Does Minimum Wage Increase Help Or Hurt The Appraisal Business?

[ucbruin]

No. You don't get it either. If there are appraisers making $400 per assignment why would they take a $300 assignment from an AMC?

Staff appraisers cannot take all the work unless there is a shortage of work. Again, supply and demand.

There are not that many staff appraisers in our business.

Maybe we are speaking past one another....
I'm not talking traditional staff, such as I was when I started.

I'm talking "staff" who are still independent yet are assigned jobs at an agreed to lower fee....

 

[J Grant]

The AMC topic really belongs in another thread but since it landed here-

The AMC uses an area supply of appraisers very differently than a direct lender, or private party or VA does.

The AMC is a wholesaler, not a primary user like a lender/ VA or private party. The sole reason the AMC exists is to make money from the appraisal process, thus they seek to obtain appraisals at discount/wholesale rates and keep the overage from it off the flat $ amount sent by lender ( passed on from borrower paid )

A direct order lender uses a large pool of appraisers ( supply) to choose the most qualified ones for their panel and their panel receives a retail C and R rate , the AMC in same area with same supply of appraisers spends considerable resources bidding for fees, or choosing by low fees or strategically removing orders from appraisers and recycling them to staff; goal is to pay a low wholesale rate..

The AMC does not seek to obtain an appraisal at a reasonable fee as other clients do, they seek to obtain them at deeply discounted wholesale rates, and have the market leverage to do so. This is the result of the flawed bundled fee provision which was not intended to be used this way , as well as provision 2 making AMC own survey's used for C and R,. It is ripe for a legal challenge because at this point competitive bidding to "win" an AMC order acts as a form of kickback which low bidder will yield the most $ back to the AMC for choosing them - which is not the fault of the appraiser but rather the system which fosters it..

 

[Michigan CG]

You never answered my question about supply and demand the two tiers of fees when lender pay a different fee than AMC;s with same supply of appraisers in the same area.

If too many appraisers are taking work at $400 in an area then they won't take $300 work from an AMC. How do you not get this?

Fred wants to do five appraisals a week but is doing seven at $400 and he is turning down work. That means $400 appraisals are getting done by other people. The SUPPLY of appraisers willing to do $300 AMC work is less and AMCs will have to pay more. Supply and demand.

If Fred were STUPID he would take a couple $300 assignments instead of $400 assignments.

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Fred wants to do five appraisals a week at $400 but he only averages two a week. He then needs to take some $300 AMC assignments to pay his bills. Supply and demand.

How do you NOT get this?

 

[Randolph Kinney]

Just wondering if raising the Federal minimum wage, will also create that inflation the Fed is keeps saying we don't have, and if so, how much more price inflation will it create?

.

I would think that if you raised the federal minimum from $7.25 / hr to $15 / hr of 40 million workers (direct and indirect), which is 25% of the total employed population, it would most definitely cause wage inflation that would ripple through the goods and services price. The CPI will go up more than 2%.

 

[ucbruin]

If too many appraisers are taking work at $400 in an area then they won't take $300 work from an AMC. How do you not get this?

Fred wants to do five appraisals a week but is doing seven at $400 and he is turning down work. That means $400 appraisals are getting done by other people. The SUPPLY of appraisers willing to do $300 AMC work is less and AMCs will have to pay more. Supply and demand.

If Fred were STUPID he would take a couple $300 assignments instead of $400 assignments.

-----------------------------

Fred wants to do five appraisals a week at $400 but he only averages two a week. He then needs to take some $300 AMC assignments to pay his bills. Supply and demand.

How do you NOT get this?

In your opinion....

Are there currently an over supply of residential appraisers in relationship to the volume of appraisal assignments?

 

[Randolph Kinney]

“The food industry is really starting to take off” as a market for automation, said Dan Hasley, director of sales and marketing for Kawasaki Robotics (USA) Inc, part of Japan’s Kawasaki Heavy Industries . He added that “food and beverage is one of the segments that really responds to tight labor markets.”

https://www.reuters.com/article/us-...umber-of-robots-to-work-in-2018-idUSKCN1QH0K0

$15 per hour sounds great for a national minimum wage ... until people realize they don't need humans to do the job.

 

[Michigan CG]

In your opinion....

Are there currently an over supply of residential appraisers in relationship to the volume of appraisal assignments?

Yes, in many parts of the country.

 

[J Grant]

If too many appraisers are taking work at $400 in an area then they won't take $300 work from an AMC. How do you not get this?
Fred wants to do five appraisals a week but is doing seven at $400 and he is turning down work. That means $400 appraisals are getting done by other people. The SUPPLY of appraisers willing to do $300 AMC work is less and AMCs will have to pay more. Supply and demand.
If Fred were STUPID he would take a couple $300 assignments instead of $400 assignments.
-----------------------------
Fred wants to do five appraisals a week at $400 but he only averages two a week. He then needs to take some $300 AMC assignments to pay his bills. Supply and demand.
How do you NOT get this?

To your credit, you answered the question but imo answered it backward- we see this totally differently. Imo it has little to do with appraisers being stupid , rather the 2 tiers of appraisal fees ( for same type of work ) is due to AMC Manipulation/exploitation of of supply and demand. I said it is not normal /regular supply and demand, rather that the AMC market and their payment structure , with an artirfically created, s outside of normal business parameters ability and incentive to exploit and manipulate S/D to secure low low fees

In your example above, WHY are there "$300 assignments" and $400 assignments " in the very same area, with the very same supply of appraisers available? The borrower in both assignments paid $400.


LENDER A orders direct, pays $400 to appraiser from the borrower paid $400. Lender A has same supply of appraisers available but does not exploit it to drive their fee down or bid out to lowest for regular work, the lender instead uses the supply as a pool to choose good appraiser for their panel

LENDER B uses an AMC , and sends the AMC $400 from the borrower paid. The AMC has a very different plan for the supply of appraisers, which is to pit them against each other /compare their fees to get the lowest fee for each order. Which is why the AMC might pay $300 or less for the very same order a direct lender paid $400 , with the SAME supply of appraisers in the region.It is not just normal supply and demand when the demand ( lender work) goes through a very small channel of clients, since HVDD and dodd frank does not allow loan officers to select and order appraisals ( which would be a more diverse demand outlet and would also see no incentive to drive fees down since a loan officer would not keep part of the appraisal fee)

The real culprit is the blended fee provision on the HUD which allows the AMC to split the amount sent by the lender for the appraisal (pass through of borrower $ fee ) with the appraiser , the AMC keeping the difference for their payment, rather than what we see in normal business where a service provider charges a customer for their service. If it were normal business, the AMC would charge the lender a fee or annual retainer for their service separate from any compensation to the appraiser, the AMC charge would be a cost expense to a lender the same as way they pay an accountant or IT support .

Again, remember, the borrower fee is set at application, and capped by TRID, It is the AMC dipping into this fee to get their profit rather than the AMC charging the lender for the AMC service that creates this situation. There can NEVER be normal supply and demand operating with an AMC due to this, , outside a few exception areas. And when those areas, in the busy cycle COW states saw s/d work against the AMC's the AMC's ran screaming to congress about an Appraiser shortage and lobbied to get education and training time lowered to increase supply of trainees. Possible pending bifurcated appraisals, which will further expand the effective "supply" of appraisers by having the inspection part done by RE agents /others, of which there is a huge supply.

Appraisers instead of bickering about chicken and egg supply and demand should be unifying to present a case where the blended fee for appraisals be abolished for lender work, with the AMC to charge a separate charge to the lender for AMC service 100% separate from compensation to appraiser. THAT is the only way to solve this , with no incentive to drive fees down the AMC would order at normal for area appraisal fee and let the AMC compete on THEIR fee to the lender to get lender work.

 

[J Grant]

Mich CG If Fred were STUPID he would take a couple $300 assignments instead of $400 assignments.
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Fred wants to do five appraisals a week at $400 but he only averages two a week. He then needs to take some $300 AMC assignments to pay his bills. Supply and demand.

Appraisers end up with lower pay AMC work because they are STUPID They take AMC work because there is a limited number of full fee pay lenders in an area. The artificially manipulated supply and demand is because post HVCC lender work though a very small channel of demand- and a good part of that channel ( the AMC';s are wholesalers rather than retail end users.

Retail users of appraisals ( lenders, VA, private etc ) pay going C and R in the case of lenders pass on what borroewr paid, because they keep no part of the fee for their own profit.

Thanks to the bleneded fee on the HUD, the AMC's can keep a portion (split) of the appraisal fee, which they do for their profit rather than charging the lender for their service.

This makes the AMC function as a wholesale buyer, seeking to obtain appraisals at the lowest rate, vs a "retail" buyer who seeks to obtain at reasonable/borrower covered fee.

This is not a fault of appraisers being stupid, though a few venal ones exist, the system simply means there is less direct lender work in many areas than AMC work, and some appraisers thus get shut out of the lender direct orders.

An example region re HVCC 2,000 diverse loan officers ordered appraisals. Post HVCC that got narroed into 20 AMC's and 10 direct lenders, a narrow channel of 30 client DEMAND.

Now factor in that the 20 AMC;'s may control 70 % of the volume and the AMC;s order differently thatn anyone else, the AMC is a wholesale buyer looking to obtain cheapest price . How does such a narrow supply of "demand" , coupled with a split fee wholesale incentive for a large percen to fit, be a normal basis of comparison with free market diverse channel of demand, where buyers of professional services usually pay retail fees for their own use?

We see very different fee tiers and ways or ordering in AMC vs the rest of the appraisal market, including how the rest of the appraisal market , it comes back to the bundled fee provision piggybacking on a post HVCC narrow channel of demand with a large segment (AMC's ) acting as wholesale buyers of appraisal services rather than retail buyers. Retail is direct lender which seeks to obtain appraisals at reasonable and borrower covered fee, vs wholesale seeking to obtain appraisal services at dirt cheap fees ..

If appraisers had more options, resources and organization they could stand up to this double force combo but the fact is they don't, and a few are weak minded or cave and that is all it takes, coupled with AMC's leveraging staff appraisers for the AMC to use their large market share of narrow channel demand to pressure fees down in their segment.

I blame the lenders who get a free management service ride or profit by setting up their own AMC and the system far more than I do individual appraisers who are ill equipped to fight back on it, and one has to ask why appraisers should have to "fight" for their fees in a blood bath standoff every day, when their focus instead should be on doing a good job, this is tax payer backed work and to have good appraiser avoiding AMC work and those appraisers who do AMC work beaten down by the daily fee battles is not a good way to serve borrower,s the investors and lenders for that matter, most individual loan officers dislike the AMC model but lack any power to change it .

 

[Peter LeQuire]

Exactly! Housing, other cost of living expenses are lower. Its a great life in the Mountains of NC. Rich with history of Hard Working people who made there own way.

But we do have high Food Stamp participation. Most of these problems in NC are caused by globalization. Environmentalist have wreaked havoc on our state. Much of the area is National Forest Land. So People up in the mountains live off the land. Nothing wrong with that.

The major threat to this region (Western NC & E Tenn) is increased population. The less we say about how it is here the longer we forestall the problems associated with population growth, from increased CO emissions to ............
Why they want to come live in our “podunk” region is a mystery to me.