Fighting AMCs alone or in groups?

[Joyce Potts]

Adam Smith and the invisible hand

" ...every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."

You don't believe in market forces where individuals acting independently of each other can affect the society as a whole and whole industries? That's your AMC model, excess supply of appraisers willing to work cheap, independent of each other while other appraisers are not willing to work that cheap.

Wait and see what happens. It may be by force of government that put people into the appraisal business that will take those people out of business. Or it may be the invisible hand of appraisers acting independently of each other to maximize their own wellbeing and personal gain.

And where does organized labor such as Unions and government regulation play into this? You can't tilt the playing field in one direction and then expect the free market forces to work as intended.

 

[Joyce Potts]

Adam Smith wrote, thought and spoke from the perspective of community among the masses. Not from the current state of society. How many appraisers came to fight AMCs before AMCs took more than half their income?

The problem is that we, the head count, look to each other for the same spirit that stood up to the English during the Revolution, and don't see our brethren standing beside us.

We puff our chests over a proud history of standing up for what we believe, the Civil War gave us such heroes on both sides. We are Americans, a force to be reckoned with, our spirit will not die.

But sadly, that might have been our history, but after WWII, we, as a people, have not stood together for anything else, and might not, ever again. Brave, strong, and sometimes stoned, young people stood up in the 60s and 70s against Vietnam and the political animals. But they did not stand together, and we as a people, did not stand with them. When survival was more closely tied to community, there was greater availability for congregation and consensus of actions toward the benefit of our shared interests.

But Industrialization fractured the family units, The Information age has further fractured us into individuals fully capable of not just survival, but success without community. If it affects me, I might care, If it does not affect me right now, I’m too busy with my own problems.

As a people – a society, we have become feral cats not wanting regulations, less than not wanting to be bothered with others and their problems.

We are focused on “us” as individuals and can’t get back to the community level with any success, save, all but the smallest of groups, without some catastrophic event that would affect the largest majority of us with such deep ramifications that we could not ignore as individuals, such as a failure of all crops and international transportation issues causing wide ranging starvation.

Even $4.00 a gallon gas did not unite us as a people, many with HUMVEE vehicles were interviewed on TV stating they could afford the gas so # U $%@ you can’t afford their gas sucking vehicles.

Americans are deeply generous, but only to foreigners that we don’t want here. We have jumped to help every country in the world, except our own. Because as an American, you have a duty to survive and thrive. We hate people that think they have a right to live, and our tax dollars should buy their food and pay their medical bills, when they are fellow Americans.

The people that died on 9/11/01 outraged the country, because they were survivors, thriving, taxpayers with jobs.

That many people, ten thousand times over, are homeless because of subprime mortgages and unemployment. Do we rally as a nation to their aid? Do we build homeless shelters and shut down the greedy that were responsible for profiteering the very shelter that keeps men, women and children alive? Nope, not at all, if they were victimized, then American society has deemed them as not worthy, pushed under the rug until they can yet again become taxpayers with jobs, thriving in our society.
This is what we must over come to be heard. And we will not be heard from a position of underemployment, enslavement or hopelessness, least we move to a foreign country and scream from there.

Excellent!! Another lady who 'gets it'.

 

[DMZwerg]

The pressure is still there, it's just focused on the AMC or Appraisal Ordering Department. The problem is that the majority of the AMCs are run by unscrupulous people and they put the pressure on the appraiser.

What many do not realize is that as AMCs rose to dominance in the mortgage lending market the pressure on appraisers actually INCREASED many times over compared to the pressure individual banks, mortgage brokers and loan officers were able to apply.

Let us say an appraiser used to get work from 20 banks/MBs/LOs. If one was applying too much pressure then losing that one was the loss of 5%+/- of his business. If he worked for 10 then it was maybe 10%. Nowdays most appraisers that work for AMCs work for 1-3 AMCs so the loss of any one account is over a 25% drop in income, and often 50% or more. Therefore if an AMC demands the appraiser drop his fees by $25 he is under extreme pressure to do so if he hasn't been able to line up sufficient higher paying clients. They usually don't put it that way, they often say "if drop your fees by $25 you will get all the work you can handle", so the appraiser, feeling the pinch, does so and gets 1-3 orders and then it dries up and the AMC used the drop in work to pressure some other appraiser to undercut him by $5/order. Even if they don't beat the appraiser up on fees they can exert pressure to meet turn times or lose the account, take complex appraisals for "the set fee" or get bumped down the list, meet ridiculous stips or assignment "requirements" or lose the account. Dance the Minuet on command or suffer the consequences (downgraded and get fewer if any assignments or lose the account entirely). Break the law, USPAP or other regulations or lose the account. When the account is only 10% of your business or less the appraiser may well have the financial ability to stand up strong, but when an account is over 25% of their income with no safety net in sight such a loss can be a severe financial blow so many appraisers will bend to the slightest whim.

The next issue is what affect such bending has on appraisal quality. Well, high pressure to meet turn times means that oddities detected will tend not to be fully investigated, if they are even detected in the 1st place. Corners are almost assuredly doomed to get cut and additional narrative, market analysis, and real support is likely to be lacking. In our current market REOs & short sales are more likely to be used even if not appropriate as there is no time to expand the search. Further, since the appraisers who are most likely to be desperately beholden to AMCs are those "raised" during the boom years many are only familiar with appraising the "cookie cutter" properties and thus are most likely to not have the tools, knowledge, or experience to fully and correctly analyze more complex properties or markets. So, without the time or money to spend on in depth analysis many complex properties and markets may well be under analyzed by appraisers who are under the effective thralldom of AMCs, and thus appraisal quality is likely to suffer given 80% of mortgages or more are being "managed" by AMCs.

I hope that helps people understand the problem with using AMCs in general and specifically those that live by the creed "quicker, cheaper" when dealing with appraisals, enthralling appraisers and using this near enslavement like the some landowners did to sharecroppers just after the Civil War to reap huge profits on the backs of said appraisers as well as the nation as a whole as those loans fall into foreclosure. The banks are even more guilty for loaning on shaky grounds, but solid appraisals one can rely on, with no undue influence by an agent of any party involved (AMCs are agents of the lender/client), would have made the issue more clear.


I hereby grant permission for any appraiser to use this post, in part or in whole, as is or rewritten in the appraiser's own words, in letters or comments to government agencies or regulators, as long as the intent remains intact. -D. M. Zwerg, Nov 16th, 2010

 

[carlos alvarez]

We as appraiser have brought this upon ourselves. I get call everyday from AMC still shopping for low fees if we would all unite and say no to this low fees we would all benefit. But I guess we are just not united and AMC‘s will get the best of it. I refuse to accept anything else then a full fee, God Bless the rest of my fellow appraisers. Carlos Alvarez RD6811

 

[heres2hope]

Thats all true, the issue at hand is how to use the free market system to fix it. Things like "lets ban together to fix and turn down low paying work" is a stupid response that doesn't work. I need work tomorrow so i'll take what you give me and I'll laugh at the guy turning it down. The way to fix it is letting the lender use which ever AMC they want as long as they are credible. The appraisers should be able to sell lenders on the best and highest paying AMC. All that would have to happen is a law would need to be passed that says "the free market rules all we ask is a double blind appraisal be complete" AMCs would be raising fees, simplifying crazy websites and conditions, and giving work to the best appraisers. by best I mean the people bringing in the work.

 

[Squareitup]

Thats all true, the issue at hand is how to use the free market system to fix it. Things like "lets ban together to fix and turn down low paying work" is a stupid response that doesn't work. I need work tomorrow so i'll take what you give me and I'll laugh at the guy turning it down. The way to fix it is letting the lender use which ever AMC they want as long as they are credible. The appraisers should be able to sell lenders on the best and highest paying AMC. All that would have to happen is a law would need to be passed that says "the free market rules all we ask is a double blind appraisal be complete" AMCs would be raising fees, simplifying crazy websites and conditions, and giving work to the best appraisers. by best I mean the people bringing in the work.

Would I be far the mark to suggest the negative reputation AMCs gained was because they, as subsidiaries of larger financial investors, weren't interested in participating in a "free" market system in the first place?

 

[Squareitup]

*duplicate removed

 

[Winds]

The AMC's are taking over. At one time I thought we had them on the run, but they came back stronger than ever.

 

[Fritz in NY]

Don't worry, they will find a way to destroy themselves. $$$ if it's not purculating, it is not in biz. Just say NO. I've KILLED 4 vendors this week....accept order, inspect property, pre-type report, and HOLD on to. I get 2-3 calls a day for AMC's waiting for a report. Then a daily 1 day update request. What do you think the lender/broker is going to do, DUMP the AMC and move on to another pond dweller.

 

[Winds]

It takes some balls to do that. Hope you can afford to "bite the hands that feeds you."
I have run into 2 types of AMC's. 1 handles the order, takes their cut, and we get a lousy fee. The other charges the lender a "minimal" fee, handles the order, and we get something closer to "full fee."
The first type is the one we must fight first. Refuse to do the lousy fee work and fight to get full fees anywhere we can. Then, if the second type is only getting $25 to $50 per order, I don't think they can stay in business that long making that kind of money.
"Power to the people."