http://www.HUD.gov/offices/hsg/sfh/appr/faqs_ML09-28.doc
An accurate reflection of customary and reasonable fees does not include fee splits or other internal compensation arrangements in the appraisal fee disclosure. Because lenders must ensure that appraisers are paid a reasonable and customary fee, appraisers are encouraged to record the fee received so the lender may utilize this information as a data point in order to comply with the requirement that appraisers are compensated commensurate with the level of services provided.
It's that very type of ambiguous approach that the AlaMode fee list hopes to counter. With the updated wording of the appraiser independence ML, AMC's could have quite easily and efficiently played the appraisers own disclosure of fees against them. It's in the specific wording that the lender determines reasonable and customary for themselves. All FHA had to do was take the fee data of which they could have had unhindered access from the broad spectrum and put forth a true representation of the reasonable fee. They could not approach it that way however (speculation), as the mandatory disclosure of fees was changed to voluntary, and because the industry is at odds, and the data would be bi-modal. AMC's would say one thing, everyone else would say another. In areas where volume from one type to another varied (AMC vs direct), the overall results would appear with stark inconsistencies from one area to the next. Couple that with bank owned AMC's and their widely varied policies and approaches, there are a lot of complicated factors. (This Mercury list brings industry wide consistency to the reasonable and customary fee process.) The fact that an appraiser may report a fee because he felt it to be inadequate and perhaps spark consumer investigation on an individual buyer level, unfortunately the wording of the ML seems to indicate the AMC could use that as further evidence towards the ever decreasing reasonable and customary fee which apparently does not have a requirement to be aligned with the rest of the industry (correct me if I'm wrong). If they were allowed to continue to manipulate appraisers with low fees, and then be allowed to solidify those consistently decreasing payouts as reasonable and customary, we would all have been in trouble. The Alamode list is a body of less manipulated data taken from appraisers whom quote fee in a USPAP compliant manner. It's not all inclusive and neither approach could be coined the industry standard that included all spectrums. But as far as the lending side goes, it's obvious the AlaMode list is less biased and manipulated, and more representative of open market appraisal product pricing for the most part. MB's do not always behave in the typically expected fashion these days, and have had to make moves to stay afloat, just like appraisers. One could reason that the Mercury report takes into account many variables with MB's, whom seem to have increasingly varied or less standard approaches to their businesses.
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I hear you. I actually was struggling to figure out why NC had several low fee spots when it's a comparatively high volume "healthier" state overall. The same is true of......and yet there were terribly low fees. It appears to literally just be a collective/cultural choice, not a purely market effect. I don't get it.
Funny you mention that, because I was thinking about the relationships between big cities and smaller ones the other day in response to arguments put forth by appraisers in those highly populated areas where fees are lower than the expected average. I think that because there is always enough work to sustain the appraisers whom are acquiescent to low fees, they seem to have more sustained influence as to fee pricing in the denser areas. Where as in a less busy setting, the appraisers whom did accept low fees may have gone out of business more often during the lull times, or of had more negotiating power to push the fee back up. There may be less negative incentive to take low fees due to overall volume in those more populated areas. On the same point, if that were the case, those areas may have lost the largest volumes of the best appraisers whom would not accept the reduced fee. Additionally, the X factor is the MB's, and how they continued to approach the business. It would not be surprising to find that MB's drove down some of those rates, in response to the typical fee drive down AMC's pushed forth. But the MB would have enjoyed fee pushdown so that he landed more customers and could tout cheaper appraisal fees, where as the AMC pushes price downward for direct profits, and the benefit of savings is not passed on to the consumer. You could research the consumer trend of appraisal service costs in those areas to see if there might be a direct relationship between lower appraisal fees and consumer savings.
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