A M Cs

[Pamela Crowley (Florida)]

Who are the AMCs and what function / purpose and WHO do they serve?

How are AMCs affecting real estate appraisers,
real estate values,
and the quality of mortgage collateral?


Please keep your replies directed to this question. General answers and/or specific examples would be good here.

Keep in mind that there are (or might be) more specific questions regarding this issue in other questions. You might want to read through each thread question before starting your answers.

 

[Tim Hicks (Texas)]

Appraisal Management Companies are companies that serve numerous lenders offering the service of finding an appraiser for them, sometimes quality control of the appraisal process, sometimes underwriting the appraisal and sometimes reviewing the appraisal.

All in all, the AMC is a good concept as a buffer between the mortgage company and the appraiser to ensure the unbiased selection of the appraiser.

However, the AMC has morphed into an equally bad concept in many cases. AMC's have realized that appraisers need them to obtain work. Therefore, many of them have decided they deserve the lions share of the appraisal fee. In fact, many AMC's shop for appraisers that will accept the lowest fee split. This is not a deserving criteria for appraiser selection. This forces the better appraisers to accept fees below what they deserve or they decide not to work for AMC's. This has caused a trickle down effect that has resulted in lower quality appraisals in many instances because the only appraisers willing to accept the poor fee splits are newer, less qualified appraisers or appraisers who are desperate for work. The old saying "you get what you pay for" is very true in many instances.

The "buffer" effect has also been affected as the AMC climate has changed. In many cases AMC's have succumbed to lender pressure for value and they have passed the pressure on to the appraiser. Sometimes this pressure has added un-necessary appraisal reconsiderations and appraisal work for no extra money in the effort to satisfy the lender needs.

As a state certified appraiser with 14 years experience in all types of residential appraisals, I have yet to find an AMC I will work for. I will not accept 40-60% of my standard fee to obtain work. I will not accept AMC rules that include "no compete" clauses, peculiar AMC underwriting guidelines or questionable review tactics. I will not accept daily status faxes, especially for days after the assignment has been delivered. In addition, I refuse to work for a company that demands timely delivery, but then will take 45-90 days to pay their bills. If you demand timely delivery, then you should pay just as timely.

It is my opinion that most AMC's do not appeal to the most qualified and knowledgeable appraisers for these reasons.

 

[Edd Gillespie]

AMC's provide the very valuable service of bringing appraisers and clients together in this day of lenders in CA doing business in CO. AMC's are providing the services that our appraisal organizations should provide, but do not. Capitalism being what it is, AMC's do this for the lofty goal of making a profit-hence they want us to work for less, and we let incompetent appraisers run around loose so AMC's can find cheap work. We appraisers have not educated any one how to know a good appraisal from a bad one, so the AMC's got us there too-they offer review as a part of the service-never mind the review is probably not worth the time it took or what they got paid for it.

AMC's are another product of a profession asleep at the switch. At the moment we are a non-profession to the public where most of the action is.

 

[Wally Jones]

The management company concept is sound. Provide a "one-stop" service point for real estate transactions. Help the lender by taking care of all the detail work in preparing for inspections, appraisals, title work, etc. Help the borrower and seller by ensuring everything is in order for a smooth closing.

If the AMC function operated independently for a flat fee we might be seeing some progress in the alleviation of pressure on appraisers to arrive at pre-determined opinions of value.

However, in our capitalistic, market-driven society, the bottom line is King and the Golden Rule applies. ("They Who Have The Gold Make The Rules")

The AMC's who are owned and operated by lending institutions are hardly independent of their influence. So these organizations have evolved into a money-making branch of the lender whose goal is to squeeze as many pennies as possible from each transaction. Fees to service providers (e.g., appraisers) are slashed while the fees to the borrower/seller are increased. (In a case from the Second Circuit U.S. Court Of Appeals in September 2004, examples were provided where document preparation was outsourced to third parties for $20 to $50 and then, without performing any additional services, consumers were charged $150 to $300 for the services. Last year, I saw a closing statement where the consumer was charged $480 for an appraisal but know that the AMC paid the appraiser $225.)

The effect on appraisers, in my opinion is twofold. First, it produces a mindset in newer appraisers that if they don't accept assignments from whomever they can, they will not be successful. Some appraisers have little business background and haven't learned how to solicit customers and are not yet sufficiently experienced in appraising to have the confidence necessary to decline these assignments out of fear they won't be able make a living. Secondly, the very low fees and higher pressure of short turn-around times fosters an atmosphere of competition which attracts entrepreneurs who believe that volume work performed by trainee appraisers for very low split fees is the road to riches. Sadly, that has been the case in many instances. New appraisers working in such an environment have learned very little about appraising but very much about the nature of man.

I'm not convinced the AMC's are having a large effect on real estate values. I think, rather, the nature of appraiser education and training may have more influence. An appraiser who has learned his or her craft well and has a strong sense of ethics will do the best job they can without regard for who the client may be. Pressure by an AMC (or anyone else) to perform at a sub-par level would be rejected by such an appraiser. I think any effect on property values is diffused in proportion to the market share of the lender/client served by an AMC.

The quality of the mortgage collateral for AMC related real estate transactions is probably about the same as for the rest of the industry. I think there are portfolios in many institutions which contain poor appraisals and which had no AMC involvement. Conversely, I think there are many good appraisals in the files of lenders which used an AMC to manage the appraisal process. Time will tell.

 

[Scott Kibler]

Overall a good concept if correctly implemented to act as an appraiser screening and appraisal review function for end users wishing to outsource these activities. It could also be useful to shield the individual appraiser from possible coersion from the clients. In practice, however, they generally do none of these things and act solely as a matchmaking service which also directs the coerision from the clients to the appraiser while collecting an oftentimes outsized portion of the fee.

 

[Restrain]

As an appraiser of 36 years, the AMC, while a reasonable concept, is still paying the same fees as in 1985, while overall fees have risen. As a result, the AMC is charging as much as $450 for an appraisal, while paying the appraiser $175. The difference is going into the lending institution's pocket, since they now own the AMCs.

There is no separation from the lender as there used to be. The reviewers, which work for the lender, regularly do not read the report. I have one AMC that regularly asks for comments which are already set forth in the report. I have called the reviewer and asked them if they actually read the addenda section and they have admitted that they didn't.

If they're not doing their job, why are they calling us?

So, there is no separation from the lender, and if the loan doesn't make, "Quality Assurance" calls, pushing for a higher value. Appraisal fees are pushed lower and lower as greed drives the demands for every higher profits from the AMCs. The end result is the better appraisers are moving away from AMCs, leaving the field for the poorly qualified.

 

[Bob Ipock]

AMC's mUST be regulated either by appraisal boards or banking commissions/boards.

AMC's MUST be forced to accept and follow USPAP as well as all state appraisal and lending laws.

 

[Lee Lansford]

The problem, as I see it, is that AMC's generally have two criteria for the selection and retention of appraisers on their approved appraiser list:

1) Work FAST and work CHEAP

2) Work CHEAP and work FAST

Or, am I being redundant.

Oh, yes, there is a third requirement: "You are licensed, aren't you?"


Lee Lansford, IFA

 

[Mister Ed]

AMC's (in my market) as I see it:

1. They require that all work be performed by licensed/certified appraisers. A trainee may go, but the lic/cert must also attend. This requirement is good in and of itself, but when you consider what I will write below, you will see where the system falls apart quickly.

2. They rape your fees. They charge borrower more for the appraisal than your standard fee and are willing to pay you 2/3 of your standard fee AT MOST--and they will often send the orders to the appraiser willing to do the work for the least amount of pay.

3. They want you to ALWAYS set an appointment for inspection within 24 hours of receiveing the order (even if they forgot to tell you that the borrower is to be out of town for a week beginning the day before you get the order--or the contact information is incorrect).

4. They want you to ALWAYS have the completed report returned within 24 hours of the inspection date--does not matter the complexity or if your mother died or if the borrower made a 1000 sq ft addition that was permitted but not yet updated on the tax rolls and you have to get new sales and drive 30 miles each way to inspect the sales.

5. The call/email/fax on a daily basis wanting status updates.


THE PROBLEMS THIS CREATES:

1. Certified appraisers cannot afford to take a trainee out to do the appraisal inspection with them, so either the trainee misses learning options OR the appraiser sends the trainee out but claims for the sake of the AMC that he/she also inspected the property (can we say FRAUD?)

2. The harrassing phone calls/emails/faxes waste your precious time when you could be trying to contact the borrower to set an appointment or completing the report. At this point, you are moved down their priority list if you do not do the work in their time frame... even if the borrower does not want to move at their time frame.

3. The 24 hour turn around is reasonable in a cookie cutter neighborhood or if you have no other work going on--which hopefully is rarely the case.

4. If the fee you are being paid is 2/3 or less than your regular fee, you may tend to be a little more sloppy than if you are getting full fee--for example: if it takes three of that AMC's appraisals to make the same as you make for doing two for another client, you will want to try to do those three in the same time frame that you would normally perform the two!

5. The promise of volume work for your reduced fees goes out the window if another appraiser in your market area will do them for $5 less! We finally lost all of our business with one of them when we would not agree to go below our $215 mark when another appraiser in town agreed to do them for $175!!!!! I told them that we were already at the "break even point" (and probably losing money) on our fee and would not lower the fees--no more work from them and our headaches are now fewer.

My office has performed work for three AMC's--Chesapeake, Omniserve, GreenLink. None has ever pushed value issues, but all have fit the mold above. They are not worth the hassles to us.

 

[TC]

Without getting too technical, AMC's are the pimps, we be the hookers.


TC