Class Valuation

[chad hampton]

what AMCs were pre 2010 doesn’t really apply

But this board’s revaa spokesman knows that. Never forget, anytime he writes anything on this board, he’s been paid to do so. So at this point, take what he says with a grain of salt. Or throw it in the trash like I usually do.

If appraisers got together and paid him six figures, he would fly around the country, reminding appraisal boards that they needed to follow and enforce their laws.

 

[DWiley]

I’m not shocked a revaa spokesman would have this take.

Its not a "take" - its just an explanation to some who might erroneously think it is not legal for AMCs to use a staff team because of their state law.

 

[DWiley]

If appraisers got together and paid him six figures, he would fly around the country, reminding appraisal boards that they needed to follow and enforce their laws.

Actually, I was telling boards that for over 20 years ago. In fact, when I spoke to your own state board that is exactly what I told them. Board members trying to enforcing their own personal views rather than the actual rules is not a new issue. Remember when your state board tried to say that exterior only appraisals were illegal?

 

[J Grant]

When I was in AMCland we took a different approach. When an appraiser set up their profile part of that was entering their base fees. When an order was assigned, the fee offered initially was the base fee set by the appraiser. The fee could be changed if the property was complex.

We also had an objective way to score all appraisal reports. We created codes for every reason a report could be sent back for revision, and each code has points associated with it, with higher points for major errors and lower points for small things (e.g. 1 point deduction for a typo in the zip code). If a report could be sent to the lender with no revisions at all, it got 100 points. So, a report with just a typo in the zip code would get a 99. We could compare the scores and predict how much QC work would need to be done, and 2/3 of the assignment logic was based on the quality score. The other 1/3 was based on turn time.

An appraiser could set their fee at $100, but they still wouldn't get any work if there were available appraisers with higher scores. I know some resent having their work scored, but without some sort of ranking system there is no way to get work to the higher performing appraisers.

When we were audited by lenders they would often ask us to show how we picked an appraiser for a specific assignment, and we would have to go through all the scores for the available appraisers and show that we did not just pick the appraiser with the lowest fee. Even if the lenders did not audit, we would never have just picked the lowest fee because QC rejections cost money. On most orders, if we rejected a report more than twice, we were basically eating the profit. There was high motivation to assign to appraisers with high quality scores.

Bidding was only done for very complex and/or high end properties. I have long said that I do not know how any AMC assigning based solely on the lowest bid can claim compliance.

The AMC's are smart enough to know that they are not allowed to solely choose by fee. Thus, they also ask for a turn time, and of course they enact some measure of quality control. However, the fact is that they still end up in most cases assigning by the lower or lowest fee , assuming the appraiser is in good standing, because if they are not in good standing, why are they on the panel?

The real problem from the appraiser;s perspective is hat the AMC is paid out of the portion of appriasl fee and the appraiser, im most cases makes substantially less $ per order when it is assigned through an AMC vs when the same order is assigned direct by the lender or client with no AMC involved.

This could be solved by the lender paying the AMC 100% as a hard cost that is not related at all to the appraisal fee. Thus the AMC can rotate work among approved appraisers or choose by top tier quality with zero regard to fees since the appraisers are all getting the full C and R appraisal fee ( which is how must direct lender clients order ).
If the lender or client wishes to avail themselves f AMC service the client should pay a hard cost for it, the same way that they do for any other service. If the AMC had to charge their lender customers a hard cost that was 100% not related to the appraisal fee, they would be like any other business out there. If a lender can pass that management cost o n the borrower, that is their option to do so.

 

[chad hampton]

Are representatives from class allowed to contact loan officers and lenders directly? Because if they’re now an appraisal company, they can’t.

In my state AMC legislation states in black-and-white and AMC’s are required to maintain a panel of independent fee appraisers.

How is this even open for debate? There needs to be three parties involved. That was the whole point of the HVCC and DF.

That’s what appraisers were sold on. It’s what the promise was and what the compromise was. And there were many appraisers out there that fully intend on holding all parties accountable.

 

[DWiley]

The AMC's are smart enough to know that they are not allowed to solely choose by fee. Thus, they also ask for a turn time, and of course they enact some measure of quality control. However, the fact is that they still end up in most cases assigning by the lower or lowest fee , assuming the appraiser is in good standing, because if they are not in good standing, why are they on the panel?

The real problem from the appraiser;s perspective is hat the AMC is paid out of the portion of appriasl fee and the appraiser, im most cases makes substantially less $ per order when it is assigned through an AMC vs when the same order is assigned direct by the lender or client with no AMC involved.

This could be solved by the lender paying the AMC 100% as a hard cost that is not related at all to the appraisal fee. Thus the AMC can rotate work among approved appraisers or choose by top tier quality with zero regard to fees since the appraisers are all getting the full C and R appraisal fee ( which is how must direct lender clients order ).
If the lender or client wishes to avail themselves f AMC service the client should pay a hard cost for it, the same way that they do for any other service. If the AMC had to charge their lender customers a hard cost that was 100% not related to the appraisal fee, they would be like any other business out there. If a lender can pass that management cost o n the borrower, that is their option to do so.

The AMCs would LOVE such an arrangement. As it stands, they are never guaranteed any net fee on any order. The thing that stops it is the requirement to redisclose if the appraisal fee changes.

 

[chad hampton]

There’s a reason everything changed when hedge funds and private equity started buying up AMC’s. Just like revaa spokesmen, they don’t care about laws. They sold out a long time ago. Probably a decade ago I heard an appraiser speak at my state board with respect to customary and reasonable legislation. He asked the state board directly - Why is it that the only thing you respond to are threats of lawsuit? At the time I didn’t understand it. But now I see he was exactly right.

 

[J Grant]

The AMCs would LOVE such an arrangement. As it stands, they are never guaranteed any net fee on any order. The thing that stops it is the requirement to redisclose if the appraisal fee changes.

I believe teh AMCs would lve it too. Is there any way to make it happen, that is the issue. The AMC;s and lenders at the top level want to keep it the way it is, with the HUD split fee compensating the AMC. It is a dead end wrt retaining good appraisers to do AMC work, especially as this last crop retires- the mid-level workers and loan officers would love to see the AMC's get out of the fee business as well and be paid by the end user.
If the lender can pass that management fee on to th borrower there is no excuse for them to keep exploiting appraisal via the HUD bundled fee split - a bunch of appraises voted for Trump, let them write him a letter to make an executive order to change it lol - all it would take is to prohibit the fee split to an AMC or cap it at 15 % .

 

[DWiley]

How is this even open for debate? There needs to be three parties involved. That was the whole point of the HVCC and DF.

Its not open for debate. Multiple states have such laws. The AMCs know the law, and comply with the law by having three parties - a lender, an AMC, and an appraisal company that is legally separated from the AMC. Some may not like that, but it complies with the actual words in the laws. (At least it did when I was working in AMCland and keeping track of such things.)

 

[chad hampton]

But as is usually the case, when people bend or outright break laws, it just takes a while to catch up. And you can see how the tide is starting to turn a little bit. It takes a while for regulators to wake up and say wait a minute, this wasn’t the intent of DF as it relates to Lending and appraising.