AI Connect

[leasedfee]

Lawyers have been having as hard a time . . . .

Sorry I was not clear. I intended to mean USPAP is a regulatory model -- and all regulatory models are created by bureaucrat/lawyer-type-thinking. That is the flaw.

 

[Eli]

Did somebody say it was stated at the seminar that the typical AMC cut is 30% of what the borrower pays? I am not going back through the thread or forum to find it, but whatever they said the typical cut was, think about that long and hard, and consider the way the profession operated from 1985 to 2008. I mention those prior years because I am very familiar with the profession during those years.

 

[leasedfee]

I am not going to swear it wouldn't work, but just paying the appraiser what the borrower pays would be an easy first step and maybe your system the next step. You may be on track in your earlier suggestion. I don't know. I know this current AMC system is bound to be doomed without significant change. Evidently, some authorities think C&R is still the answer, but I don't buy it being the best for the public with the market structure being the way it is where the middle man in most cases is taking a cut of the fee the borrower is paying.

Eli, I'd guess that if they eliminated the skimming of the appraisal fee, then the market prices for appraisal would fall. The lowest bidder is already willing to work for, say, $300 and the AMC/bank skims, say, $200. The appraisal price would in this example would fall to $300 if directly paid. My contention is that having a bank-AMC shop their business to the lowest bidder of their choice. That is the agency-principle contortion, where the parties are no longer independent. The poor appraiser says I need this work and client and if I raise my price to $305, I will lose not just this job but also the client. The poor appraiser says I need this work and client so if I give an opinion of value that is unsatisfactory to the customer, I will also lose this client. Again the agency-principal problem. (( Same agency-principal problem between Yelp and restaurants, so both are easily corrupted when it comes to pimping reviews, being blackmailed by Yelp to post glowing reviews, or paying for deletion of bad reviews. Yelp has the disincentive to promote honest public reviews despite their original intention 'cause they have to generate profits.))

On the other hand, if the appraiser gets assignments by a clearing-house independent of the client there is no fear for extreme price sensitivity or reprisal. If the clearinghouse computer tossed out the lowest bidders and highest bidders, there would still be competition for a reasonable price that would go up or down as supply and demand fluctuated. The bank/AMC (actually, AMCs would mostly go away too as they're rendered useless for most lenders) no longer has buying/firing power. Other parties like lawyers or private lenders/investors would receive a "sound" appraisal whether they liked it or not. Gone with crazy spreads as appraisers don't directly serve the plaintiff lawyer or the defendant lawyer. Appraisers could also take a couple of weeks off, because they don't have to worry about losing their clients -- just change your status on the clearing-house computer to "not available".

 

[Eli]

Dodd Frank may be in trouble.

 

[Eli]

Eli, I'd guess that if they eliminated the skimming of the appraisal fee, then the market prices for appraisal would fall. The lowest bidder is already willing to work for, say, $300 and the AMC/bank skims, say, $200. The appraisal price would in this example would fall to $300 if directly paid. My contention is that having a bank-AMC shop their business to the lowest bidder of their choice. That is the agency-principle contortion, where the parties are no longer independent. The poor appraiser says I need this work and client and if I raise my price to $305, I will lose not just this job but also the client. The poor appraiser says I need this work and client so if I give an opinion of value that is unsatisfactory to the customer, I will also lose this client. Again the agency-principal problem. (( Same agency-principal problem between Yelp and restaurants, so both are easily corrupted when it comes to pimping reviews, being blackmailed by Yelp to post glowing reviews, or paying for deletion of bad reviews. Yelp has the disincentive to promote honest public reviews despite their original intention 'cause they have to generate profits.))

On the other hand, if the appraiser gets assignments by a clearing-house independent of the client there is no fear for extreme price sensitivity or reprisal. If the clearinghouse computer tossed out the lowest bidders and highest bidders, there would still be competition for a reasonable price that would go up or down as supply and demand fluctuated. The bank/AMC (actually, AMCs would mostly go away too as they're rendered useless for most lenders) no longer has buying/firing power. Other parties like lawyers or private lenders/investors would receive a "sound" appraisal whether they liked it or not. Gone with crazy spreads as appraisers don't directly serve the plaintiff lawyer or the defendant lawyer. Appraisers could also take a couple of weeks off, because they don't have to worry about losing their clients -- just change your status on the clearing-house computer to "not available".

It could work. It would eliminate the "market power" of the oligopsony market structure, which is breaking antitrust laws anyway.

 

[Eli]

And leasedfee, your suggestion would be more market specific in nature. $300 may be great in some markets, where it has run many out of business in many markets. In some markets, an appraiser wouldn't even touch the typical assignment for $300 today. The problem is that current laws and regs being implemented as we post are not going that direction. They are going the C&R direction with more state and ASC oversight. I hope the plan works better than it has the last 7 years. I guess the new AMC regs could be a big game changer. Remember they have been pretty much unregulated to a large degree.

 

[leasedfee]

And leasedfee, your suggestion would be more market specific in nature. $300 may be great in some markets, where it has run many out of business in many markets. In some markets, an appraiser wouldn't even touch the typical assignment for $300 today.

Each market would have appraisers bidding respective to their ability/willingness to supply reports, so not a fixed fee amount established in Washington. Prices would rise and fall with supply and demand.

 

[Eli]

Each market would have appraisers bidding respective to their ability/willingness to supply reports, so not a fixed fee amount established in Washington. Prices would rise and fall with supply and demand.

I can see it, but you are wishful thinking based on where things are going. At least states are becoming a strong authority for appraisers to complain to about fees and such. The game is changing due to more oversight of AMC's based on current laws and regs.

 

[Eli]

In some ways leased fee, your suggestion might not work due to market structure. If you only had one buyer, it could lead to more ruinous competition in the market. A perfect free market, or perfect competition exists when there are an unlimited number of buyers and sellers. In your scenario, there really would only be one buyer and even more sellers to the one buyer. Not the exact perfect scenario that exists in a totally free market. In a perfect free market with pure competition, the market operates the most efficiently, but it occurs between one buyer and one seller, and there are an unlimited number of those one buyer and one seller transactions going on based on supply/demand. The ease of buyers and sellers coming in and out of the market is like cutting butter in a totally free market and pure competition.

 

[PL1957]

Each market would have appraisers bidding respective to their ability/willingness to supply reports, so not a fixed fee amount established in Washington. Prices would rise and fall with supply and demand.

If you want to turn appraisal into a commodity, go to a highly regulated rotational panel. If you want to turn it back to a profession, get rid of a licensing system that makes everyone equal.