Today, lenders are very worried about investors requiring loan buy-backs. I keep hearing about minor appraisal errors, such as typos, resulting in buy backs. Of course, many of the loan documents, including appraisals, have been lost.
Is this realistic? I don’t know, but lenders are worried so they tell their agents, AMCs, to increase appraisal requirements. There were much more significant changes in 1989, such as appraiser licensing, that will not be reversed.
AMCs work for lenders, and do what they say. But, if one of an AMCs lender’s require something, that AMC may require that it be done for all of their lenders because it is too much of a “hassle” to send out separate engagement letters for each lender’s appraisals.
This is a short excerpt from an article in the January, 2013 issue of the paid Appraisal Today newsletter, which focuses on AMCs, including background checks and a profile of an AMC that pays well and that appraisers like to work for.
You are all right about AMC’s. Quick turnaround, low fees and constant corrections and/or additional comparables with no addtional fees. I don’t work with these companies. Too much hassle and too little money. Luckily, I have a couple of AMCs that pay my fee and accept my turnaround. I can even ask for a fee increase before I go out on the assignment if I find that the property is unique or complex. I also have several bank clients. Good companies to work for if you can get the work. The rest of my work is by word of mounth from attorneys, realtors or property owners. Sometime I do relocation work but its too infrequent. I have almost 40 years in the business and have finally found my niche.
I once worked with AMCs and then in a fit of anger and passion I decided I could not run my business and work for them and I said, enough! I, unlike the rest of you, either can’t find a good one or don’t know one when I see it. So, I reasoned whether they are bad or I can’t figure out how to do what they want its time to quit.
Now I pick my clients carefully and I do not allow any work in here that is going to the secoindary mortgage market. I don’t make enough to pay the bills some months, but by golly I’m proud of myself and not tearing out what little hair I have left. I take really challenging assignments and don’t charge as much as the big shots do, which is dumb business.
Enough of this AMC crap. Yes they exist, but we don’t have to acknowledge them. The real problem is what we have let become of ourselves and our profession. We act like a Junior High Football team that isn’t quite sure which way they are going to run or what we are going to do when we get there. And, like a Junior High coach, the AMCs are there to guide us through. When will we graduate guys? I’m ready for the pros and I’ll tell the AMC what thney get and when they get it. And so far somebody is doing what they want because they are still there outsourcing harrassment.
It’s entirely up to us and so far we are blogging. Ten years of blogging, first it was the mortgage brokers, then it was HVCC and now its AMCs. Why don’t we talk about appraising and some of the dumb stuff we have been taught that doesn’t make sense?
I talked to an AMC who swears it isn’t an AMC and it has certified and designated appraisers working for it and they use Zwillow for market analysis. THey have established themselves as the go to guys for fraud stats. Typographical errors my foot. Here’s one, *^&%$#@()*. Stick that in your review, my compliments.
This article is well vteetd. However it does not tackle the motivation behind the discounted fee request from the other side of the desk. The cost savings from reduced costs of appraisal services are not passed back to the customer/consumer. Rather the amc approach is to co mingle total appraisal fees, thereby creating an environment which creates variable opportunistic profit through downward fee pressure. / To put it simply with the walmrt analogy: I’m not reducing my fee if such reduction means a profit incentive (thing of value) for me to be assigned the order. Were cost savings being passed back to the customer, discounting would be more acceptable. Can you still call it a discount if it does not equate to cost savings and the borrower still pays a constant rate regardless of the appraisers fee? As a customer, when a vendor charges less for their product, you get to see those cost savings right? Would so many still shop there if the reduced vendor pricing merely equated to increased company profit and the product purchaser viewed no cost savings? / If you mailed these guys a hundred dollar bill back for every order, it would be clearly a thing of value. The industry has yet to tackle the ethical challenge of why discounting beforehand to create the 100 profit incentive ahead of time is not considered providing a thing of value. Clearly, the amc’s send the orders to the appraisers that all else being equal, provide the amc with the largest profit margins. They have a right to make profit, but I wonder what right the consumer has to save a buck when the cost of the service is reduced. Not one dollar of appraisal cost savings get passed back to the borrower. When amc’s abandon the preferential assignment based in individual order profit and move to a cost+ system instead, the aggravation of these overly competitive fee issues in a potential restrained trade environment will be greatly diminished. Then cost savings will be actual savings, and discounting is each appraisers individual business decision without undue bias. / My 1004 fee? 350/450 for most of them, and like Mr Harris states: Each order and order scenario needs individually considered. $250 is right out, considering the borrower is still probably being charged $500, regardless of my discount.
I have worked hard to find a few good AMC’s that pay a reasonable fee with a fair turn time and will defend the appraiser when lenders ask for unreasonable conditions. They are out there but they are few and far between. Between these few AMC’s and non-lender work I am somewhat happy with my appraisal business. Its barely a living and very hard to expand as lenders don’t want to use trainees. I am not afraid to turn work down after reading a 15 page engagement letter with ridiculous expectations. When I take on a new client and find that the amc/lender insists on stupid requirements I finish that one report and then ask them to take my name off thier aproved appraiser list. If we all did the same the bad amc’s would have to change or go out of business. I too agree with Edd that AMCs should not exist but they do and if you want to work in todays lending climate you have to make the best of it.
I totally agree with Eddie, AMC’s should not exist, period, they do nothing for the industry, NOTHING!
I agree completely Edd. But whether she is hearing this from AMCs or not the fact is that the amount of requirements by AMCs IS increasing and it is completely out of control. Some of our engagement letters are 18 pages long with such things as taking new comp photos for every assignment even if we have already used this comp and taken an original photo. Photos of every single room including the laundry room, redacting personal photos in a picture that you can barely see in the first place, but they want pictures of every room!! Now we are to be professional photographers too. They want photos of view for comparables if an adjustment is made. Every single item must be bracketed even if you have to use a sale that is not comparable or outside the market to do so….for little things like decks or fireplaces. Providing 4 active or under contract comps in a declining market in addition to at least 2 sales within 90 days, sometimes this is just not possible but they don’t want to hear that no matter what kind of commentary you provide. My favorite is a very popular AMC who has asked us several occassions to change something in our appraisal to be wrong, i.e. the county name or tax ID number because of what is on the title binder, even when we tell them the title binder is wrong and needs to be correct. Their response, just change it and then add a comment that it was requested by the client to change it to match title work….yea….NO!! The list is endless and all this for the ridiculous fees we are paid and a fast turn around is crazy! Now they want background checks on all appraisers, they want E&O policies in our reports even though our provider has told us that is not good business practice to provide in the report, they want only certified appraisers for even a 2075 driveby!! Really…on a form that does not even require you to develop a value you want a certified appraiser??!! This industry is out of control. We have no way to train new appraisers because no one will accept a trainee without the supervising appraiser inspecting also, so how is a trainee to make a living during their training process? The appraisal industry needed some reform, but it has gone too far. We are busy, that is nice but having to login to 20 different websites every morning for status updates on orders, only assigning to the appraiser the order was sent to rather than the most qualified or one that is available in our office reduces productivity all around.
The construct of the AMC is not necessarily evil. I belive that they can provide services, such as reviews, which are of benefit to sole proprieters, who comprise 85% of appraisers.
However, the AMC’s are competing in the market for clients. I envision the sales person, trying to land an account, promising the potential client “We’ll require the appraiser to provide four closed sales, two comps within 90 days, two listings, and an address verification photo of the street number, as well as street photos in both directions, and a picture from the front porch, and a cost approach for all reports, even if the subject is a burned-out 120-year-old home valued at $1.00” etc (these are all real requirements I’ve been subjected to; the real list of requirements can go on for miles).
From the context of your post I deduct you are hearing about typo buy backs from AMCs.
Yeah, right. Anyone in their right mind would not require such a thing, therefore be assured it is another thing dreamed up by AMCs to justify their existence which is otherwise pretty much unjustifiable.
Get it in writing with who, what, where and how and maybe we can discuss merit.
The more AMCs hassle appraisers the more they think they can convince somebody they provide a useful service. It is not working as far as I am concerned.
AMCs should not exist and here we are volunteering to sit on boards to regulate entities that shouldn’t exist in the first place. What is the matter with us?