Price fixing by AMC's

[TJSum]

we need to form AMC cooperatives. It would work. google "cooperative" it's very simple and would work. I should form one.

Great idea!!! AMC's are not the answer and neither are these online appraisal directories who charge good money and if the appraiser is lucky enough to generate any calls out of them, they are just for a comp check.

There are basically two ways to market yourself as an appraiser. You can either become a "skippy" or you can be known for your good quality, honest, professional customer service. Many of us have secured good long lasting clients locally in this fashion of providing the second choice

But marketing locally just does not cut it any longer, the business has become more national because of the internet. How can we market ourselves nationally, the way we do locally providing honest good quality service? What if we formed a national co-op where each appraiser kept their indepedence, but at the same time had a national presence through the co-op. The only fee involved would be a yearly membership fee to maintain a coop website, for someone to manage the web site and of course marketing. The coop could be promoted as a national "company" of appraisers who provide honest good quality work only. No funny business.

The co-op could have strict requirements for the appraiser in order to belong and maintain a good reputation. The guidelines for the potential clients could be right on the website to let them know if they are seeking skippy they came to the wrong place. There could also be a limit to the number of appraisers for each service area to avoid oversaturation.

One of the main reasons I hear from the large banks for using AMC's is that they need the proper "firewall" between the loan officers and the appraiser, but we all know that concept is not working. What if we provided them with the business model where it would work ??? :icon_idea:

I am sure many or most will say, the lenders do not want to "fix" the real problems, and for the most part I agree. But in today's climate, we might just have a chance if we provide the proper business model.

 

[Couch Potato]

There may well be a violation of laws by AMCs, but price fixing is not one of them. Only sellers can fix prices and in their relationship with appraisers, the AMC is the buyer of the service. AMCs are sellers in their dealings with banks, but they charge more than the typical appraiser would charge, so it would be tough to charge them with unfair competition. Some form of coop could work, but the same issues those running AMCs face would need to be addressed. Who qualifies for membership? What causes disqualification? Who operates the needed infrastructure? What would be the source of the startup capital? It is very likely the fees paid by such a coop would end up being less than what is currently paid by many AMCs once all the expenses of operation are taken out.

 

[hastalavista]

TJ-

Low fees does not equal "skippy".
I think it is common knowledge I don't do AMC work, but I get emailed by many forumites who do; most are afraid to admit it on this forum because they fear they will get labeled as a "skippy" simply by accepting a low fee to make a living. All of the ones I have spoken to have the same objective as the rest of us when completing an assignment- to produce a USPAP-compliant appraisal with credible results that are meaningful to the client for the intended use.
Many of the threads (not necessarily yours) imply that working for a low fee is the same as being a skippy. This simply isn't true.

Your idea of a co-op is not without merit. They will, however, be competing with other entities on a number of levels; one of them being "fees" to their clients (I assume it is the larger lenders that are being targeted). So the fee-competition will always be there (its been there without the AMCs).
There is one company that is trying to do something similar to what you suggest; I say "similar" because it isn't a co-op but is a franchise (and not inexpensive to buy in). They have a national presence and advertise to national clients for work through their own ordering system. Their business plan calls for mid- to large-sized appraisal firms, and is not feasible for individual appraisers.

But let us assume that a co-op and a for-profit AMC are competing. Let us further assume that the costs associated with such an enterprise are similar (this is a big assumption; many of the AMCs are connected with larger companies and can benefit from economies of scale in their organization).
What would be a reasonable outcome if the above scenario played out and the co-op was able to successfully compete as a viable business?

There would still be competition with fees and turn-times.
If one assumes that an AMC must have a bottom-line profit of 10%, and that a co-op can pass on that profit to their members, then the fee difference could (theoretically) be a 10% difference.
Note that the charge to the client would be the same. It is the fee-split to the appraiser that is different.

I don't know about anyone elses operating expense ratio as an appraisal business, but mine is fairly high.
If the co-op could manage an operating expense of 25%, that means out of a $350 appraisal, the appraiser gets $262.50. The AMC (since it retains 10% for profit) pays out $227.50; the difference being $35 dollars.

Now, back to the real world.
Is there a $35 difference spread in the fees in your market? There is about a $100 spread in mine.
Would I reject taking a job at $227.50 if I'm taking one at $262.50? Maybe. Maybe not; depends how busy I am. My typical fee may be $425 in my market, but I'd consider taking a job for $375 if I had nothing better to do.

So, what does the co-op idea accomplish?
A. It gives more control to the appraiser. This is good.
B. It presumably can create a quality-orientated service organization. This is very good.
C. It can increase the fees to the appraiser by about 10%. This is a marginal improvement.
D. It does not eliminate fee competition. (This is market driven, so naturally this isn't an issue with me)
E. It does not eliminate turn-time pressure- in fact, this may be the competitive difference. Large lenders may be willing to pay more for a commitment of quicker turn-time.


Of course, one can disagree with my basic assumptions. :new_smile-l:
But I think it is helpful to evaluate an idea placed into the context of the real world where the idea will be tested.

 

[TJSum]

All good questions Tater. I just wanted to start the discussion. I am tired of the "victim" culture that prevails in our profession. The AMC's this, Skippy that... m2: Let's come up with a business model that will compete with these. Like I said, in the past many of us have done it locally, but that might not be good enough for the future. The industry screams out for a proper "firewall", let's come up with a way to provide one.:icon_idea:

 

[Ken B]

I am tired of the "victim" culture that prevails in our profession. The AMC's this, Skippy that... m2:

I'll drink to that.

 

[Couch Potato]

Denis gave an even more detailed presentation of the same types of questions I posed. It's not that the idea does not have merit, but it is not some great panacea either. I do agree on wanting an end to the "poor, poor me" junk.

 

[TJSum]

Good points Denis. As stated above, I just wanted to get the discussion started, see if it is feasible.

I never meant to imply all appraiser's who work for AMC's are skippys. The reason I have a lower opinion of AMC quality is because many of them are being revealed not to have the "firewall" that is advertised. For the most part the less experienced appraiser works for an AMC because they have not been around long enough to develop their own full fee clients, I know there are exceptions. Most of these AMC's then require a 24 hour turn around time (or less) to even have a greater chance of lower quality reports even from the more experienced appraiser. It is the way the system is set up that provides the lower quality, not anything personal against any individual appraiser.

The coops marketing could be based on a "true firewall", honest reports and professional service. Not quickness, we will be prompt but not quick, that seems to be the AMC's big selling point, but there is a flaw to that. The clients, as least the good ones, will know the difference.

 

[Pamela Crowley (Florida)]

How would we be able to compete with the AMCs that unlock, convert the appraisal into something that can be computer checked for various 'guidelines', datamined for AVMs and/or various kinds of databases and repair contract lead sales, etc, etc, etc. ?????
Per the court testimony of First American eAppraiseIT former CEO/President, their bank clients demand that these 'conversions' at least be done and we're still working on all the reasons for it. It appears the appraisal were/are(?) also being delived unlocked so the bank clients can 'add other documents' (and remove unwanted pages, etc. ???).

How would a legitimate appraisers co-op who's primary concern is secured delivery of unaltered high quality appraisal reports compete with that???

 

[Carnivore]

Let see, Pam, and now the NY AG has eveidence of numerous AMC's internally are colluding and conspriring with banks on hitting the number, black listing, altering federal documents etc etc ...

Yet, somehow TAVMA members are not suspect in Price Fixing! Yea, thats right! They are too honest to price fix!

 

[Lobo Fan]

It is getting worse. This was in my latest Appraisal Scoop:


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FNC Releases Automated Appraisal Tool - Collateral Headquarters

According to Broker Universe: Oxford, Miss.-based FNC Inc. has announced the release of Collateral Headquarters as a desktop tool to enable regional and community lenders and appraisal management companies to automate appraisal ordering, assignment, tracking, and review from a single centralized platform.

The system captures best practices in a user-configurable out-of-the-box solution that offers to cut turn times, lower costs, address regulatory compliance, and track performance. Collateral Headquarters also gives lenders an administrative dashboard.

Users can assign appraisals automatically to their pre-approved list of vendors; manage jobs by vendor, status, or due date; use a time-and-date stamped record that tracks the progress of each loan in production; and immediately verify completed orders.

An FNC spokesman said inquiries about the new service have largely come from mortgage industry players eager to head off regulatory scrutiny along the lines of the New York lawsuit alleging that First American's eAppraiseIT unit inflated appraisals on behalf of Washington Mutual.

Click here to see how it works . . .


According to the FNC web site: Collateral Headquarters provides a platform for your lending institution to automate and streamline appraisal ordering, processing, communication, review, reporting, and archiving.

Here’s how:

No searching for appraisers—Upload your own pre-approved appraiser list to the Collateral Headquarters platform or search our database for connected appraisers by area. A few clicks and you’re done.
Automatic appraisal ordering—Once your list is active, Collateral Headquarters can assign orders automatically through round-robin vendor selection or your pre-selected rankings.
Organized work queue—Collateral Headquarters keeps all of your jobs on one platform, organized by status, due dates, or vendor.
No more phone tag—Communicate with appraisers using Collateral Headquarters’ instant messaging 24 hours a day, seven days a week.
No papers to shuffle—Appraisal reports arrive back to the platform as data files.
Automated appraisal review—Improve your turn times with automated review that allow your people to concentrate on exceptions.
FNC can be found online at http://www.fncinc.com.

Article Source: Broker Universe

This is Appraisal Port. I guess they are feeling confident about their lawsuit. They were trying to sell me back data-mined appraisal for $125.00 per month. Their data base sucked. One address came up four times with four different owners and four different legals, and all of them were wrong.