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".