Moh-
First,
The bidding system works very good for two types of appraisers:
1- The appraiser is incompetent and cannot compete with a competent appraiser if the assignee pays a reasonable fee for the appraisal. In the bidding system, the incompetent appraiser can push away the qualified appraiser and grab the assignment.
2- The appraiser has an appraisal mill with many trainees and can bit low on multiple assignments and reassign them to trainees.
I am sure you are not neither of those two so why are you vehemently advocating the bidding system that is going to spoil the whole system?
(my bold)
I believe you are sincere in the bolded statement and I appreciate it.
My position is not new. I've long advocated for appraisers to act as business people. I've long advocated for less (not more) regulation regarding our activities. I've been on the losing side of that argument without a doubt.
My business (like most everyone else) is significantly down post-HVCC. You probably recall, when HVCC was first circulated, I was one of the few who were vocal in opposition to the idea. I saw more negative consequences then positive ones. And, while I did not predict with any precision exactly how the HVCC would play out, I did predict the outcome: The elimination a lot of good business relationships that appraisers built-up over the years and a significant reduction in income (for those whose primary business model was mortgage-related appraisals... as mine was).
There were two sides of the quality coin: There were bottom-feeder brokers/clients who were looking for someone to make the deal happen. There were also good clients who wanted an honest and credible appraisal
and who valued appraisers who could provide such reports. I lost a lot of those kinds of clients; I suspect you did as well (as did many).
So we couldn't police ourselves sufficiently such that not enough of us had the backbone (or the ethical character) to resist being pressured by a broker. Because of that we were clamoring (and received) a process that insulated us from the bad-guy client (HVCC).
Now, clients being able to ask for bids sounds fair and reasonable to me. But you argue it won't work and cite a couple of reasons:
The appraiser is incompetent and cannot compete with a competent appraiser if the assignee pays a reasonable fee for the appraisal. In the bidding system, the incompetent appraiser can push away the qualified appraiser and grab the assignment.
In a bidding system, the client gets what it pays for. If quality is a requirement and the quality cannot be obtained at the low fee, then won't fees go up as clients discriminate in their choice of appraisal-providers, rewarding those who produce quality and skipping those who don't? By mandating a minimum fee, how does a lender use its fee to discriminate in favor of better quality. Do you think everything shifts-right on the quality scale because the fees go up (I don't think you do and I certainly don't). The same poor quality appraisers will be competing for the same jobs as they do now.
The only difference is that they will be paid more.
The appraiser has an appraisal mill with many trainees and can bit low on multiple assignments and reassign them to trainees.
They could do that before. Now, many states (like ours) has regulations limiting the number of trainees a supervisor can have, and requiring the supervisor to be a certain level (certified, for example).
And, if they want to violate that regulation, won't they make more money if the fees are arbitrarily increased? How does a mandatory minimum fee eliminate an appraiser who intentionally wants to act unethically? I'll tell you; it doesn't. What it does do is increase the reward for gaming the system.
Problem: Too many
bad appraisers succumbing to client-pressure and acting unethically.
Solution: Create a third-party firewall to separate helpless appraisers from big, bad clients.
Result: We are separated and third-party firewall is being paid by a slice of the pie that was formerly ours.
Problem: HVCC-enabled AMCs are
forcing us to accept low fees.
Solution: Pass legislation that rewards poor business people (and, maybe someone out there can actually make a profit at $225/appraisal) by mandating increased fees. This will equally benefit
incompetent appraisers as well as competent ones.
Result: We are now arguing how to measure
reasonable and customary fees.
Problem: How does one determine a reasonable and customary fee?
Potential Solution: Rather than have AMCs dictate fees, why not have appraisers bid on the fees and establish reasonable ranges that way?
Argument against: No-
there are too many bad appraisers who will low-ball us good appraisers. Enough such that we (the good ones) won't be able to compete against them. We need another solution that ensures we get paid closer to what we want rather than relying on what another appraiser is willing to take.
How many levels of regulation and guidelines to we need to protect us from ourselves?
AMCs love your bidding theory and I bet they are 100% agree with what you are advocating.
They may or may not be in love with my
theory. In the short-run it may be in their advantage. In the long-run I don't think it will be.
But I also think this: AMCs would like nothing more than to have a set-fee schedule that is imposed upon them because a regulatory requirement; it won't significantly harm them. What it will do (IMNSHO) is eliminate much of the quality leverage that you, I, and others still have and can use in our favor.
Anyway, that's my opinion. I'm much more confident in my ability to earn a higher fee/income than what I'll be able to earn relying on some regulation or mandate.
There is obviously a contingent of seasoned, experienced, thoughtful, and competent appraisers who disagree with me. :new_smile-l:
I suppose time will tell.
