Newz: Hidden AMC fees, Appraisal Subcommitee Cutbacks, Highest and Best Use
July 11, 2025
What’s in This Newsletter (In Order, Scroll Down)
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- LIA AD: Borrower Wants Answers Appraiser Can’t Give
- What is Highest and Best Use in Appraisal? Appraisal
- By Kevin Hecht
- Purple Rain! Vibrant Violet Villa That Would Make Prince Proud for $3,499,000
- Could a Class Action Lawsuit Finally Unbundle Hidden AMC Fees? by Isaac Peck, Publisher WorkingRe
- The AMC Industry Won’t Be Toppled by Code
- Appraisal Oversight (ASC) Subcommittee Faces Cuts Amid Leadership Turmoil
- Mortgage applications increased 9.4 percent from one week earlier
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What is Highest and Best Use in Appraisal?
By Kevin Hecht
Excerpts: When determining property value, one of the most critical concepts in real estate appraisal is highest and best use (HBU). Professional standards require appraisers to develop an opinion of HBU when necessary for credible assignment results. HBU refers to how a property should be used to generate maximum value under specific constraints, not necessarily how it’s currently being used.
Definition of Highest and Best Use
In professional appraisal practice, Highest and Best Use is defined as “the reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and that results in the highest value” (Appraisal Institute, The Dictionary of Real Estate Appraisal, 2022). This definition emphasizes that HBU must be reasonably probable, not merely possible or speculative.
Appraisers must analyze the property as vacant land, and as improved, considering what is legally permissible, physically possible, financially feasible, and maximally productive in the current market.
Why Highest and Best Use in Appraisal Matters
Highest and Best Use gives stakeholders insight into a property’s worth at its full potential. It guides market value determinations that reflect the property’s full potential and informs development and investment decisions based on feasibility and profitability. Additionally, HBU supports lending and underwriting decisions, especially for construction loans or redevelopment projects, guiding land use planning and zoning analysis in transitioning neighborhoods.
To read more, Click Here
My comments: Well written and understandable. I was trained at an assessor’s office to first determine highest and best use for each property I appraised. For homes, issues I have had were a small house on a large lot where nearby lots were being converted to apartments. More common for homes is a possible lot split. HBU is a regular factor for appraising commercial properties in my city. The main part of the city was almost fully developed by the early 1940s. Often the HBU was not the current use.
Purple Rain! Vibrant Violet Villa That Would Make Prince Proud for $3,499,000
Excerpts: 4 bedrooms, 5 baths, 7,651 sq.ft., built in 2021, 0.49 acres
The unmissable Saint Thomas abode is certainly an entertainer’s paradise, offering three custom kitchens and two living rooms as part of its 7,600-square-foot spread.
Featuring all things lavender inside and out, the fully furnished residence boasts purple-painted walls, carpets, artwork, built-in seating, tile, and lighting.
There is also a fitness center, an entertainment room with a purple pool table, and a sauna. Sweeping views of the beautiful ocean view pool and Atlantic Ocean
To read the listing with 77 photos, Click Here
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Could a Class Action Lawsuit Finally Unbundle Hidden AMC Fees?
by Isaac Peck, Publisher WorkingRe
Excerpts: With the CFPB unlikely to take action on this issue given its weakened state, a new class action lawsuit, Timmins v. Clear Capital, Core Valuation Management (CVM), and Rocket Mortgage, is forcing the issue to a head in a California courtroom.
Timmins alleges that, because the true cost of appraisal services is obscured and misrepresented on her mortgage disclosures, along with the fact that Clear Capital and CVM took a substantial, undisclosed portion of the “appraisal fee,” that defendants engaged in unfair competition by means of both fraudulent acts and unfair acts, unjust enrichment, and deceptive acts and practices in violation of California’s consumer protection laws.
Against the backdrop of the $418 million settlement the National Association of Realtors (NAR) finalized in late 2024—stemming from a class action lawsuit over price fixing and transparency of compensation in the real estate market—AMCs and lenders are likely approaching this latest challenge to appraisal fee disclosures with heightened caution.
This litigation is important as it challenges the legal basis of the current AMC “fee split” model and presents arguments appraisers have been raising for over a decade.
Will this case lead to material change in the appraiser profession? Only time will tell. Here are the details on what is likely to be just the beginning of a long legal fight over appraisal fees.
To read more, Click Here
My comments: A very hot issue for appraisers since AMCs took over lender appraisal management. Some state regulators require that the fee paid to the appraiser be disclosed in the appraisal.
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The Elasticity of Demand and Market Data Adjustments
By Steven R. Smith, MSREA, MAI, SRA
Excerpts: I have worked through four real estate recessions. It has been my experience that adjustment factors change with the market. They are not constant. Appraising in a changing market is the most difficult time for appraisers. Especially for the real estate appraiser who verifies market data with a party to the transaction finds out about motivations, terms, concession’s or personal property packed into the sales price.
The absolute best thing an appraiser can do is talk to market participants,
talking to listing and selling agents is the most efficient way to find out about the actions of buyers and sellers in the current marketplace.
Our databases do not reveal the nuances of a changing market. Nor do they
reveal the Cash Equivalency details needed for market data adjustments.
Some appraisers solve the problem by Bracketing the Sales Price. The thing
is we already know the Sales Price, but we often do not know the motivations,
terms, concessions or personal property packed into our subject transaction, nor do we know about them on our comparables… If we did know, then our value estimates would be different. Imagine a market that had been going down slowly since, let’s say May. Say it went down ½% in May, ¾% in June, 1.0% in July, 1.5% in September and 2.0% in October; a total of -4.75%.
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The AMC Industry Won’t Be Toppled by Code
Excerpts: Call me when AI stops summarizing and starts suing, because until it drags the AMC industry into court, raids their coffers, and rewires the entire system they broke, it’s just another overhyped spectator in the plunder parade.
Think of the limitations of AI as something similar to a math equation in an educational book. All the software is capable of doing is repeating already known information to educate a student. The AI does not think per se, it is only trained on existing data, able to use existing formulas. What many people online end up doing is believing they are somehow more capable when using the AI tech, despite their inability or reluctance to form these arguments themselves in person without the AI tech assistants presence.
That’s where it’s capability ends and the responsibility to actually do something with the information falls on the human. So for every minute people spend quizzing AI tech systems about all their real world problems, is another minute gone by, that nobody is making any real world effort to actually solve the problem. AI is nothing new, it never brings anything new to the table, other than the occasional note of a human using it becoming slightly better educated on topic matter they were not equipped to use prior, based on their own previous personal education.
To read more, Plus some interesting appraiser comments, Click Here
My comments: I have been hearing from appraisers, regarding UAD 3.6 changes, that AI will take over appraising. I have no idea when and if that will happen. AI seems to be good with words, but UAD 3.6 has the words scattered around and many data fields.
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Appraisal Oversight (ASC) Faces Cuts Amid Leadership Turmoil
Excerpts: Appraisal oversight agency returns after 7-month pause, operating with fewer staff and rising scrutiny in the real estate sector.
After going silent for over half a year, the US Appraisal Subcommittee finally convened in June, reports Bisnow. It returned with nearly a third of its workforce gone and its mission under increasing strain.
Acting Executive Director Matt Ponzar told the board the ASC is operating with about 30% fewer staff, citing cost-saving directives from the White House.
The ASC’s reduced footprint comes amid intensifying controversy in the organizations it oversees. Two lawsuits filed this year against the Appraisal Institute (AI)—a major industry group responsible for education and certification—allege fraud and a toxic workplace culture.
Meanwhile, TAF, the nonprofit that creates the Uniform Standards of Professional Appraisal Practice (USPAP), has faced criticism for becoming overly reliant on educational sales revenue and cutting ties with federal oversight. Its role in resolving appraisal bias is also being questioned as it distances itself from the ASC.
To read more, Click Here
My comments: I’m not surprised at the staff cutbacks. There have been many cutbacks all over the government agencies.
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HOW TO USE THE NUMBERS BELOW. Appraisals are ordered after the loan application. These numbers tell you the future for the next few weeks. For more information on how they are compiled, Click Here.
Note: I publish a graph of this data every month in my paid monthly newsletter, Appraisal Today. For more information or get a FREE sample go to www.appraisaltoday.com/order Or call 510-865-8041, MTW, 7 AM to noon, Pacific time.
My comments: Rates are going up and down. We are all waiting for rates to drop in 2025.
Mortgage applications increased 9.4 percent from one week earlier
WASHINGTON, D.C. (July 9, 2025) — Mortgage applications increased 9.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 4, 2025. Last week’s results included an adjustment for the July 4th holiday.
The Market Composite Index, a measure of mortgage loan application volume, increased 9.4 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 13 percent compared with the previous week. The Refinance Index increased 9 percent from the previous week and was 56 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 9 percent from one week earlier. The unadjusted Purchase Index decreased 13 percent compared with the previous week and was 25 percent higher than the same week one year ago.
“Mortgage rates moved lower last week, with the 30-year fixed rate decreasing to 6.77 percent, its lowest level in three months. After adjusting for the July 4th holiday, purchase applications increased to the highest level of activity since February 2023 and remained above year-ago levels,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Homebuyer demand is being fueled by increasing housing inventory and moderating home-price growth. The average loan size on a purchase application, at $432,600, was at its lowest since January 2025. The refinance index also increased over the week, with VA refinances in particular up 32 percent.”
The refinance share of mortgage activity decreased to 40.0 percent of total applications from 40.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 7.7 percent of total applications.
The FHA share of total applications decreased to 17.9 percent from 18.2 percent the week prior. The VA share of total applications increased to 13.0 percent from 12.0 percent the week prior. The USDA share of total applications increased to 0.6 percent from 0.5 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.77 percent from 6.79 percent, with points holding steady at 0.62 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $806,500) decreased to 6.69 percent from 6.78 percent, with points increasing to 0.65 from 0.40 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 6.51 percent from 6.53 percent, with points increasing to 0.80 from 0.76 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 6.04 percent from 6.06 percent, with points decreasing to 0.63 from 0.67 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs increased to 6.01 percent from 5.99 percent, with points increasing to 0.73 from 0.60 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The survey covers U.S. closed-end residential mortgage applications originated through retail and consumer direct channels. The survey has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, thrifts, and credit unions. Base period and value for all indexes is March 16, 1990=100.
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Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
1826 Clement Ave. Suite 203 Alameda, CA 94501
Phone: 510-865-8041
Email: ann@appraisaltoday.com
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