It is no secret that appraisers and appraisal management companies (AMCs) have a very confrontational relationship, and policies and regulations like HVCC and Dodd-Frank have obviously made things worse. Both parties are essential to the mortgage process, but are clearly at odds with each other. What’s ironic is that these two parties often depend on one-another for income and job security, yet they can rarely see eye-to-eye on several important issues—namely fees paid to appraisers. Like many issues that plague the industry, the resolution begins with communication.
Since GlobalDMS' clients span lenders, AMCs, and appraisers, we decided to write a 2-part series in-which an appraiser and an AMC were interviewed to give their specific view points on both this appraiser / AMC relationship and what can maybe be done to improve it. In part 1, GlobalDMS asked a certified general real property appraiser by the name of Bryan Reynolds to provide his insight from the appraiser’s point-of-view, in-which he answered these four thought provoking questions:
What, in your opinion, are the biggest challenges to a successful vendor/AMC relationship?
“Trust; neither side trusts one-another. While the AMCs tout their excellent service they provide to clients, most appraisers see right through this charade. If they provide such excellent service, why don’t they market it to the banks and have them pay for it? Instead, their primary selling point is that they will not charge the bank for this service, but deduct it from the appraiser’s compensation instead—in essence they will snip the fee from the appraiser. However, appraisers have allowed this to occur by agreeing to some of their ridiculous fees. Appraisers need to stand up for themselves and learn to say no, and they also need to quit giving away their services. It amazes me how some appraisers don’t see the true value in their own service.
“When AMCs initially contact an appraiser for a potential order, they usually only ask two questions that deal with fees and turnaround times. If they are rotating appraisers, why is fee even a question? More importantly, why do they shop for lower fees when they certainly don't pass the extra savings on to their clients and ultimately the consumer? Keep in mind most businesses are in business to make a profit, and I don’t see AMCs as being any different. But do they really have their clients’ best interest in mind when they take days or longer to place an order to try to select the cheapest fee?
“Appraisers are often guilty of agreeing to unrealistic time frames to secure an order, and then typically fail to meet the deadlines. One owner of an AMC once told me that his staff views appraisers are liars. I told him many do so in an effort to tell the AMC what they want to hear. While this practice shouldn’t occur, unrealistic turn-times also shouldn’t be requested by the AMC. This does nothing but jeopardize the quality of service for all parties.”
How do you feel these challenges could be met so a more positive relationship can unfold?
“AMCs should leave the appraiser alone. Daily updates are not needed by anyone and only slow down the entire process. AMCs should also have knowledgeable folks conducting reviews and that only ask for items that are actually needed. For instance, a former student of mine just sent me an email from an AMC indicating the appraiser had violated USPAP, as his adjustment was outside the 10% range. This is not a USPAP issue.
“A former owner of an AMC recently admitted to me that only some of his clients required one current listing, while a few others wanted two current listings—the majority didn’t require any listings. To make this easier for his company, he simply instructed all their appraisers to provide two current listings on everything. As a result of this unnecessary extra work, everyone was impacted and the entire process was slowed.
“I’ve also personally had an AMC request rental photos one time when it was not an assignment condition or a Fannie Mae guideline. As soon as I informed them that the additional work would result in an additional fee, they all of a sudden waived the unnecessary request. Banks should be enlightened that this behavior will negatively impact the entire process.”
Fees paid to appraisers by AMCs has been a major issue over the past couple years, and has tarnished the relationship between both entities. As an appraiser, how do you feel this issue could be resolved once and for all so both parties are happy?
"Appraisers should be paid legitimate fees and not have the fee dictated to them by the AMC. AMCs should be compensated by their clients and not through stealing a portion of the appraiser’s fees. Appraisers should also receive their payments promptly. Most service providers, including doctors, attorneys, plumbers, etc., expect payment at the time their services are rendered. Why are appraisers expected to extend credit to their clients?"
The lack of communication between vendors and AMCs has also created problems and has caused distrust. How, in your opinion, can AMCs communicate better with the vendors they depend on? Do you feel technology can help with this?
"Cease the unnecessary and meaningless communication. There is absolutely no reason anyone needs daily updates, because this only slows the appraiser down and frustrates them for the interruption. When the date of inspection is communicated to the bank, what do they do with that information? Absolutely nothing!
"Technology may be able to be implemented with the banks to eliminate the middleman."
Bryan S. Reynolds is a registered agent with the TN State Board of Equalization, Certified General Real Property Appraiser, and an AQB Certified USPAP Instructor. Mr. Reynolds has been an In-State Instructor for the International Association of Assessing Officers (IAAO), and presently serves as an adjunct senior faculty member of The Columbia Institute. He is also an approved appraisal instructor in 31 states.
Mr. Reynolds is the owner of Reynolds Appraisal Service and a partner in the ad-valorem consulting firm, The Bryclan Group—http://thebryclangroup.com/. He provides various residential and commercial valuation services, as well as consulting and litigation support services and is available for lectures worldwide. He can be contacted at (270) 929-3088 or by email at firstname.lastname@example.org or email@example.com.
The information contained in this blog post does not reflect the views of Global DMS