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