Not to quarrel with your assessment otherwise, but supply and demand is not a lead pipe cinch in anything. I learned that in economics too.
During the 90s we had ups and downs then the dotcom bubble. But FEES never changed then, only volume.
Do you think that is because all the banks suddenly turned altrustic? Or could it be because the appraisers themselves actually stood their ground? Certainly for every product or service, there is a different amount of time before prices start going up and down to reflect changing demand and supply curves. I think the lenders and appraisers had more of a business relationship than anyone cares to admit. Maybe lenders didn't want to lose that good appraiser that always buttered their bread. Perhaps they truly did value a good report back then and didn't want to risk losing a genuinely good appraiser. But those days are gone, mortgage appraisals have turned into a commodity, and must be analyzed as such, because the model does not seem to be going away. So the supply and demand functions I am speaking of only apply in a free market, where both suppliers and users of a particular product or service are FREE to enter and exit at relative will.
When the tubed TV starting getting replaced with flat screens, do you remember what happened to price of the older style TVs? Did they change in a day? No. It took time for each company, one by one, to realize that at their current prices, sales were decreasing, mostly due to the newer product, the flat screen. Some lowered prices for a while, hoping to sell what they could, perhaps just getting rid of inventory. As more and more realized they could not turn a profit anymore, they freely exited the market, perhaps to never be heard from again, or perhaps just reassigning the entire division to the production and marketing of flat screens. As fewer suppliers remained, there was again an equilibrium for a little while, as there was still some demand, and prices actually went up bit. But in the end, no one wanted the clunky ol tube TVs anymore. They went the way of the VCR, record, and 486 computer.
Today's appraisers have the same opportunity with regard to standing their ground. Demand will not decrease simply because appraisers start refusing to do 1004s for $250. It may in time, but that is coming anyway.
You and others speak of AMCs as the 800 pound gorilla, and that there is ONE market in this country for appraisals. This is just not the case. Look again at the COW states. Each market in this country that is somehow separable by a level of geographic competency tends to be its own unique market. There is blending at the edges of course, but still, the Cleveland MSA market is certainly separate from the Detroit or San Fransicso MSA. Even in the COW states, not every market was approaching $1000 for 1004s.
In each of these individual markets, it may be the same AMC players, but the suppliers (appraisers) are all different and still have complete freedom to enter and exit. Each time an individual accepts an assignment for less than what others are comfortable with (undercutting, feeding their family, whatever you wish to call it), then C&R in that market goes down just a tiny bit. But the process can go both ways, it is not irreversible. Here's how this will play out in a sample market.
AMCs and lenders alike want to pay as LITTLE as possible for reports. Appraisers want as MUCH as possible for reports. That is normal on both sides, and part of life. Each transaction is in effect a little negotiation, isnt it? No one is forced to EVER accept any assignment. We are not employees. Now some are, as staff appraisers, but I am not speaking of those folks.
As demand for appraisals goes down, each INDIVIDUAL appraiser has a decision to make. Do they take on less work, or lower their acceptable fee in an attempt to get more orders than others? I think this is an important concept. I would hope all agree that this is how it 'goes down'. Some have some minimum fee they feel their value provided is worth, and are willing to hold their ground. I applaud them! If EVERY appraiser did that, then even in a slowdown, fees would not go down. But some invariably accept a lower fee, inching down that C&R as described above. Some appraisers will decide that the now lower C&R fees are not acceptable, and exit to another career, live off savings for months or longer, retire, blow up an AMC headquarters, etc.
So now there are fewer suppliers to match the lower demand, and perhaps prices stabilize. And the process repeats.
I understand the point you are making about AMC's allegedly taking a big cut out of the appraisers' pockets. If an AMC if getting $300 for minimal ordering/servicing/delivery on a report the appraiser gets $350 for, I get that this is not right. But we have allowed this to happen. Do you think that absent the development of AMCs that the appraiser in this example would otherwise be getting $650 for that report today? I don't.
If C&R is lower than what we want to it be, it is appraisers' faults. The barriers to entry of appraising have always been high. Alternate products were always few. So why is it appraisal fees BEFORE AMCs came out did not grow with inflation? Wasn't the AMCs doing that.
There are certainly many issues in this industry, but lets never forget that each market is still its own independent entity in a way. Maybe one appraiser in each city or market needs to form a co-op so everyone's interests could get on the same page. I am thinking about doing just that in my market. We will never have direct representation in Washington or even at the state level, but we do still control our fates in each individual market. And each and every assignment accepted, declined, or countered helps to set C&R just a tiny little bit.
