NOT customary and NOT reasonable fees?
What is reasonable? Let me see… For example, the amount of work to produce the appraisal plus respond to request for more information, updates, etc. increases the time from 5 hours ($70 per hour) to 8 hours ($47.50 per hour), a 33% decline. Of course that is gross, not considering your expenses. You are able to get the same fee – $350. But, the fee is not reasonable. Calculate this for your typical appraisal fees.
What is customary? Somehow AMCs seem to think that “one price fits all”. Before AMCs took over, appraiser fees varied widely around the country. The Midwest was typically the lowest, around $250. The West Coast (Washington and Oregon) and some East Coast states were higher, around $450. Alaska and Hawaii were much higher. We accepted “standard” fees from our clients as we took the easy appraisals and the hard appraisals, which balanced out. I didn’t ask for a fee increase when a property took more time. If was a high end home or a rural acreage property, the lenders paid higher fees. Or, we scheduled appraisals to reduce driving time. Clients understood that they could not give us all the hard appraisals and appraisals scattered over a wide geographic area.
Now, AMCs have standard fees, but they don’t consider the factors above. Many appraisers have responded by asking for fee increases or just turning down the assignment.
TRID vs. the current system of AMC ordering appraisals
TRID will make the method above (“one fee for all appraisals”) very difficult for AMCs. Lenders have to provide an appraisal fee within 3 days. AMCs won’t be able to spends days “shopping” for the lowest fee for a tough appraisal. AMCs won’t have time to negotiate with appraisers. Yes, there are options but they delay the loan.
Now, appraisers can quickly accept broadcast orders with the expectation of getting a fee increase. After Oct. 3, that will create problems for lenders and AMCs.
What will happen? How can AMCs tell their lenders what to charge for a specific appraisal (the full cost, including AMC fees) within a few days? Their systems assume all appraisals are the same. I doubt if they have anything set up to distinguish complex rural from a tract home. Can AMCs even quote different fees within a state? I see AMCs making less money because the appraisal fees they pay will increase. Now, they are waiting for appraisers to tell them that the fee has to be higher.
What does this mean for appraisers who work for AMCs? Higher “standard” fees to cut down on appraisers refusing fees? This cuts into AMC profits unless they can get higher fees from their lender clients. But, AMCs compete with other AMCs. Fees are a big factor when a lender selects an AMC.
I have no idea what will happen. I am glad I don’t own an AMC with lots of lender clients. Maybe they will never raise appraisal fees for difficult properties. But, who will do them?
Volume is high now and AMCs have difficulty finding appraisers to do the tough appraisals and FHA appraisals. When volume is low and appraisers need the money, the “one fee for all” is easier for AMCs to use.
It is the same old game for AMCs- In order to accept the order, you must check the box that says, by accepting this order (at 60-75% of the old fee) you AGREE that the fee is reasonable and customary according to the standards of the previous 3 years….I work retail now to get affordable health care, and a steady base rate. New AMCs are popping up all over, and many are amateurs. I need a consistent work flow. I am still trying to recover financially from entering Appraising in 2008, and a short sale property loss 3 years ago, I am nearly broke from living from AMC to AMC and them disappearing each year. I do all AMC work for refinancing and sales, and the underwriting requests are many and absurd.
I should never have entered this field.
Ann, I am so happy you raised this topic! I recently completed what I believe is a reasonable and rational proposal for establishing de minimus or default MINIMUM acceptable fees for GSE work across the country. It has provisions for regional variance; or can (as proposed) be used as a one size fits all national fee (don’t scoff til you read it please). In this case, I let the Federal Office of Personnel Management do all the heavy lifting and calculating. ALL I did was compare THEIR GS Pay scale appraiser salaries and benefits to comparable “civilian” appraisal jobs on a per assignment or hourly basis.
The proposal equates to about 15+pages when printed is I am providing a link only.
http://mfford.com/html/c___r_fees.htm You, along with any of your readers may feel free to copy and distribute as you see fit. All I ask is that the entire proposal and heading remain intact. Thank you for your efforts in keeping us informed.
Very interesting analysis!! I cannot image that appraisers can charge $800+ for a house appraisal for lender work. But, it shows what a reasonable fee would be, using goverment employee income. Also, it is another way to show that fee appraisers working for lenders/AMCs that they are not making much. Prior to licensing, most appraisers were staff appraisers at lenders – salary, benefit, advancement opportunities, etc. Cheaper for lenders to use fee appraisers.
Ann, thank you for posting and reviewing my link to C&R fees. I have charged up to $3,500 for SFR appraisals. Admittedly the rare exception rather than the rule. My ‘prevailing’ fee for non complex, FNMA conforming loan limit transactions had been $450 since 2006 & ’07 until AMCs came along. Now that is as rare from an AMC as $3,500 used to be. I don’t expect a typical fee of $800 but I DO expect typical fees in my area (& similar areas like Washington DC, Virginia, Baltimore) to be around $585 to $685 base; & FHA to be $750 with all the required extra work (assuming it is being done in good faith and not side stepped-like actually crawling under the house or in the attic).
I already KNOW some AMCs have sent new TRID price lists out raising THEIR gross billing amounts from $495 to $545 with FHA being $50 above that. Appraisers will be lucky to get $400 on regular fees and $450 for FHA. As far as I’m concerned banks still intend to only pay 75%+- of “C&R.”
I am a State Certified General appraiser with 50 years in the business. I have yet to do an assignment for an AMC. The hassles of arguing with the inexperienced ones does not suit me nor should it suit any competent appraiser. I have a select few clients and service them and their referrals, only. As a 20 year partner is a very good firm, I’ve learned with whom to service. There was a time when direct discussions helped to eliminate differences with the assignment, never advocating a value until I settled on a figure based on research and analysis. With the select few clients, I can still do that. One’s integrity can be misaligned by allowing a buffer between the client and the appraiser, especially if the buffer does not represent both sides properly. The horror stories I have heard and read about concerning AMC’s is more than I can spend worrying about. Fees should be reasonable. As we hold our industry out to the public as professionals, we should be compensated in a just manner. No two assignments are truly alike.
With the implementation of TRID and the zero tolerance feature of the appraisal fee adjustments, direct discussions with the lender will be required in order to establish the assignment guidelines and the fee since there are very few outs to the quote for the TIL form. Standard fees should be in play with the complex properties being a higher fee than the non-complex properties. The extent of the complexity should be made known before the acceptance of the assignment. If the complexity of the assignment is not made known before the assignment, then the appraiser is the loser since his time on the assignment is extended and the standard fee divided by the time to complete the assignment reveals a lower per hour fee. It does not appear to concern the AMC’s. Just how are they going to project a fee to their clients and shop for the lowest bid. The lenders will be required to reflect the appraisers fee on the TIL.
Without proper discussion with the client’s designated personnel, this could cause delays in the presentation of the Truth In Lending forms to the buyers, thus, causing delays in the processing of the application and extending the closing period. What real estate agent is going want to hear that? The time bomb is ticking. What are the AMC’s going to do when no appraisers will do their work. More and more lenders are returning the ordering process to in house because they can control the selection of the appraiser and the fees.
We, as an industry, should hold ourselves out as professionals (and act like one) and consult with the client’s representative before accepting the assignment.
Not all AMC’s prey on appraisers. I am a Certified General Appraiser in NH with 30 years in the business who started Granite State Appraisal Management. The appraisers on our panel set their own fees; the appraisal fees are billed directly to and are paid directly by our lender clients to the appraisers, typically within 2 weeks; our lender clients are billed separately by us for the AMC services we provide. I believe we will see more arrangements like this. Our lender clients like knowing that the appraisers are being paid fees set by the appraisers, not by us. The appraisers like knowing that we don’t take a penny of their fees. And we like knowing that we’re doing business the way it should be done.
Good for you! Cost plus pricing is the only fair way to handle AMC fees! Of course the devil is always in the details. If your clients require lowest fees then only the low bidding appraisers names are put in front of them. Credit where credit is due though. A cost plus model is a huge step int he right direction.
Thanks. As a matter of policy we simply dont accept work at discounted fees and do not reply to broadcast fee requests. We do reply to our clients that request fees on complex properties however. And,….that appears to be the way most our lenders are handling the complex property fee issue. All the best…..
For the past 3 years we have seen one lender client after another drop their AMC and take their compliance in house. The most recent of which took place on Sept 1 past.
Reasons: Low appraisal quality. 1). Despite lender directives to the opposite those AMCs tended to revert their own lists of lower fee appraisers. 2). Communication. By nature AMCs create a barrier between appraisers and their clients. That is common in any relationship when a third party acts as the intermediary. 3). Compliance. Regulatory reviews revealed a low level of performance in the compliance piece. The result, in 2012 some 70% of our clients used AMCs. Today, only 25% of our clients use AMCs.
That is not to say there are high performing AMCs in the market place. There are. As they are the exception lender clients have moved to in house compliance and in house appraisal management.
We have worked directly with our clients to set an effective means of communicating with our clients and developed pricing strategies to account for appraisal fees that involving complex properties. As of this date all lender/clients are on board.
This is a reply I supplied to an AMC that was questioning a fee quote I made.
“The bid is to cover unknown expectations as to what this rural Subject consists of in terms of home size, age and features, the site size and out buildings, etc. It will also cover the distance to photograph comps and the listing(s) that your clients require.
It appears that you would like us to bid on something that is very rural and we have no idea what it is since there is no listing or prior sale and no public information online. I would suggest that as the AMC maybe it would be wise that for future appraiser requests that information about the home be supplied. This is especially true with the upcoming TRID, the TILA-RESPA Integrated Disclosure rules, problem that we will all have in terms of asking for additional fees for complex assignments that are discovered only after we get there.
This is a very poor business practice on our end, blind bidding. Drive an hour or more one way, find a complex assignment for one reason or another, inform the AMC and then have it cancelled but with a $50 cancellation fee. We are out prior research and travel time, vehicle cost and the loss of income for an assignment.
Our policy is that we have an agreement to appraise a home for a fee. If we inform you and the lender of what is there, since you and the lender have no idea, and the assignment is cancelled, the lender is responsible for a reasonable consultation fee plus expenses since we apprised you of factors that you did not know and of which you were not aware. If you and the lender want to place the responsibility on us to inform you and the lender of the property factors that influence the lender’s financing decision do not expect it to be a trip fee but a significantly greater consultation fee plus expense charge.”
Randall R. Davis, SRPA, SRA
Certified General Real Estate Appraiser
The Davis Appraisal Company LLC
Real Estate Appraisals with Integrity since 1977
5580 State, Suite 8, Saginaw, Michigan 48603
Office: 989-792-7772 Cell: 989-274-7772