much thinner. Going with the low bidder on a residential appraisal probably saves the client $50 to $100 compared to saving a commercial client $500 to $1000 on a typical appraisal. I agree if they are choosing from a list of competant commercial appraisers there is no reason to not go with a lower bid. Most residential appraisers are not forced to bid on assignments like they are commercial so his entire premise that all of our work is because we are the low bidder does not apply in residential. And while there is no guarantee higher fees result in better appraisals, it is almost 100% guaranteed that lower fees will result in inferior work because appraisers will be forced to work faster, cut corners, and make mistakes.
-by Mark
Yes….. but because of those low fees I’m getting out of the business! How is that good for the appraisal industry? Pretty soon the fees will be twice as high with the good appraisers getting out of the business. More appraisers are leaving the business than getting into the business
-by James Johnson II
ABSOLUTELY FLAWED LOGIC! The best and brightest Appraisers do not even CONSIDER bidding on these assignments, which eliminate them totally from the equation. Do the math from the article, these are $250 appraisal assignments. Prior to HVCC the industry established a competitive rate to functionally run a business at $325-$400. Now, as described above, its $250. All this has done is driven the Appraiser into his home and cut staff to accommodate the 30% +/- reduction in revenue. The best Appraisers that should be taking on new trainees no longer have the resources nor the time due to the current events. The proliferation of these AMC Appraiser Assassins is like watering down the gas in an engine; eventually the whole operation will cease to function. They are parasites KILLING the host!
-by Michael Shank
The AMC’s that I am aware of charge a set fee to the lender. Using a low bid appraiser for residential properties makes the AMC more money. This doesn’t save the Lender or consumer any money. AMC’s make their decisions based on profit to them, not quality to the industry. Shame on the misleading idea that AMC’s exist to benefit either the consumer or lender.
-by Tom
The big issue with this article isn’t related to the statements made, which many have addressed in their comments.
The big issue with the article is it proceeds under the assumption that an AMC is able to distinguish between a quality report and an average report, or that an AMC is capable of developing a set of metrics that distinguishes an “A grade” appraiser from a “B grade” or a “C grade”. I do believe there are some good actors out in the AMC reviewer space, but experience tells that the majority are not good reviewers and are simply applying an automated rules set or comparing an appraisal to a set of client guidelines rather than making a real and substantive judgment or assessment of the quality of a report. It is a fallacy to think that they can and do this consistently well. The primary motivation of an AMC who does not operate under a cost plus model is minimizing appraiser fees, so long as it can be done in such a way that the client is unable to discern the impact.
-by Jim
31 Appraisals with fees totaling $77,600 or $2,503 per appraisal? I’d love to work for those low fee every day!!!!!
-by Janet W
So, good for the AMC’s, how about the appraisers? The cost of doing an appraisal keeps going up and up, however the fee for a report keeps going down and down. How is an appraiser suppose to survive with such low fees that do not even cover their costs, and does not support any kind of live style as we are not making enough per report to cover all our costs? My mother was one of the 1st women appraiser’s in the business, she passed away a few years ago almost broke due to the ever increasing costs for software, support, and office supplies, etc. Sad way to end a lifetime of appraising with nothing to show for it !!! I am leaving the business, this is my last year. I cannot afford to become a Certified Appraiser due to the low fees and higher costs of classes, testing, and licensing. Sad for the business and for people who are looking for experienced appraisers.
-by Brian Palm
While this article is a nice rebuttal to the original article, it is off point. The original article was talking about price impacting the quality of work on commercial appraisals and yes all things being equal price will end up being the determining factor in business. The issue with low price impacting quality resides on the residential side. Where the AMC’s look at no other factor than price and when price is the only factor being looked at quality goes out the door.
-by sdw
Although I appreciate Mr. Mann’s article, there are a couple of points that stick out which I would like to address. The first is that Mr. Mann is strictly addressing commercial appraisals which require appraisers with a general certification. While there may be some incompetent general appraisers (I don’t personally know any), they have to have reached a higher level of competence in order to receive that qualification. While it’s true that a higher level of competency is needed to perform commercial appraisals, it’s also true that general appraisers (on the whole) have a better grasp on appraisal principles and procedures than a “wet behind the ears” residential appraiser who has just been handed his license. The second issue I’d like to address is the fee structure. The higher fee structure of a commercial appraisal allows a higher margin to be built-in. A $50,000 fee can be padded much easier than a $200 residential fee. This also allows one to lower their fee and still be profitable. Which do you think has more margin built-in to its sale price; a Ferrari or a Ford Escort?
-by Ron Styles
Just because George Mann says it’s true does not make it true. Low fees are the major cause of inferior appraisals. I think the old saying “you get what you pay for” applies in the appraisal ordering process. If an appraiser accepts low fees for an assignment it’s make sense that he will have to cut corners in order to make a profit. AMC”s are offering fees that are well below what I was charging 10 years ago. While technology makes it possible to increase production the fees associated with being an appraiser have increase significantly including dues, software cost, E & O insurance and the list goes on. Are there bad appraiser and appraisals out there no matter what the fee? Sure they are but they are the exception rather than the rule. As an appraiser with over 25 years in the real estate and appraisal industry, I could not disagree more with his opinions.
-by Matt Evans
The opinions of Mr. Mann seem to be somewhat misleading as they relate to residential appraisal work. Although it may be true that going with the lowest bidder saves the client money for commercial appraisal work, I don’t know if the same is true for residential work. It is my understanding that most lenders collect a standard appraisal fee from the borrower, which is split between the appraiser and the AMC. This is typically done prior to getting a fee quote from the appraiser. So, when the AMC sends out a blast email for the lowest bid, they do so to keep a larger portion of the fee collected from the borrower, not to save the borrower money. I was approached by an AMC to be on their panel of approved appraisers. They send out blast emails, and the emails invariably show the appraisal fee to be $225. I have never accepted an assignment from them, but once I clicked on the link to accept, and it disclosed that the total fee collected from the borrower was $425. I highly doubt they refund money to the borrower once they find an appraiser willing to accept the assignment at the lowest possible fee.
-by Matt
To get right to the point, the following quote was almost entirely misleading: “If we had the philosophy that all low bids would result in poor quality appraisals and we went with the second lowest bids (who is to say all of them would result in better products?), the fees would have totaled $99,900! What kind of service would we be providing to our client (or employer) if we had them (or really the borrowers) pay $22,300 more for these appraisals that had no assurance of being any better than the low bid reports?”
This is simply not true, as most AMC’s have a set rate schedule they charge their clients, and then they try and get the appraiser that would allow them to make the most spread. The truth is that the AMC would make less per appraisal, NOT the client paying more. The client pays the same rate regardless. The AMC’s goal is to maximize their profits- at the Appraiser’s expense. In light of other professions, Appraiser’s are not being allowed to fully participate in the free market. For example, imagine a similar scenario for Attorneys- where every job they get has to come from an AMC type company. Where the Attorney used to get $100 per hour, now he gets $50 per hour, and the middle man gets $50 per hour, and the client needing the legal services still pays $100 per hour. Add on top of that, now the Attorney has a plethora of people that work for the middle man (most not even schooled in the legal profession- and from a foreign country) looking over all of the documents he creates and dictating what he can and cannot say- and questioning him on every thing. I highly doubt Attorney’s would go for this. The unfortunate thing is that Attorneys have the common sense to band together to prevent this from happening, however Appraisers for some reason are missing this mentality for the most part.
-Bottom line is that AMC’s, except for a choice few, exploit Appraisers.
by Rip Booker
In all due respect to Mr. Mann and his experience, the current conditions regarding residential real estate appraisal are abominable regarding fees and the way work is assigned. I would have to think his vision of the business is somewhat skewed given he has been (and is currently) an owner of an AMC. Although I do not have the apparent review experience stated by Mr. Mann, what reviews I have performed were frightful in many ways when the verification of factual information has been performed. Due to the low bid systems for some, but not all AMCs, the work quality has suffered due to the nature of the AMC model which must generate income to survive by either subjecting appraisers to low fees or raising the loan service costs which squeeze homeowners and potential homeowners. Therefore, sending assignments out to a low end bid appraiser totally makes sense even if the product is not of a high caliber (USPAP exhibits minimal standards like building specifications). The promise of high quality appraisals with low fees is a wild indulgence which is sold to the lending institutions for business purposes, but not to appraisers who have invested thousands of dollars in a business concern to appraise real property. On the other hand, many appraisers are beginning to farm out their research work to virtual office assistants in other countries where the pay scale is very low and the return is very high if reports can be turned over in lightening speed with high accuracy. The advances in technology are going to affect the appraisal business more than any low bid appraisal work as far as I can see in the near future. The accuracy of AVMs will continue to get better and there will be no need for a large number of appraisers with “boots on the ground”. Our numbers are thinning because we are becoming redundant to the financial culture. This is the terrible truth of the matter. We as appraisers will either become Certified General appraisers or glorified home inspectors or not work in the industry. The writing is on the wall regardless of the current situation regarding low bid appraisal versus quality. In essence Mr. Mann does have a strong point concerning how the market for our business works. The economic principals of competition and substitution are at hand whether we like it or not.
-by Mike Allen
While the author’s comments regarding low fee appraisals and their accuracy is probably valid, it doesn’t mean that low fees are the best way. Until appraisers can unite and build a force behind upward movement of fees, the AMCs will continue to pay low fees. When an appraiser accepts a low fee, it is usually because they have to have an income and for them, it’s the only fee that they can obtain. Something is better than nothing and the appraiser and their families have to eat. One senior representative of a noted, national AMC stated that they “buy low (AMC from appraiser) and sell high (AMC to the client), as their total business plan. Until clients penalize ($$) their AMC provider, for errors on the completed report, AMCs will accept adequate work instead of good work. Filling in the form is not the whole job. A decent text addendum is also needed to tell the reviewers about the comps, the neighborhood, the logic, why some adjustments were/were not made, etc. I’ve reviewed many appraisals with a 5 or 6 paragraph (short ones) in their addendum and half of that was disclaimers and CYA material; nothing about the subject or comps. How is a reviewer or lender going to say whether the work is logical or credible? You get what you pay for, however. Pay a little more and you get more information. Lenders need to be requiring more and penalizing their AMC for lack of it. Maybe something like that would drive an increase in appraiser’s wages. Get rid of the appraisers who will only provide the minimum and pay the others a little more.
-by Bob
I am unable to tell if misdirection is the author’s intention. Residential appraisers do not receive $2500 (77,600/31) for an assignment completed on a 1004. AMC’s have no place in the appraisal process. Our government needs to finish what was started 25 years ago (FIRREA) by directly managing appraisals for federally related transactions.
-by Terry Shannon
What I find so obnoxious about “low bid” appraisals is that it just ads insult to injury. Residential appraisers have descended to the very bottom of the totem pole. We are the last people considered in the entire process. Yet, it is our work, our reputation, our very livelihood on the line every time we submit a report. Most of the time spent in required classes is devoted to telling us how many ways we can wind up in jail. All too often, it is appraisers who become the scapegoat for scurrilous lending practices by most of the major banks and mortgage lenders in the country.
Most appraisers who have been around for more than a few years have long looked upon AMCs as the scourge of the industry. While the situation has changed a bit since the enacting of the Dodd/Frank bill, AMCs in most instances are still paid a percentage of the appraisal fee – sometimes as much as 60%. Yet they do absolutely nothing toward the completion of any report. The fact is, they provide nothing for appraisers. There is no reason they should receive one penny of the appraisal fee. Consider this: The benefit of virtually all of the services AMCs provide acrue to the lender, not the appraiser. A fellow at one AMC protested that they DO provide a major service for appraisers in that they provide the work. However, I countered asking if AMCs suddenly disappeared from the earth, would there no longer be a need for appraisals? Wouldn’t lenders still be obliged to obtain appraisals for the homes with which they secure mortgages?
AMCs should be paid by the lender for services rendered over and above the actual appraisal. No one from an AMC is going to set up my files, or pull comps or hold the other end of the tape for me, or drive around the damn countryside taking comp photos. The fact that so many of the AMCs have gone to “low bid” assignments is just rubbing salt into the wound. I find it nearly impossible to recommend that anyone would be wise in choosing a career in appraising – at least on the residential level. Appraising has become a far less rewarding and far more thankless job over the past several years. With the advent of the UAD we are now, more than ever, simply form fillers. Even our commentary is regulated with stipulations that certain words and phrases either must or must not be included in narrative comments. I believe that some reports submitted are never read by a human, that all of the “reviewing’ is being done by computers. That certainly adds a personal touch.
-by Edd Gillespie
Until the profession decides whether appraisal report qualilty has to do more with skill in filling in blanks or selecting and analyzing data we are stuck with discussing iossues that have no foundation.
These offerings by Peck and Mann boil \down to the simple observation that clients want to pay less for appraisals and appraisers want to be paid more. DUH!
Also Mann, like Zillow, burdens appraisal with sales price prediction as opposed to an opinion of value when he speaks of “accuracy.” Amazing, just amazing.
-by dick richards
obviously, a hired gun siding with AMC’s ….scumbag
-by Greg Johnson
I work a rural area and been appraising for 21 years and yet to review a good AMC appraisal report. I have found the reviewers in most AMC’s are in the same pool and / or network of form fillers of low quality, more or less a cycle of form fillers. The industry is fixed to reward AMC’s for lower bids, not quality and the primary reason why experienced appraisers are exiting the industry.
-by Marcy
Appraisers – just goes to show you – if we as a group don’t stand up to being bullied into lower fees by the AMCs, we deserve to work for peanuts. His point is that the AMC doesn’t care whether you are fairly compensated for your time and expertise as long as they can get away with paying you less by playing you against each other. I wonder how the author would feel if his company was forced to “bid” for every lender assignment.
-by Dustin Harris
Appraisers, fee comes down to two things: How efficiently does your office work and how much are you worth per hour? Find out how much you are worth per hour (realistically) and stick to your guns. If you are worth $125 per hour (after you figure in expenses), and an order comes in that will take you approximately 5 hours and the fee offered is $500, you may want to rethink accepting it. We can all too easily get in the habit of complaining about low fees, but we are business owners. We are not forced to accept any fee that comes along. Ultimately the choice is ours. One choice we should NEVER make, however, is to lower the quality of our work in order to do more work. That is always a short-lived proposition.
-by Bill
What would you expect to hear from an AMC owner? Keep in mind that generally the AMC gets to keep the fee difference between what the LENDER pays, and what the appraiser gets paid, for doing little to nothing. I am CERTAIN the lender desires the BEST appraiser, with the MOST experience, who is geographically competent, and the lender believes they are paying for it. They certainly NOT getting it. With the AMC model, forced down our throats by Andrew Cuomo (who, surprise surprise is reported to own stock in AMC’s and has close acquaintances-campaign supporters, who own AMC’s), this ability of the lender to be assured a quality product is diminished. So certainly the AMC is ALWAYS looking for the cheapest appraiser, and will ALWAYS justify using the cheapest appraiser, as the author has tried to justify here. it is EASY MONEY (for them) Don’t buy this whitewash!
-by Geo
Baloney.
After 10 years of appraising and reviewing appraising, most residential appraisals are garbage.
These form fillers couldn’t perform a real valuation if their livelihoods depended on it.
All they know is how to click and auto-fill. Most do have the training or sense to calculate an income valuation using a Cap Rate and not some phony multiplier. Most couldn’t tell you what a reversionary value is or the difference between a pro-forma cap rate, a transactional cap rate and or a ‘worked up’ cap rate. I also love the across the board 3k to 5k for a bathroom or $3500 for a fireplace…etc, etc. Morons. Hardly any appraisers do the research to see what the market bears on the deltas and the delta prices of varying property types. The industry is filled with hacks.
Stop defending the hacks, which is nearly the majority of residential appraisers. I’m sick of it. This is why the industry is garbage and this is why I left. Shilling for the undereducated is neither moral or ethical.
-by BK
Interesting article. Now lets tell the rest of the low bid story. That the appraisal fee collected from the borrower has stayed the same or in some cases increased despite the fact that the appraisal fee may now be as little as 50% or less of the collected fee. That the fee paid to the appraiser is not cleary defined on the settlement statement. That this lack of transparency leads the borrower to believe that the appraiser is being paid the full fee collected from the borrower. That the lender likely gets a “referral” fee (kickback) from the AMC and that this is a profit center for the lender. That the AMC and lender lobbyists fight vigorously to keep this dirty little secret just that which is reflected in the last several rounds of RESPA reform that did nothing to change this. After all would you want to give up that kind of easy profit so easily skimmed from the appraisal fee. Lets get some quality numeric data on this part of the AMC equation.
Appraiser who has taken a “haircut” on their fees.
-by Cara
I’m guessing that your review appraisals are also going to the lowest bidder. Review appraisals are the ONLY way to know if the appraisal done is actually a good quality appraisal or not and if you are also giving those to your lowest bidder then you are getting the same quality of review as you are the original appraisal. This will give you the results that you’re wanting to show off in order to “prove” that giving orders to your lowest bidder is ok.
-by Joshua Jessen
It might be safe to assume that the author may not have encountered many “Level A” appraisers if low bids were the determining factor. The appraisers he considers Level A are most likely Level C in reality with limited experience as the true Level A appraisers would not work for the low fees offered. His Level A folks are only considered to be Level A because they are the best he has, but not the best out there by far. This is the problem with lowest bidder ordering systems. IMO.
-by deb Mack
If your math is correct with 31 assignments at $77,600. fees that is $2503.22 per assignment. This doesn’t make sense and lacks creditability in my book. I understand the competitive nature of business, but essentially you are getting a referral fee, which in the real Estate industry is 20%. Some AMCs are getting a 30% + referral fee by cutting to the lowest bidder. With States requiring College education and 2000 hours of “experience” before someone can become a Licensed appraiser, never mind a Certified Appraiser that clients require, where will future appraisers come from?
-by Dan
You are comparing apples to oranges. The low bidder on a commercial property appraisal and the low bidder on residential appraisals is not the same animal. There is a certain amount of work involved in a commercial report and discounting it by $500 or so is not the same thing as residential appraisers who accept $150-200 fees for a residential report. A decent/good residential appraiser cannot afford to spend the time involved to complete a credible report for $150-200 and still remain in business. There is no comparison between residential and commercial fees. This article is misleading at best, if you want to comment on appraisal quality and fees at least have some experience in the residential arena. I have reviewed many of the low fee residential reports and 95% of the them are bare bones, filled with boiler plate comments (or no comments at all), no explanation or reasoning behind any adjustment or the value opinion….. The funny part is these low fee appraisers are only killing themselves, I charge considerably more for the review than they made for the original report.
-by Ron Hengst
Management Companies should be regulated with there foot held to the fire. I don’t go near those scumbags and your logic is a joke on this low bid nonsense. Management companies are attempting to turn the appraiser into the field grunt that is legally responsible for the appraisal while the management companies line their pockets with zero risk involved. This line of logic also gives reviewers and AMC owners such as yourself an income thus your reasoning in this article is basically your version of justification for your position as a reviewer and AMC owner. I don’t buy it for a second.
-by John Center
You paid an appraiser $50,000. for one appraisal ?
-by Frank
We have been in business 27 years and have never seen it so bad. Example LSI requested a bid in $1.5 million dollar property on 5 acres in a high end Westchester County, NY area. Previous beat down bids drove us to bid $450.00 and we lost. How can you win biids at $2500.00;
-by Erik
You should be very proud of yourself, getting low fees because appraisers need to eat, and destroying the profession so that other than the son or daughter of an appraiser (and that is quite doubtful) will go into the field. There’s a great word to describe you – SCHMUCK!
-by Brad
It may be true that some or most low bid appraisals appear to be correct and accurate although it is often that the reviewer has no geographic competancy. The report may have all of the adjustment percentages in line, explanations of adjustments, pretty pictures and the like but if they are not geographically familiar with market nuiances then the opinion of value is not worth the paper it is printed on. A local lender in my area decided to go all low fee and the quality is poor. Non verified sales, incorrect terms of sale, non-arms length sales and so on make for an unreliable report. To the reviewer it looks fine though. Acceptability does not equate to quality. Just look at our president.
-by David Gustas
The author makes the comment that he had one commercial appraisal that was $100 million off the value and asks how many low quality residential appraisals it would take to equal that. He must of completely missed the last recession that was caused, in large part, by residential lending practices.
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