This article was written in 1996. There have been significant changes since
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Appraisal Management Companies -
should you work for them?
This article was published in Appraisal
Today in November, 1996, and was written by Ann O'Rourke.
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Recently, a local appraiser called me
saying that one of her major client was going to be using appraisal management companies.
She asked me what she should do.
Large lenders using appraisal management companies (AMC) is an
increasing trend. Although the percent of lender appraisals done through appraisal
management companies is relatively low (estimated at about 5% by some), it can make a big
difference if one of your main clients starts using one.
Many appraisers are very upset by appraisal management companies,
saying they are destroying their livelihood by asking them to work for very low fees. But
lenders use them for good business reasons.
Working for one or more AMCs is a business decision for a fee
appraiser. You choose who you work for. Not all appraisers have to work for low fees (say
50% to 60% of standard). Not all AMCs pay low fees.
Why do lenders use AMCs?
Lenders use AMCs because they offer "one-stop shopping" for
appraisals (many also offer title reports and other services). With more and more mergers
creating larger and larger lenders, managing a national or large regional fee panel is too
much of a hassle.
The appraisal fees they pay to the AMCs are typically higher than they
would pay to fee appraisers, but they don't have the expense of fee panel management, and
managing their appraisals (ordering, reviewing, etc.).
The most likely lenders to use AMCs are large regional or national
banks, thrifts, and mortgage banking companies. Finding an appraiser for a one-time loan
in a remote area can be a challenge unless you have a very large fee panel.
What are the minuses for lenders?
When lenders use AMCs they give up control over the appraiser and the
In some parts of the country, the majority of loan originations are
done by mortgage brokers, who like to be able to choose the appraiser. Real estate agents
also like to have some control on appraiser selection.
Local lenders using a relatively small local fee panel don't have much
incentive to use an AMC. They lose feedback from their appraisers, and the fees paid to
the AMCs are typically higher than are paid to the fee panel appraisers.
When appraisal volume picks way up, AMCs have difficulty finding
appraisers willing to work for a reduced fee.
When did AMCs start?
The oldest AMC I know of is Lenders Service, near Pittsburgh, PA, which
is almost 30 years old. It is also the largest AMC.
In the past 5 to 6 years, many new ones have started in response to the
predominance of the mortgage lending business by large banks, thrifts, and mortgage
banking companies. Recent trends in mergers and acquisitions has increased the number of
large mortgage lenders.
Quality of work
I regularly hear questions about how "good" the appraisals
prepared for AMCs are. I really don't have any information, but doubt they are worse than
those done by "lets make a deal" appraisers working for some mortgage brokers.
There is data to show third party originated loans have a higher default rate.
The most significant problems seem to occur when an associate is
working for half the fee you're getting, i.e., half of 50%. It's very tempting just to
throw something on the form.
Doing a 48-hour turnaround can be a real problem when the appraisal is
not a "slam dunk." In order to complete it on time, corners may have to be cut.
The minuses of working for an AMC
The biggest minuses are lower fees and sometimes having to purchase
For many appraisers the biggest problem is having to purchase special
software for electronic transmission. This is both a financial and time burden as you have
to learn how to use the software. If you work for more than one AMC you may have to
purchase several different software programs and learn how to use them.
Many appraisers are personally offended when asked to work
for less than their "standard" fee. But the fees paid by AMCs do vary. Some
appraisers (i.e., rural areas) get higher than their standard fee, and some (in
urban areas) get 50% of their standard fee. Some AMCs pay relatively low fees
and some pay relatively high.
Some appraisers have mentioned slow payment from some AMCs.
Why work for an AMC?
Some appraisers don't like the fast turnarounds, i.e., 3 days. Working
for a low fee and a fast turnaround are definite minuses.
However, there are some benefits to working for appraisal management
- If you don't have any other work, it's better than nothing and having your house go into
- Unless you work for an appraisal management company, you won't be able to get work from
certain lenders. Citibank, for example.
- You won't be hassled by mortgage brokers and underwriters.
- Access to lenders without having to be on a lot of fee panels.
- Only one company to deal with instead of many with conflicting requirements.
- Some are very loyal to their appraisers, especially if they have worked for them when
business was strong several years ago.
Typically you don't communicate with the lender who ordered the
appraisal. That can be a plus or a minus. The plus side is no phone calls. The minus side
is not being able to communicate and problems or ask any questions.
Should you work for an AMC?
It's a business decision, depending on how busy you are, how likely you
will be able to get new clients if a current one goes with an AMC, whether or not you use
associate appraisers, etc.
However, this is an increasing industry trend. Lower fees are in the
future for most residential appraisals.
Give it a try and see how well you like it.