AMC purpose

[chad hampton]

Except for the fact that I was paying attention 10 to 15 years ago and it was unthinkable that three parties would be turning into two. I sat at appraisal board meetings as they discussed AMC legislation and they talked about how the process would work. One important thing to remember is that one side can just claim things to be permitted and since there’s no oversight, they can claim they are right.

How many independent appraisers get invited to the breakfast club?

 

[chad hampton]

duplicates

 

[Bobby Bucks]

We're fortunate as an industry to have notables and their volunteer lapdogs to prevent independent appraisers from bullying AMCs.

 

[DWiley]

Chad, you walked into a trap.An appraiser can form an AMC and thus compete as an AMC and an appraiser, but that would entail great expense. And a small AMC struggles to successfully compete against large national foot print/connected politically AMC's.

There is/was no trap. The only trap was the conflict in the logic (and actual words) of a certain poster.

One thing I have observed here is that many have only worked in one small segment of appraisal, and they assume things everywhere else are exactly as they are in their own one-person company. Many are not even aware of what others in their market are doing.

There is an appraiser that lives a couple of miles from me that I don't know well, but I bump into him from time to time. A few years ago I learned that has an AMC. A local lender asked him if he could just manage all their appraisal orders, and the volume was large enough that he had to register as an AMC to do that. So, he has two companies, an appraisal company and an AMC. There is no law that prohibits one from owning more than one company. He has no desire to compete nationally as an AMC. He only does what the local lender needs, and he has cash flow from two companies. Any appraiser could do that, and grow it to any degree they wanted. Most have never even considered it.

Sure, there is expense, as with any business, but setting up a local AMC certainly does not involve "great expense." In my state, it cost $2,000 to register, and $2,000 to renew every 2 years. And one must pay the ASC fee, but for a small panel that would be minimal.

 

[George Hatch]

Chad, you walked into a trap. An appraiser can form an AMC and thus compete as an AMC and an appraiser, but that would entail great expense. And a small AMC struggles to successfully compete against large national foot print/connected politically AMC's.

Chad didn't walk into a trap. He said something dumb and I didn't ignore it as if it wasn't dumb.

As a practical matter the reason individual appraisers can't compete with those AMCs which are operating at the much larger scale is because of the difference in coverage and the economy of scale. If a lender has 100 assignments to engage today they can place them all with a single AMC without any back-n-forth negotiations with 300 appraisers scattered all over the region in order to thin them down to 100 assignments. For the lender, one call does it all. So to speak. The AMCs sell other attributes, but coverage is one of the big selling points.

Just like with direct engagement, what's low impact on the lender at small volumes is different when the volumes are much larger.

 

[J Grant]

There is/was no trap. The only trap was the conflict in the logic (and actual words) of a certain poster.

One thing I have observed here is that many have only worked in one small segment of appraisal, and they assume things everywhere else are exactly as they are in their own one-person company. Many are not even aware of what others in their market are doing.

There is an appraiser that lives a couple of miles from me that I don't know well, but I bump into him from time to time. A few years ago I learned that has an AMC. A local lender asked him if he could just manage all their appraisal orders, and the volume was large enough that he had to register as an AMC to do that. So, he has two companies, an appraisal company and an AMC. There is no law that prohibits one from owning more than one company. He has no desire to compete nationally as an AMC. He only does what the local lender needs, and he has cash flow from two companies. Any appraiser could do that, and grow it to any degree they wanted. Most have never even considered it.

Sure, there is expense, as with any business, but setting up a local AMC certainly does not involve "great expense." In my state, it cost $2,000 to register, and $2,000 to renew every 2 years. And one must pay the ASC fee, but for a small panel that would be minimal.

Since an AMC costs so little to start up, why are they keeping $hundreds of $ of the fee split per order? (rhetorical question- because they can) Yes the trap was partly of his own making. A rabbit hole in these discussions that takes the emphasis off of the main problem.
'
Indeed, as you point out, there are exceptions. An appraiser here and there has the capacity and connections to get AMC work from a local client. But most local clients who use an AMC sign on for a large regional or national AMC service. It has been shown that a large number of independent appraisers cannot compete with that.

The GSEs could make a policy: They will not accept an appraisal from an AMC where the split fee system was used to pay the appraiser a portion. The GSEs will only accept appraisals from an AMC when the lender paid a cost to the AMC and the AMC paid the borrower's covered appraisal fee $ amount to the appraiser. (I am aware that is a wish list , unlikely to happen ) But the GSEs responded after the RE broker NAR lawsuit to clarify to the lenders that the GSEs would continue to consider seller-paid buyer broker commissions as outside of a concession, even after a lawsuit that was intended to see buyers pay it, which would relieve high commissions from the system. I am aware that it is optional for a buyer to pay it, but like the lenders and the AMC's, the sellers use the legal loophole courtesy of the GSE, making sure to clarify that they will not consider a seller-paid buyer broker fee a concession. Everybody gets protection except the individual appraiser, who makes the dinkiest fee in the RE food chain and yet sees it cut when an AMC is used.

 

[George Hatch]

Except for the fact that I was paying attention 10 to 15 years ago and it was unthinkable that three parties would be turning into two. I sat at appraisal board meetings as they discussed AMC legislation and they talked about how the process would work. One important thing to remember is that one side can just claim things to be permitted and since there’s no oversight, they can claim they are right.

How many independent appraisers get invited to the breakfast club?

What do you mean "no oversight"? Your state Rules and Regs your state board operated under have been set forth in writing via the legislative process. Same as is the case for the banking regs at the federal level and the lender policies at the lenders - including the GSEs.

Those state rules/regs are what your state board has to operate with. No more and no less. They have no authority to freestyle on their own beyond the specifics of those rules and regs. No discretion to operate off their "vibes" or other undocumented expectations. If you are unable to find the phantom references to "3 parties required" then the only explanation for that is because they never existed in the first place.

 

[J Grant]

I was going to warn Chad against this. He keeps putting his foot in his mouth.

There is oversight. The problem is that the oversight has been corrupted - regulators are refusing to rule that a lender pay a cost charge for an AMC service and allowing the egregious fee splits to continue. Regulators must have gotten some pretty high-value perks when they changed the original HVCC regs to allow AMCs to conduct their own fee surveys for C and R and for lenders to own an AMC. When the oversight is bought and paid for to favor corporate interests , the individual has no chance.

Now the regulators allow waiver/value acceptance, where the regulations around appraisals are no longer a problem wrt target values - because no appraisal is done! The lender simply estimates the value for the property needed that lets the deal work !! I mean, why did the HVCC and Dodd Frank ever bother ...

 

[George Hatch]

The GSEs could make a policy: They will not accept an appraisal from an AMC where the split fee system was used to pay the appraiser a portion. The GSEs will only accept appraisals from an AMC when the lender paid a cost to the AMC and the AMC paid the borrower's covered appraisal fee $ amount to the appraiser. (I am aware that is a wish list , unlikely to happen )

I think you're right on that one. The GSEs (probably) could do that without any legal repercussions. If they wanted to.

 

[J Grant]

Thank you for agreeing.

The GSEs jumped in to save the day for $ broker interests. The GSE could do it for appraisers, if they wanted to.


Fannie: Selling Notice April 15, 2024Real Estate Commissions and Interested Party Contributions

We are aware of the proposed settlement agreement, subject to court approval, announced by the National Association ofREALTORS® (NAR) in the Burnett et al and Moehrl et al cases. While there are no immediate changes to our Selling Guide policies,we are clarifying the current treatment of seller-paid real estate agent fees under our interested party contributions (IPCs) policy.Selling Guide B3-4.1-02, Interested Party Contributions (IPCs) permits interested parties (including property sellers) to makecontributions to the borrower’s closing costs subject to maximum limits ranging between 2% and 9% of the property value.Typical fees and/or closing costs paid by a seller in accordance with local custom, known as common and customary fees or costs,are not subject to the IPC limits described in Selling Guide B3-4.1-03, Types of Interested Party Contributions (IPCs). If a seller orseller’s real estate agent continues to pay the buyer’s real estate agent commission in accordance with local common andcustomary practices, these amounts are not required to be counted towards the IPC limits for the transaction.As part of our standard risk management practices, we continuously review and evaluate our Selling Guide policies. We willcontinue to monitor the various real estate agent commission lawsuits and settlements and evaluate the potential implications tothe mortgage industry and our policies.

My comment: IPC is commonly called a concession.