Revised HUD-1 form to shed light on “appraisal charges”

magnifying glass fine print

Do you think appraisal management companies have increased appraisal efficiency in the California real estate market?

  • No (93%, 415 Votes)
  • Yes (7%, 30 Votes)

Total Voters: 445

With the introduction of appraisal management companies (AMCs), the newly created federal Consumer Financial Protection Bureau (CFPB) has taken a second look at the extent to which the HUD-1 Settlement Statement discloses appraisal fees. Contemplated changes include disclosing the amount of money received by the AMC in addition to the amount received by the appraiser in an effort to make the transaction more transparent. These changes, if adopted, would appear on the revised HUD-1 form effective July 2012. [See first tuesday Form 402]

The single sum recorded as “appraisal charges” on the current HUD-1 settlement is divided among multiple entities: the appraiser and the AMC, who is sometimes owned or partly owned by the lender. Before the insertion of AMCs into the appraisal process, appraisers received the majority of the appraisal charge; now, however, 40-50% of the appraisers’ fees are diverted to the AMC while borrowers’ costs have simultaneously increased.

Not surprisingly, the CFPB’s upcoming revision of the current HUD-1 form is supported by real estate agents, appraisers and builders, while lenders and AMCs dub additional illumination of appraisal charges unnecessary.

first tuesday take: Brokers win, buyers win; lenders’ feelings are hurt.

The itemization of appraisal fees is a step in the right direction towards better public policy for encouraging homeownership. Ever since the establishment of AMCs as government-mandated facilitators, appraisal costs have increased artificially, with homebuyers paying more in appraisal fees and appraisers receiving less pay for the same work. [For more information on AMCs role in the appraisal business practice, see December 2011 first tuesday article, Appraisal management to the rescue? ]

With lenders and appraisers being unable to contract services directly, AMCs handle job assignments (which the lender used to do) with no oversight. Thus, these facilitators are unchecked in business transactions, creating incentives for AMCs to extract additional fees for mere logistical support (or just to take the money and run). By now, such overinflated prices and unfair business practices have riled appraisers, lenders and borrowers quite enough. [For more information on the AMCs driving up costs of appraisal, see September 2012 first tuesday article, The good faith estimate is designed for shopping around.]

Overall, real estate will benefit from more transparency within appraisal business practice. Increased transparency can only revitalize the public’s trust in the ethical standards of real estate providers and prove advantageous for agents and brokers. [For more information on the importance of real estate licensees obtaining public trust, see November 2011 first tuesday article, Damage control: restoring public trust in real estate professionals.]

Re: “Consumer Financial Protection Bureau scrutinizes appraisals and other realty fees” from The Washington Post



  1. Flash said:

    AMC have stolen the appraisers right to market themselves and stolen half of their income. What if the same senario was getting your car repaired in a government auto repair facility. Your mechanic would chosen by the government and forced to work for 1/2 their usual pay. Automobile owners could only go to government auto repair facilities for repair work. While the mechanic is paid a lower fee for the work the government takes half the labor costs and pockets the money in the government pockets.

    This is the same situation in the Appraisal Industry and it make me sick. All the education and years of experience mean nothing which is why I can not afford to remain in the appraisal profession. Realtors have not taken a cut in commissions, therefore I will return to real estate sales and look at disgust at what the government has allowed to happen to the appraisal profession.

  2. Frank Soares said:

    Appraisal Management Companies have a place they should just not be the only place or the forced upon place. I have an on going respectful relationship with several Appraisal Management Companies. I take pride in my work and expect a fair fee. We do not always agree the fee I request is fair but there is always a medium that we come to terms with. Appraisers need to understand Appraisal Management Companies need Appraisers. Lenders do not loan on B.P.O. Valuations. It took me two years, two starving years to build a relationship with good Appraisal Management Companies. It would not hurt my feelings to regain complete control of my business and have the opportunity to work directly with lenders, go back to collecting fees at the door and proudly handing someone my business card rather than the one the AMC provided. In the end I would continue to accept work from Appraisal Management Companies especially the one’s that earned my respect. If you don’t get up every day and try to improve upon things than what ever place you are in is your own fault. ~~~ just my opinion ~~~

  3. Cameron Conant said:

    This article states that appraisers are getting less pay for the same work? How about less pay for more work!!!!!!!!!!!!

  4. KL said:

    Most of the article is accurate, with the exception of “Ever since the establishment of AMCs as government-mandated facilitators, appraisal costs have increased artificially, with homebuyers paying more in appraisal fees and appraisers receiving less pay for the same work.” Appraisers are now doing twice the amount of work per report than they were prior to UAD, DF, and the now dead HVCC.

    What is now worse than low fees, is now the extreme pressure the AMCs are placing upon appraisers for fast turn around times. They expect appraisers to complete a compliant report within 48 hours of inspection. The AMCs only add to the problem of the process taking extra time. From start to finish they are mucking things up each and every step of the way….all the while picking the almost empty pockets of the appraiser. They hound the appraiser with emails and phone calls with unnecessary “status updates” that prevent the appraiser from concentrating and doing their job.

    One last thing…..many of these AMCs get paid up front for the appraisal fee, yet take anywhere from 45 -90 days to pay the appraiser. Sometimes they do not pay at all, and the appraiser has to take to being a bill collector. Eventually, people (lenders and banks) will figure it out and stop using them. Even the lender owned ones are starting to realize that the AMC model is no longer profitable.

  5. Leroy Thomas said:

    Geographic competency was never an issue before HVCC or Dodd-Frank. Appraisers had clients that provided them assignments in their areas. There no need to accept work that was too far away because you had plenty of work nearby. Now with the advent of AMCs you get appraisers coming from who knows where. The appraiser no longer has control of his/her client base and has to take the work where they find it.
    We have to get rid of the AMCs. Well how do we do that? I say, write/email your local and state representatives. Write/email the CFPB. Join a local or national coalition to promote the appraiser lobby. Most important is to network and urge your peers to do the same.

  6. LeMOINE BOND, CaREB 00287022 said:

    … just a bunch of Washington bull socializing real estate & all its various facets & functions – transparency? balony; confidential data is a function of the free enterprise system. Get Washington out of the business!

  7. Gregory Karr said:

    Really nothing new here. The law to require AMC’s must have been initiated by the people who wanted to open the AMC’s. They added nothing to the appraisal process and drove up the cost. Some crooks in the business took advantage of the old system and obtained bogus appraisals and perhaps the AMC’s have helped that, but for a guy like me, who can review an appraisal, they just added costs for the buyer/borrower, and in the beginning added more turn around time. Also, out of area appraisers are being used more now than before. Not a good thing.

  8. Dwight said:

    The HVCC is a farse. It clearly states that lenders can not have an interest in the AMC. I raised this question when this idiocy first started. Wells Fargo owns Rels, BofA owns Landsafe, etc. NOBODY cares.
    This is just another bad idea by the fools on the hill.

  9. Nancy Mitchell said:

    I can remember when the “government” was pushing loans to welfare recipients so they could own a piece of the pie and their own home 40 years ago. Today it’s nothing but “low income housing” built by builders with the good old government loans and grants. After about a year or two, the welfare recipients trashed their new houses and walked away from them into something newer the “government” provided for them.

    The banks today are really taking a huge loss with all the REO’s being auctioned for half of what was owed on them..On the other hand, the banks were makeing loans without all the documentation AND verification that should have ALWAYS been required. When corners are cut, someone is going to come up short. I have been in the business for over 35 years and have seen many “programs” come and go… instigated or backed by the “government.” My opinion is that the “government” should stay the hell out of free enterprise.

  10. Barry e fowler said:

    An appearance of neutrality does not mean that appraisals are not biased. Anyway you look at it , it is the Lender that subscribes for the appraisal. Even though through a third party, the pressure for lower results is still there. An appraiser that consistently returns higher values will not be popular.

    The third party is simply the Fox putting the pressure on the chickens.

  11. tw said:

    I believe the main issue was the fed’s didn’t have the right guidelines with the mortgage companies to begin with. If mortgage company’s had not lended on NO MONEY DOWN AND LOW ADJUSTABLE RATES PROGRAMS that eventually came due to buyers who clearly were not able to finance a regular loan, we wouldn’t be in this mess today. Obviously, those types of buyers did not have good credit and no means to justify being able to handle such an obligation and got NASTY LOANS. Instead, the mortgage companies clearly took advantage of these individuals wanting a piece of the AMERICAN DREAM. This was nothing more than GREED,GREED,GREED on the commission end for these loan originators. They had access to the credit report and history of that buyer and new they were a risk from the beginning. But, really the truth is, they wanted to also capitolize on future business along with the original loan transaction commissions. They new these buyers would have to come back and refinance in the future. As for appraisels, that comes second because the appraisel isn’t ordered until a buyer has been approved for alone and has found the home they want to purchase. Anyways, what the banks didn’t count on, was the down fall of the economy and set themselves up to end up with nothing but empty homes getting vandilized and having to take the loss’s on all the mortgages through REO’s and Short Sales….They deserve it!!!

  12. Gary said:

    My experience is that appraisers are doing lazy, innadequate appraisals and are low-balling the appraisals way under market value. I recently saw a 3BR condo that had been appraised 2 months earlier at $396K appraised for $315K. The appraiser used two 2BR’s and one 3BR, all with less square footage, as comps. Each unit backed up to a major (noisy) street and had patios (the unit being appraised has a large yard comparable to an SFR, plus a choice location). The appraiser used the same price as the lowest priced 2BR and it ended up costing the borrower .25 points on his rate, despite and 792 FICO. The customer told me they would not pay for the appraisal and said they were no longer interested in refinancing.

  13. BJ said:

    Just another layer of governmental interference where it isn’t needed. Just as that same interference by government caused the whole ball of flaming disaster to engulf the entire industry by forcing lenders to invent programs to put people in homes they could not afford. You cannot blame appraisers for the state of the current market. It is their job to appraise a property based on what a willing buyer is willing to pay and a willing seller is willing to sell at based on current market conditions. When the government forced lenders to pull programs out of a magic hat it spurred on a buying frenzy that reduced the supply of homes and sent prices soaring. Look what’s happening to the price of oil today.

  14. Nancy Mitchell said:

    The whole idea of creating a “middle man” between appraisers and banks was sheer idiocy. Whoever comes up with these ideas should learn the business before they make these rash decisions. I was an appraiser BEFORE appraisers had to be “licensed.” I had taken many appraisal courses and enjoyed working for myself. When the licensing came into effect, (another attempt to protect the public!) I dutifully did what was required, studied, took the test and obtained my “Trainee’s License.” During that period of time I could not find even ONE appraiser who would sponsor me, ok my work, etc. Consequently all my time and effort and money was wasted. However, I do know how appraisals are supposed to be done, and now with the addition of AMC, I think it is overkill on the part of the “government” who thinks it is protecting the citizens. In the past couple of years, I have seen an influx of out of town realtors and appraisers who don’t know the areas. They are turning out stuff that is bogus…You gotta know the territory, and with AMC they are liable to send someone who has no clue. Now the Feds have gotten into the act with loans and created NMLS – another load of you-know-what. The government needs to stop protecting us from ourselves. In my opinion, the “government” is who created all the problems to begin with by coming up with programs that encouraged “the poor” to buy homes with little or nothing down.

  15. Edward Quigley said:

    The AMC process is an insult to the mentality of the industry. As usual, a few bad apples have resulted in a swing to the other extreme. Why not just take some money off of the top of every deal and reward the banks directly? At least they would be directly taxed on the added income.

  16. Maryann pearson said:

    Lenders used to select appraisers who had experience and competence in a particular area and property type. Now the AMC’s seem to choose appraisers based on lowest cost to them (giving them a bigger portion of the fee). Frequently I have to dispute shoddy appraisals done by out of area appraisers. A waste of everyones time and money and bad for the lender and consumer.

  17. Hector Michael Perez said:

    morning, how could it be that a lender own its own AMC, does that make sense? Why does the FED allow that? Also the person that reviews my work, why are they not Certfified Appraiser with all the course work that the state requires me to have.? They dont know appraisal theory, i just dont get it..

  18. Sharron Bethards said:

    As a Mortgage Banker (25 years) I can tell you the “Government Loans most of us use like FHA, VA and the First Time Buyer DAP helps were all documented loans. Documented income and money to close were in place then and now. Yes FHA and VA loans are part of the problem now but only after the big banks started using the credit score to approve their loans and not documentation of income and money, along with loan programs that started out with qualifing off a 1% interest rate only to jump to rates the buyer could not pay for in two to three years. Stated Income with monthly payments that does not even cover the monthly interest is crazy. Making loans to families who would never qualify if they were required to bring in 2 years of documented income and current pay stubs was so wrong. Three years latter the same buyer is now bringing in their tax returns and pay stubs and buying new homes at 1/2 the price of the home they lost. The problem in this market did not take place with FHA or VA home loans, however even FHA & VA buyers took to walking away from their homes when values of homes around them dropped to the point that these home owners could not sell when needed due to lost income or family changes that took place where a new home was needed. A friend was forced to move to TX to keep his job. He was forced to walk from his VA loan as his loan was over $300,000 with a current value now of only $160,000.00. Some of the stated income loans were up side down with in months due to the added interest being added to the buyers loan amount starting with the 3rd month in some of these loan programs.

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