The Appraiser Shortage Myth Part 43

[Eli]

This is not some hooboo booboo. There are laws in place.

 

[DWiley]

You are a broken record, putting the blame back on the appraiser.

How about this, get your fee from the lender for management, stop taking a cut of the borrower paid fee, restore fees back on res lending side. There, I am putting the blame back where it belongs. While appraisers can be faulted for lowering their fees, why are they even being pressured to do so? The AMC as middleman is why. Lenders virtualy never shopped by fees prior to AMC takeover of large volume, as long as what an appraiser charged for an appraisal was within the range of what borrowers were paying. And that is still the case for lenders not using an AMC.

As I said before, we take no "cut" from the borrower fee. I never see the borrower fee. The appraiser charges me. I charge the lender. I have no relationship with the borrower (expect in very rare cases like PMI removal). What I charge the lender is based on my agreement with that lender and has nothing to do with what the fee the lender passes along to the borrower.

You want your appraisal business to be free from the forces of competition. You want to be able to charge whatever you want, and you can. What you cannot do, however, is force a buyer of your service to not compare your rate with the going market rate. If you don't want to compete, then don't. Simple as that. There was a reason that I built my own firm around non-lender work

 

[Eli]

My perception is the revised C&R law put it like a train wreck with antitrust law.

Now an oligopsony is a different problem.

Appraisal practice without a license is a different problem.

 

[Eli]

There are laws involved here. I really don't care what you think. Get a lawyer!

Let him or her post . You would be better off.

 

[hastalavista]

Sounds like more (free) work put upon appraisers.

That depends, I think.

This forum is like the kids who live in Lake Woebegone; they all are above average (I include myself).
My fees are higher than many. For a fact, my turn-times are longer than most. Yet, even with those high fees and longer turn times, I get residential mortgage appraisal business.

If low fees mean crappy appraisals, then scrutinizing quality will benefit every appraiser who believes that their work is better than average. Because along with the belief that low fees means crappy appraisals is the belief that those who do crappy appraisals cannot do good quality work (or, cannot do them at the same volume level they churn out crappy appraisals; on this I agree).

Screening out the crappy appraisals/appraisals will result in those who remain (average or better) having the pie to divide. All of a sudden my higher fees become more competitive because the $250 crappy appraisals (if quality is related to fee) will be screened out. I also said that the pendulum always swings a bit too far, so there is a risk of some lenders over-reacting. But, I believe the system will find its balance.

However, I also believe that there are plenty of appraisers who do good work and who are willing to charge, say, $325- $350 for a job I wouldn't touch for less than $500. If they can do the job and it meets the requirements at $325, they deserve it. And, that profile probably does fit a lot of appraisers on this forum: They do good work and compete with the $250 crappy appraisers. Those guys are gone, then they'll get the work at $325 - $350. If they think they can raise their fees some more, that's great (their increases makes my fees more competitive). But my guess is that many of these appraisers have the technological skills and processes-in-place to improve their efficiency and be competitive on price at $325 - $350 while making their minimum profit margins. It won't be long before they are considered the next level of bottom feeders who are complaining now.

So, will the increased scrutiny create more work for some? I have no doubts. More work for those who think they are above average? I have my doubts.

 

[Deleted member 130081]

Despite what many think, there is no rule or regulation requiring AMC use. What the rules do require is separation, and many lenders have decided that the easiest way to show compliance with the requirement is to use an AMC.

What the proliferation of AMCs did was expose the market data related to appraisal fees. While local lenders delay with a handful of appraisers, AMCs deal with thousands. That goes them a LOT of data about appraiser fees, and they use that data (just like appraisers use MLS data) to see what the "comps" say about market level fees. If appraisers want higher fees, all that has to happen is for the appraisers in an area to raise their fees. The problem is that there are a lot of appraisers who only know how to market for business based on fees.

Fees are very high in the COW states right now, but few are complaining about that now. Lenders know it is just the market rate. AMCs have just raised their lender fees. Appraisers love 4 digit fees. The complaints in those states is about turn times more than fees.

JG lives in one of the states with a huge supply of appraisers, yet seems to think that that huge supply should have no effect on her fees. That is no more realistic that a builder in 2009 thinking that he/she should still be able to sell houses at the "old" prices despite the fact that the housing market was flooded with inventory. Supply and demand just does not work that way.

Well, you said it with your own words. Pooling of labor in the fashion AMCs do is not typical in the US, nor is it consistent with a traditional free-market system, where a consumer would typically not have access to each and every possible provider. You may say this is all fair in love and war, but again I would argue this did not arise from free-market forces, rather was a result of government intervention into an established free-market. While not exactly the same story of how things came to be, your defense is not unlike Standard Oil claiming consumers could just stop using oil if they didn't like the prices. This is not about selling televisions, this is about home-ownership and the financing that makes that work for the benefit of all.

I don't hate AMCs for being who they are. But to claim they are free-market participants when the truth is they came to power through government intervention and use tactics to pool labor that are outlawed on the retail side, is disingenuous.

 

[Deleted member 130081]

That depends, I think.

This forum is like the kids who live in Lake Woebegone; they all are above average (I include myself).
My fees are higher than many. For a fact, my turn-times are longer than most. Yet, even with those high fees and longer turn times, I get residential mortgage appraisal business.

If low fees mean crappy appraisals, then scrutinizing quality will benefit every appraiser who believes that their work is better than average. Because along with the belief that low fees means crappy appraisals is the belief that those who do crappy appraisals cannot do good quality work (or, cannot do them at the same volume level they churn out crappy appraisals; on this I agree).

Screening out the crappy appraisals/appraisals will result in those who remain (average or better) having the pie to divide. All of a sudden my higher fees become more competitive because the $250 crappy appraisals (if quality is related to fee) will be screened out. I also said that the pendulum always swings a bit too far, so there is a risk of some lenders over-reacting. But, I believe the system will find its balance.

However, I also believe that there are plenty of appraisers who do good work and who are willing to charge, say, $325- $350 for a job I wouldn't touch for less than $500. If they can do the job and it meets the requirements at $325, they deserve it. And, that profile probably does fit a lot of appraisers on this forum: They do good work and compete with the $250 crappy appraisers. Those guys are gone, then they'll get the work at $325 - $350. If they think they can raise their fees some more, that's great (their increases makes my fees more competitive). But my guess is that many of these appraisers have the technological skills and processes-in-place to improve their efficiency and be competitive on price at $325 - $350 while making their minimum profit margins. It won't be long before they are considered the next level of bottom feeders who are complaining now.

So, will the increased scrutiny create more work for some? I have no doubts. More work for those who think they are above average? I have my doubts.

Well, what you seem to ignore, is where does the money come from to support that lower fee? This thread after all, is about the shortage of appraisers. You can justify it, you can accept it, whatever, but the plain and simple truth is the money that supports the lower fees (meaning, how could an appraiser ever work for the low fee question) comes from the margin that used to support the trainee expense. It really is that simple, no matter how anyone wants to dance around it. Appraisers used to get a certain fee that covered all their expenses, including trainees. Now that a certain margin has been eaten up by the AMC, there is no more room left to support a trainee. So, the argument that continues to be made that the low-ball appraisers are incompetent is in my view a poor conclusion. I think many competent appraisers can afford to do a simple 1004 for $250, maybe even $200, but that doesn't leave any money left over for anything else. Now the same group that has eaten the margin for themselves, is complaining there may be a shortage of labor looming. Reap what you sow is what I think.

 

[DWiley]

Well, you said it with your own words. Pooling of labor in the fashion AMCs do is not typical in the US, nor is it consistent with a traditional free-market system, where a consumer would typically not have access to each and every possible provider. You may say this is all fair in love and war, but again I would argue this did not arise from free-market forces, rather was a result of government intervention into an established free-market. While not exactly the same story of how things came to be, your defense is not unlike Standard Oil claiming consumers could just stop using oil if they didn't like the prices. This is not about selling televisions, this is about home-ownership and the financing that makes that work for the benefit of all.

I don't hate AMCs for being who they are. But to claim they are free-market participants when the truth is they came to power through government intervention and use tactics to pool labor that are outlawed on the retail side, is disingenuous.

What illegal tactics are you alleging? Comparing prices is not illegal. In fact, it is the norm. As I have said many times before, appraisers make a living by analyzing comparable market data - but many do not want that done with the services they provide. I agree that AMCs poll labor, and it is the data from that polling that some do not like.

If you want to use an oil company example, then it is the appraisers who are the oil company, because it is the appraisers who provide the service that is purchased, and it is the appraisers that set the market rates that the buyers of those services have to pay. Just look at the COW states to see that. If AMCs controlled pricing the way some claim, then why have fees in those areas gone up 100% or more over the past two years? Do you think it was AMCs or lenders who said, "Gee I think appraisals in Portland should cost $900?" No, it was the appraisers in that market who drive fees to that level.

 

[Eli]

Fees have revolved around FHA (years ago) and VA as long as I can remember. I'm young. Lol

Until the oligopsony. Antitrust? Tell me.

Commingled fees? Lol

 

[J Grant]

As I said before, we take no "cut" from the borrower fee. I never see the borrower fee. The appraiser charges me. I charge the lender. I have no relationship with the borrower (expect in very rare cases like PMI removal). What I charge the lender is based on my agreement with that lender and has nothing to do with what the fee the lender passes along to the borrower.

You want your appraisal business to be free from the forces of competition. You want to be able to charge whatever you want, and you can. What you cannot do, however, is force a buyer of your service to not compare your rate with the going market rate. If you don't want to compete, then don't. Simple as that. There was a reason that I built my own firm around non-lender work

It's semantics - the fee paid to the appraiser IS a cut from the borrower paid amount with the differential going to SL- if it SL does not end up with the full differential, where does it go? Does lender keep a portion?. It is not a case that borrower pays $550, appraiser gets paid $550, and SL charges the lender a separate charge, correct me if I am wrong, if that is the business model. Assuming it is not ( or fees would be higher and no need for this thread) Then:

A) Borrower pays $550 to lender for appraisal. Does the lender pay SL $550? or some lesser amount?

B) Appraiser charges SL $300. Does SL keep the differential of $250 from the $550? Or does SL charge the lender a flat rate no matter what the appraiser charged, such as SL charges $150 per order?