Of the 359 first tuesday readers who voted in our recent poll, an overwhelming 94% (337 voters), denounced appraisal management companies (AMCs) as decreasing appraisal efficiency in California.
Today, all appraisers of one-to-four unit residential properties must be overseen by an AMC, mandated by the government’s recent efforts to get a handle on out-of-control lending practices. Sound in theory, suspect in practice: some lenders retrieved this stolen appraisal business by setting up and operating their own AMCs. Back in control, they are reaping ever more profits on the origination of a loan.
first tuesday take: Under this AMC regime, homeowners pay more for appraisals and appraisers are paid less. Often, half of the appraiser fee charged the buyer by the AMC is retained by the AMC as the appraiser facilitator, a.k.a. the middleman. AMCs add no value, but suck up half the fees – isn’t that what RESPA was set up to avoid?
While the new Consumer Financial Protection Bureau (CFPB) disclosure requirements intend to create more transparency for buyers, what real estate really needs is a fix for this broken appraisal process. AMCs are corrupt and unnecessary middlemen. Let’s get them out of the act.
To cast your vote and read more about the new appraisal fee disclosure requirements, see the February 2012 first tuesday article, Revised HUD-1 form to shed light on “appraisal charges.”