Hybrid Appraisals

[George Hatch]

The market sets the C and R fee now, and appraisers have no problem with it - the problem is that the AMC takes a split of the fee.

Rinse and repeat teh bold type sentence below. It has been explained numerous times, which means you either fail to understand it or pretend that you do not understand it.

When there is no AMC involved, lenders do not solicit competitive bids for non-complex orders. They pay all the appraisals on their panel in a region the SAME C and R fee .

Do you understand this simple fact, or not ?

I understand what you're saying but I also understand that the AMC users do not make the same decisions as the non-AMC users (which are numerically fewer in number). A simple fact that I'm sure YOU understand.

It's the lenders who make these choices. The larger number choose AMCs and the smaller number choose direct engagement. So much so that - as you continually comment - there aren't enough of those non-AMC assignments to go around. There's far too much competition among appraisers for most of them to consider that a viable business strategy.

 

[J Grant]

The other point nobody wants to engage with is that even under C&R it will be the market that sets the rate. Not the govt. If 100 appraisers are chasing 75 assignments that day only the most competitive bids are going to be accepted; the less competitive bids will sit idle. No different than when a property is listed too high in the MLS. It languishes while the more competitively priced listings get snapped up.

Rinse and repeat for a month or two and the lower number becomes the more common number as a direct result of the market participants exercising their choices. Add to that, the more efficient the tech-enabled point of purchase becomes the more potential there is for fee volatility. The winners of the live-action bidding on Monday were bidding at $402 but the winners on Wednesday were bidding at $399. A month later the prevailing fee might be $567; for the most part its volumes on the demand side that are more flexible, not the available supply of appraiser productivity.

The point being that any assumptions that govt will prohibit appraisers from competing each other by fee may be subject to challenge.

Lenders do not want to engage in your fantasy winners on Monday or Tuesday bids idea. Are you reading challenged? How many times must it be said - when no AMC is involved, the lender pays C and R. Hard stop. Lenders are in the mortgage lending business, not a low appraisal fee business.

The only ones interested in low fees are the AMC because that is how they get compensated. s LEandieiwcdutp is a

 

[TC]

The SFR appraisers flooded their own market 15-20 years ago by chasing the short dollar without regard for the long term. That gross oversupply is what put them at the competitive disadvantage when the lenders were abruptly forced to direct engagement. That oversupply is what they get blamed for. It's also a mistake they didn't repeat this time around. They're losing business now because the 2025 demand is down, not because the supply is too high for the 2015 demand levels of the past.

The problem now is the rise of the machine, which was also eventually inevitable. It is the technology that enables loan origination to operate on a national scale instead of a local scale. It enables the no-personal contact business relationships, the blast solicitations, the portal engagement and transmissions, and the industrial economy of scale at the point of purchase. THAT evolution was also inevitable and inescapable regardless of anything the appraisers could have done to prevent it.

It is the technology that enables the waiver and the hybrid, and the migration of the easiest and most profitable assignments to the box. And that trend will not be limited to the SFR niche, either. The simplest and most profitable CG work is going to get gobbled up by the machine, too.

I was just about to say that, beat me to it.

A Q-1 post.

 

[J Grant]

By definition, what "should be" usually...."isn't".

In a corrupt system, that is the case. When corruption is removed, what should be, then is -

 

[J Grant]

I was just about to say that, beat me to it.

A Q-1 post.

Please don't buy into the blame tech falsehood.

Technology has nothing to do with AMC low fee solicitation. It existed the day the HVCC passed as it does now. The low fee is due to regulators being influenced when they changed the second provision for AMC to use their own surveys to evade the intent of C and R.

Tech or no tech, the lenders do not engage in fee shopping, the AMC s do. It is low tech, the AMC's mass email bids or compares fees internally.
Using portals does not determine the fee.

 

[George Hatch]

And yet most lenders are not using direct engagement. I don't know how you can acknowledge that fact without also acknowledging the reason they're doing so is because they consider it in their own best interests to do so.

15+ years so far, with no end in sight. I predict you and I will both pass into what comes next before the govt finds a reason to outlaw the bundled fee model. Which BTW will not stop the AMCs from shopping by fee. Heck, you can't even articulate what adverse effect the bundled fee model has had on the safe/sound mortgage lending beyond its effect on appraiser fees. You don't even know if there's a measurable difference in the loss ratios between direct engagement vs AMC engagement on tranches consisting of similar property types and LTVs. All you know is that working for splits is just not fair to the appraisers.

 

[J Grant]

And yet most lenders are not using direct engagement. I don't know how you can acknowledge that fact without also acknowledging the reason they're doing so is because they consider it in their own best interests to do so.

15+ years so far, with no end in sight. I predict you and I will both pass into what comes next before the govt outlaws the bundled fee model. Heck, you can't even articulate what adverse effect the bundled fee model has had on mortgage lending beyond its effect on appraiser fees. You don't even know if there's a measurable difference in the loss ratios between direct engagement vs AMC engagement on tranches consisting of similar property types and LTVs. All you know is that working for splits is just not fair to the appraisers.

WTF??

I have acknowledged the fact that most lenders do not use direct engagement, and have explained why - because the lenders pay nothing, no hard cost for AMC service due to the HUD built fee (and failed to be validated by the influential regulators who changed it to a second C and R provision wrt AMC fees ).

Yes, Captain Obvious, it is in their own best interest to get free AMC service. If the lender had to pay a cost to the AMC, the lenders would switch to direct order because it would be cheaper. If the lender could pass the cost on to the borrower, maybe they would still use the AMC. The problem is not the AMC; the problem is that they split off the borrower-paid fee.

It is more than enough to recognize that working for fee splits when an AMC is involved is not fair to appraisers. Maybe it is anti competitive for anti trust, Iit is like no othe rbusienss model out there.

You know who does not use AMC's? Besides some lenders, several large nationwide wholesalers do not use them and order directly. Let's hope it stays that way. They are more interested in a quality panel and will pay the small cost to run it rather than use the AMC model one tried it and went back to direct order. No work is safe, however, with the sharks out there -which is why I advise against going into the business with a res license only.

Running a direct order panel costs less than it used to be because of portals, auto review programs, direct deposit payment, etc.

 

[George Hatch]

Let's articulate a little thought experiment. Use your words.

Lets fantasize about a federal govt which decides on Monday to outlaw the bundled fee model and forces the lender to pay the AMC separately from the appraisal. What do you think the conversation between the AMC and the AMC-using lender will look like on Tuesday? And just for fun, lets assume the individual at the lender is a low-EQ pirate who doesn't care how appraisers feel about the lender's decisions. In fact, lets say its someone like me. And not a sensitive, caring, nurturing and supportive person like you.

Me: Okay, so we agree that your end is $250 and is billed separately in our disclosures from the appraiser's fee, right?​

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AMC: Of course. Does this mean you don't care what the appraisers' fee is? After all, the borrower is paying both fees, not you.​

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Me: Are you high? Of course I expect you to bring me the best deal on appraiser fees that are available. Why else would I do business with your company EXCEPT to control the total of the fees I'm passing on to my borrowers? I do not intend to lose business to XYZ bank across the street over a $25/deal difference in the fees they're charging their borrowers.​

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AMC: But what of the appraisers? Don't you care about their well being?​

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Me: You need to step away from the crack pipe. I'm in the lending business, not the appraiser-nanny business. Appraiser lives don't matter to me. I only care that they make their work look good enough to get me by without causing me any problems. That's your other job; to ensure the work is "good enough" before sending it to me.​

 

[J Grant]

Let's articulate a little thought experiment. Use your words.

Lets fantasize about a federal govt which decides on Monday to outlaw the bundled fee model and forces the lender to pay the AMC separately from the appraisal. What do you think the conversation between the AMC and the AMC-using lender will look like on Tuesday? And just for fun, lets assume the individual at the lender is a low-EQ pirate like me who doesn't care how appraisers feel about the lender's decisions. And not a sensitive, caring, nurturing and supportive person like you.

Me: Okay, so we agree that your end is $250 and is billed separately in our disclosures from the appraiser's fee, right?​

​

AMC: Of course. Does this mean you don't care what the appraisers' fee is? After all, the borrower is paying both fees, not you.​

​

Me: Are you high? Of course I expect you to bring me the best deal on appraiser fees that are available. Why else would I do business with your company EXCEPT to control the total of the fees I'm passing on to my borrowers? I do not intend to lose business to XYZ bank across the street over a $25/deal difference in the fees they're charging their borrowers.​

​

AMC: But what of the appraisers? Don't you care about their well being?​

​

Me: You need to step away from the crack pipe. I'm in the lending business, not the appraiser-nanny business. Appraiser lives don't matter to me. I only care that they make their work look good enough to get me by without causing me any problems. That's your other job; to ensure the work is "good enough" before sending it to me.​

I think that the pretend conversation you present is improbable.

Let's say a borrower paid appraisal fees in a region are $550. That is C and R established by record, so it would be hard for a lender to break that amount and thus be out of compliance. The lender might offer the AMC $75 per order, take or leave it. The appraiser gets paid the $550 covered by the lender, regardless, and at that point the lender might choose to order directly. The lender has already approved the appraiser working for AMC and has their names..

WTF would a lender pay an AMC $250 to manage a stupid appraisal order? The only way the AMC gets $250 now is by driving teh fee down via the split. AMCs would be prohibited from splitting the borrower-paid fee in your section above, where the government prohibited it.

If the lender is allowed to pass the cost of AMC service on to the borrower as a line item, the lender might pay the AMC $100 per order.

 

[George Hatch]

You can swap any number you want in there and t won't change the conversation. The deal will occur at wherever the point is for the meeting of the minds, just like any other transaction.

Regardless of however much the AMC agrees to work for, they aren't in the lending business where the mortgage deal is the thing and for whom the appraisal assignment is a trivial distraction. The AMC is in the shopping-for-appraisals business where the appraisal is the thing. Just like a fee shop; they're also in a completely different business than the lenders.