AMC Allocation of Commercial Jobs?

[George Hatch]

Yoyu consistently refuse to address the divergent set of motivations about fees for retail (non AMC clients ) vs wholesale (AMC's)

Retail clients, including residential mortgage lenders who do not use an AMC, have an interest in obtaining an appraisal at a reasonable cost. The wholesale client ( an AMC ) shops not just for cost but for profit, which vendor fee can they most profit from? This gives them an additional driver of motivation to pressure fees way beyond that of an end-use client who is concerned with reasonable cost.

I estimated 15% of the market, you stae 5% of the market. The upshot is the AMCs control the leverage of supply and demand on the res side because of their huge market share, not because of some heroic stance of the CG community or because back in the day some res licensed certs took on trainees. If you guys are bidding against each other and your fees are flat even without AMCs, you are experiencing some degree of oversupply.

The CGs do not have more options because the market is not so oversupplied - the CGs have more options because there are many more points of origin (diverse demand points ) for ordering commercial appraisals AND they can do residential work - they thus are not stuck with a highly concentrated number of big AMC /affliated lenders or big lender clients who control a large share of the volume on the residential side, Then add in the profit motivaiton dirving ee presssure from the AMCs.

You consistently ignore the real-world example that with the SAME supply of RES licensed appraisers, fees plunged almost overnight when the HVCC shifted a large amount of volume to the AMC's. Which blows the oversupply -the appraisers are to blame- out of the water.

Though by now the res appraisers working for AMCs are so traumatized and in need of a fee increase, that it has become entrenched -a sorry state of affairs.

What you are ignoring is the significance of the sequence of events. Once the lenders were faced with the choice between direct engagement (like the FRT lenders) or AMCs (as some of them had already been doing) many of them chose the AMC route. That happened first.

The spread of appraiser-competition followed. THAT was the effect of supply/demand. The progression of that trend in that sequence was/is significant to the outcome. As in, not irrelevant.

"If you won't do it we'll find someone else who will - BECAUSE WE HAVE OPTIONS AND YOU DON'T.​

Ask the AMC operators. They freely admit to shopping by fee among (who they consider) to be similarly competent appraisers. But they also comment that it was always the case that a few of their appraisers were approaching them to offer lower fees in exchange for more work. Same as has always occurred on my side of the business. Most of our assignments among our regular clients are the result of us competing with each other, often by fee. Not always, but often.

That's what YOU keep ignoring.

As for CGs not being so short-sighted as to flood their own market, just the fact that these clients still shop by fee (successfully) should leave a mark on your reasoning. But you keep missing that point. Deliberately so, it appears. Just because the discounting has been lower (due to them having fewer alternatives) doesn't mean they don't shop by fee.

Think it through. What do you think would have happened if the CGs had been as dumb about trainees as the CRs and doubled their number in 5 years? The fees would have compressed accordingly AND the AMCs would have had the same oversupply to pit against each other on their way toward selling the bundled fee to the lenders. Enough so as to gain traction in the non-resd'l mortgage lending markets.

 

[J Grant]

What you are ignoring is the significance of the sequence of events. Once the lenders were faced with the choice between direct engagement (like the FRT lenders) or AMCs (as some of them had already been doing) many of them chose the AMC route. That happened first.

The spread of appraiser-competition followed. THAT was the effect of supply/demand. The progression of that trend in that sequence was/is significant to the outcome. As in, not irrelevant.

"If you won't do it we'll find someone else who will - BECAUSE WE HAVE OPTIONS AND YOU DON'T.​

Ask the AMC operators. They freely admit to shopping by fee among (who they consider) to be similarly competent appraisers. But they also comment that it was always the case that a few of their appraisers were approaching them to offer lower fees in exchange for more work. Same as has always occurred on my side of the business. Most of our assignments among our regular clients are the result of us competing with each other, often by fee. Not always, but often.

That's what YOU keep ignoring.

As for CGs not being so short-sighted as to flood their own market, just the fact that these clients still shop by fee (successfully) should leave a mark on your reasoning. But you keep missing that point. Deliberately so, it appears. Just because the discounting has been lower (due to them having fewer alternatives) doesn't mean they don't shop by fee.

Think it through. What do you think would have happened if the CGs had been as dumb about trainees as the CRs and doubled their number in 5 years? The fees would have compressed accordingly AND the AMCs would have had the same oversupply to pit against each other on their way toward selling the bundled fee to the lenders. Enough so as to gain traction in the non-resd'l mortgage lending markets.

I am not ignroing anything. You have been spinning the blame for years ot appraisrs and not addressing the real reason for AMC fees. While appraisers caving in or offering on occasion to lower them have a share of blame, it is simply a desperate response to being squeezed with little recourse (except to quit or leave the res loan realm behind)- because the reality is the lion's share of volume in res work is on the lender side.

It is a distraction to compare it to your fee competition - AMCs only control 5% of the volume. Lucky you, because it is the AMC's who have the motivation to bid not just for reasonable cost (your fees are bid for a reasonable cost). The AMC's pit appraisers against each other to obtain a low fee that returns them a profit and not just cost. Couple that with their enormous market share. There is no similarity to it on the commercial side.

I will provide an example. You, me, or any average person needs a lawn mowing service. They shop around and compare some fees. Many fees are similar. A customer often chooses a mid-range fee, but even if someone chooses a service with the lowest fee, they are just paying a cost for the moving service. But imagine if a regulaion chages things to where many individuals are not going to choose and hire thier own lawn mowing services . Overnight, 10 big companies now control 80% of the lawn mowing orders, and the companies are compensated by receiving a split of the pay/fee from a lawn mower who charges them the least. The company is not charging its customers for mowing the lawn. This company offers free lawn mowing service to customers, which gives them an enormous market share. ( the govt perk of a bo, by a government perk of a bundled fee that sees the company instead get compensated by how low they can drive the lawn mower guys' fee down and pocket the rest.

This sorry state of affairs has little to do with res appraisers having taken on too many trainees. If there were not a sufficient number of appraisers who were trained, lenders would have had trouble fulfilling orders. Even if an oversupply of trainees occurred in some mill shops, it was corrected when the number of trainees per mentor was limited to 3 per supervisor back in 2010.

That is supported by the fact that the same number of residential license appraisers were present before and after the HVCC. And literally overnight, the massive shift to AMC ordering saw fees cut in half, because overnight, appraisers lost their former lender clients who now ordered through the AMC's.

 

[George Hatch]

The massive shift literally aggregated the diffused activity among 100,000 points of purchase into the smaller number of clients, each doing larger volumes.

An ice cream truck that drives the neighborhood, effectively selling door-to-door, is operating at one level of efficiency​

A retail storefront that includes ice cream in their inventory is operating at a higher level of efficiency.​

A wholesaler selling ice cream to the storefronts and supermarkets is operating at an even higher level of efficiency​

An importer selling imported ice cream from China by drop shipping via Amazon is operating at an even higher level of efficiency.​

At each level the economy of scale is going to affect the pricing at the point of purchase. The markup for the ice cream truck is going to be a lot higher than the markup at the wholesaler. The larger the volume, the less redundancy in the fixed overhead and administrative costs.

It is indeed all driven by greed and self-interest at every step. Nobody is saying otherwise. Exploiting opportunities in the market is how our economic system works.

But what goes unsaid is that the less efficient marketplace of appraisers selling appraisals to the MBs door to door and in small volumes per portal has been rendered obsolete - in part by the legislation but also in part by the technology. Just like when you transitioned from 35mm film to digital imagery despite the effect it had on your film retailer and your 1hr film developer - for whom you (and every other appraiser) had zero sympathy when you cut ties with them.

 

[J Grant]

But what goes unsaid is that the less efficient marketplace of appraisers selling appraisals to the MBs door to door and in small volumes per portal has been rendered obsolete - in part by the legislation but also in part by the technology. Just like when you transitioned from 35mm film to digital imagery despite the effect it had on your film retailer and your 1hr film developer - for whom you (and every other appraiser) had zero sympathy when you cut ties with them.

This comparison is ridiculous (you are not the only one to make it) - and appraisers tiny share had no impact on the switch to digital.

The shift to digital imagery was truly a game-changer with regard to the technology of photo imaging no longer needing to be sent out for developing. The market for the shift to digital was consumers numbering in the hundreds of millions around the world.

The AMC fee, on the other hand, has almost nothing to do with technology. It enabled the govt perk of a bundled fee supported by stakeholders for their benefit. It was enacted against a small group of professionals ( appraisers ) to benefit the middlemen and to give banks and lenders free of cost AMC service.

 

[George Hatch]

The other puzzle piece is the continued reduction of demand for appraiser-hours over time. 40 years ago we were doing appraisals for every transaction including the no-brainer no-cash refis. Over time the practice of swapping the 100% appraisal requirements with ever-increasng alternatives like BPOs, AVMs and now hybrids and waivers - that's all been cutting into the long term demand. Meaning the same number of appraisers it took to run everything in 1996 still represents an oversupply relative to the actual demand in 2025. And it appears that demand is going to continue to shrink, possibly faster than the number of appraisers who pass on or otherwise retire over the next few years. That doesn't count the potential replacement factor via PAREA and whatever other shortcuts in qualifications occur going forward.

We had a window a few years back where supply/demand actually balanced to the point that appraisers could get their fees. Where even a half-wit in Calif could charge $800 for a 1004 and maintain a backlog of outstanding assignments. So the market DOES respond to changes in the supply/demand, even at the AMCs.

 

[Zoe]

The other puzzle piece is the continued reduction of demand for appraiser-hours over time. 40 years ago we were doing appraisals for every transaction including the no-brainer no-cash refis. Over time the practice of swapping the 100% appraisal requirements with ever-increasng alternatives like BPOs, AVMs and now hybrids and waivers - that's all been cutting into the long term demand. Meaning the same number of appraisers it took to run everything in 1996 still represents an oversupply relative to the actual demand in 2025. And it appears that demand is going to continue to shrink, possibly faster than the number of appraisers who pass on or otherwise retire over the next few years. That doesn't count the potential replacement factor via PAREA and whatever other shortcuts in qualifications occur going forward.

We had a window a few years back where supply/demand actually balanced to the point that appraisers could get their fees. Where even a half-wit in Calif could charge $800 for a 1004 and maintain a backlog of outstanding assignments. So the market DOES respond to changes in the supply/demand, even at the AMCs.

Who will appear in court on next lawsuit when appraiser is gone officer?

 

[J Grant]

The other puzzle piece is the continued reduction of demand for appraiser-hours over time. 40 years ago we were doing appraisals for every transaction including the no-brainer no-cash refis. Over time the practice of swapping the 100% appraisal requirements with ever-increasng alternatives like BPOs, AVMs and now hybrids and waivers - that's all been cutting into the long term demand. Meaning the same number of appraisers it took to run everything in 1996 still represents an oversupply relative to the actual demand in 2025. And it appears that demand is going to continue to shrink, possibly faster than the number of appraisers who pass on or otherwise retire over the next few years. That doesn't count the potential replacement factor via PAREA and whatever other shortcuts in qualifications occur going forward.

We had a window a few years back where supply/demand actually balanced to the point that appraisers could get their fees. Where even a half-wit in Calif could charge $800 for a 1004 and maintain a backlog of outstanding assignments. So the market DOES respond to changes in the supply/demand, even at the AMCs.

But that was an extreme situation and temporary. Since it was an extreme situation with super low mortgage rates, to use that as an example that even with AMCs, supply and demand work is nonsense. The problem, as even you admit, is mainly a very narrow channel of demand through the AMC.s. Of course, a reduction in overall volume due to a segment loss to WAIVERS increases the imbalance. Though with more retiring and very few entering, it might mitigate that.
PAREA is attracting only a trickle of people, with an anemic number of graduates. The pathetic play to lower education to lure people in, instead of correcting the fee imbalance, shows how it is all about profit to the GSEs enabled stakeholders - do they have a mission of public trust ?

 

[Zoe]

But that was an extreme situation and temporary. Since it was an extreme situation with super low mortgage rates, to use that as an example that even with AMCs, supply and demand work is nonsense. The problem, as even you admit, is mainly a very narrow channel of demand through the AMC.s. Of course, a reduction in overall volume due to a segment loss to WAIVERS increases the imbalance. Though with more retiring and very few entering, it might mitigate that.
PAREA is attracting only a trickle of people, with an anemic number of graduates. The pathetic play to lower education to lure people in, instead of correcting the fee imbalance, shows how it is all about profit to the GSEs enabled stakeholders - do they have a mission of public trust ?

George don't want to look at market structure and anti trust violations in the industry.

I am shocked FTC has not got involved in anti-trust law. You know the squeaky wheel gets the grease.

FTC would overrule FDIC, CFPB, FSLIC , etc.............etc. on anti-trust violations.

 

[George Hatch]

But what goes unsaid is that the less efficient marketplace of appraisers selling appraisals to the MBs door to door and in small volumes per portal has been rendered obsolete - in part by the legislation but also in part by the technology. Just like when you transitioned from 35mm film to digital imagery despite the effect it had on your film retailer and your 1hr film developer - for whom you (and every other appraiser) had zero sympathy when you cut ties with them.

This comparison is ridiculous (you are not the only one to make it) - and appraisers tiny share had no impact on the switch to digital.

The shift to digital imagery was truly a game-changer with regard to the technology of photo imaging no longer needing to be sent out for developing. The market for the shift to digital was consumers numbering in the hundreds of millions around the world.

The AMC fee, on the other hand, has almost nothing to do with technology. It enabled the govt perk of a bundled fee supported by stakeholders for their benefit. It was enacted against a small group of professionals ( appraisers ) to benefit the middlemen and to give banks and lenders free of cost AMC service.

You didn't just switch to digital imagery. You also switched from buying forms, paying typists to transcribe to those forms using IBM selectrics and white-out, you switched from dot-matrix to laser printers, you switched from micro-fiche and the costs of buying/maintaining those viewers to CD-ROMs and then later to all-online, you switched from MLS books to pay-by-the-minute modem access to the MLS and later to internet access, you switched from the heat sensitive paper those viewers used, you switched from using faxes and answering machines and receptionists to take calls for you, you switched from beepers to smart phones, you switched from paying couriers to deliver to sending PDFs and XMLs.

You have diverted a number of your business-related purchasing decisions from one type of goods/services to others as a direct result of technology and you didn't give two seconds of thought about how those decisions adversely affected the revenues at your former vendors. None of us did. Because none of those choices were personal to us, it was just business.

It doesn't matter how much the AMC gets paid; your fee is still the result of (generic) you competing with the other appraisers on that panel. If it comes to pass that the AMCs end gets fixed at $10/assignment they're still going to shop appraisal fees by price and you're still going to end up with $150 appraiser splits in the event of a big slowdown in the market for 1004s. Whether they thrive or fail at whatever their end is will be immaterial to how the fee competition between appraisers turns out. The borrower might end up paying less overall for the combo but in no case will the appraisers be getting paid more unless that AMCs run out of alternative vendors to pit against each other.

 

[George Hatch]

But that was an extreme situation and temporary. Since it was an extreme situation with super low mortgage rates, to use that as an example that even with AMCs, supply and demand work is nonsense. The problem, as even you admit, is mainly a very narrow channel of demand through the AMC.s. Of course, a reduction in overall volume due to a segment loss to WAIVERS increases the imbalance. Though with more retiring and very few entering, it might mitigate that.
PAREA is attracting only a trickle of people, with an anemic number of graduates. The pathetic play to lower education to lure people in, instead of correcting the fee imbalance, shows how it is all about profit to the GSEs enabled stakeholders - do they have a mission of public trust ?

The exception literally proves the rule. You cannot get the fees you want from an AMC because at the stabilized volumes there are enough of your competition who are willing (and apparently able) to work for less in lieu of not working at all. The AMCs literally don't need appraisers at the higher fees unless/until the demands peak far beyond normal. They are not experiencing a shortage of appraisers yet, otherwise you could get your fees from them. And we have good reason to fear that PAREA and reductions in experience criteria will effectively prevent a economic parity between the appraisers and the lenders and their AMCs for the foreseeable future.

Not even you can claim that fee appraisers are enslaved. What's happening is that nobody is protecting them from the decision making of their peers.