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Appraisal Fee Mark Up's

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slacker

Junior Member
Joined
Feb 20, 2002
Can a lender or AMC mark up an appraisal fee for their own profit?

In other words, lender tells Joe homeowner that the fee is $500.00 for the appraisal, I then get the order for $250.00. The whole time, I have no idea how much the home owner is being charged and the home owner has no idea what I'm getting paid.

The reason I want clarification is because I know someone who is doing it.
 

USPAP Compliant

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
Yes in most states. No in some states.

This is no different that a building contractor charging over and above what his sub contractors charge him. No different from someone buying products or services at wholesale and selling them at resale.

The appraiser should charge the amount that he or she wants for his or her services.

Pennsylnaia has a bill (not sure if it has passed yet) that will requie this to be disclosed and for any amount over the actual appraisal fee from the appraiser to be covered by the lender. In other words lenders will pay a fee to AMC's over and above the amount of the actual cost of the appraisers fee.
 

Mike Simpson

Senior Member
Joined
Jan 30, 2002
Slacker-

CAN THEY???-Boy-Howdie-they all do!!!

I raised my rates based on what AMC's were chargin. Then I caught several clients padding my bill! This is in the past of course, but it made me so mad I raised my fees immediately across the board. The ones who didn't want to pay the increased rates went by the way side. I explained to everyone why I was raising my fees..."the nations largest lender charges X amount, and I've caught L.O.'s padding my bill." "You know what that tells me?" I asked, "I should be charging more." Talk about gluttons--as if they're not making enough!!!

-Mike
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Why would anyone one want to be an Appraisal Management Company if they didn't make money?
 

BarbaraNJ

Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
New Jersey
slacker:

Not in New Jersey anymore !!!

NJ just passed a "reform" law which contains a provision that no one can mark up fees that are just passed on to the applicant. This came out of "B" and "C" loans which are made to people who can least afford the fees.

Since these people usually have the points and fees all wrapped up in the mortgage since they have no $$$ to begin with, everyone was taking advantage by inflating fees, which wound up all in one big "lump" added to the loan amount.

The management companies are Screaming that this is unfair to the mortgage applicants Because the applicant gets a better price when a lender gets everything from one source. Guess they forgot to mention that they are in business to make money, and it has to come from somewhere---NJ found that its usually the applicant.

Don't know if other states will follow suit, but I have to think that if there is no money in marking up appraisals for the management companies, maybe lenders will be "forced" to deal with the appraisers directly.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Just heard from one of my lenders that since their regular FHA Appraiser (fee about $400?) somewhere in California was 3 weeks out, they decided to try First American AMC. FirstAm said 2 weeks turn time. This lender does CODs from the borrower and before any appraisal was done, FirstAm charged a couple of borrowers on their charge cards $750! Then called the lender and told them it would take 3 weeks instead of 2.

This lender went nuts! Told FirstAm to cancel everything and refund the charges to their borrowers. Said: What good is that when they charge almost twice what the regular Appraiser charges, takes the same amount of time, and the quality is always questionable!!!! This is close to a direct quote.

So, I talk to a FirstAm rep that tells me that they were recently told to stop marketing their Appraisal services.

Could we possibly get lucky enough to have FirstAm get out of the Appraisal biz???? Maybe. They did try real hard to sell that lender their AVM service.

HUD/FHA: Did you see that fee markup to the borrower?????? Pretty hefty, huh? You really think an AMC is better????? Have you ever asked First American what they actually paid the Appraiser out of that $750 fee??? Try asking the Appraisers what they were actually paid.
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
Years ago when I was actively selling real estate, you took a buyer in to the lender and the LO took an application. Along with the application was a little thing called an Application Fee. It was explained that this fee covered the lenders necessary costs to gather the information in order to pass judgment as to if they would make the loan or not. Buyers were told that this covered administrative costs, appraisal fee, credit report, etc. Very reasonable.

Today, nobody wants to risk a dollar in order to see if they can get a loan. Hence you have such statements as "Stop the appraisal if you can't make value." or "Notify us if comp search does not support value."

As far as mark-ups go, what some are talking about is if a bank or lender hired an appraiser to do an appraisal for, say $300 and then tacked an extra $50 on to the fee and the appraisal showed up on the HUD statement as $350. That is generally considered a no-no.

However, a bank or lender can contract with an AMC for, say $375 per appraisal and show the $375 on the HUD statement as the cost to them for the appraisal. Regardless if the AMC paid the appraiser $175 or $300, the cost to the bank to get that appraisal from the AMC is $375 and that is the number that goes on the HUD statement. The AMC is providing a service to the bank and charging the bank for that service. There is nothing wrong or illegal about this type of business dealing. What the cost to the AMC to get that appraisal done has nothing to do with their agreed charge to the bank.

I think that a lot of appraisers are quite frankly ticked off that they agree to do a URAR for $225 through an AMC and then the AMC charges the lender $400.

Question: Whose fault is it that you are working well below the established market levels for this type of work? Who will really criticize an AMC for attempting to maximize their profits in their chosen line of work? Who would not like to see the difference between what the AMC pays and what the AMC charges lenders go directly into their pockets? But who is sitting on their butts letting marketing opportunities go by all of the while grumbling about the low fees?

I get a little tired of hearing people grumble about AMC's and the low fees they are getting paid. Fact in point is that I do a fair amount of work for several AMC's. I would estimate about 20% of my work comes through AMC's. I have yet, in nearly 5 years to accept an order that is less than my normal fee schedule. Why, because I try to give them the same service and high quality reports that I give to the local banks and lenders. I take the odd order once in a while in Hawks or Levering. I go the extra mile for them and write the reports in a way that the lenders UW do not have to come back for this or that. I attempt to fully communicate with them, telling them when I have a problem getting into the house or contacting an owner. When they call and I answer the phone, I great them like I missed talking to them. A little small talk and then straight answers to their problems.

In short, I try to deal with my AMC clients just like all of my other clients. I hope that they can make money off of handling appraisals for banks and lenders. If they make money and stay in business, that means that we have a good chance of holding on to their business. As I said, all of my business with them is at full fee and on my time frame. Taking this kind an approach to AMC's translates to about $30,000 per year of full fee work for me. It would not be very smart for me to walk away from them or be antagonistic with them just because I didn't like them making a few dollars from their customers.

AMC's are a reality of the appraisal business. IMNSHO you can do one of three things.

1. Refuse to work for them and gather your business elsewhere.
2. Work for them on their time frame and at their fees.
3. Consider them as another client and only do business with them in a normal business climate that is mutually agreeable to you and the AMC and at fees that are mutually agreeable.

Whatever you do, do something and please stop grumbling about AMC’s or worrying bout how they do business. They are here, they exist, and they are part of our business scene today. They obviously fill a need for the banks and lending institutions or they would not be able to stay in business for long. Constant grumbling will not make them go away. It only tends to fill up pages on this BB. And constant grumbling has never helped anyones attitude in doing business.
 

Randy Beigh

Senior Member
Joined
Jan 16, 2002
Richard

I fully agree with everything you said and will only add one thing. It doesn't matter a wit what the AMC charges. It only matters what I get paid. If I get my fee and they double, triple, or quadruple it, what do I care? How does this affect me?

Very good post.
 

Rob Bodkin

Junior Member
Joined
Nov 9, 2002
Professional Status
Certified Residential Appraiser
State
Washington
Great post Richard!

Rob Bodkin
Freestone Partners
 
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