Let's Talk About What C&R Really Means And How It's Determined

[VolcanoLvr]

I've been in discussion about C&R with a peer appraiser I greatly respect in another part of the country. This appraiser has decades of experience, both inside and outside (but related) the appraisal industry/profession.

The appraiser has said: "Lenders are required by law (and are subject to severe penalties) to charge the same fee for the same service, unless they can show the service provided to a particular customer had additional costs (tract home vs. custom home estate in rural area)."

The appraiser provided a case study where two separate appraisals were done on two different properties across the street from one another - but the appraisal fees paid were different. In the appraiser's opinion, that was wrong.

The D-F law, and the subsequent recent FDIC AMC Registration Rule (not yet published in the Federal Register, so no Effective Date established) says that 1) C&R can be established by applying published third party 'surveys' to a geographic area, and 2) C&R cannot be established by using fees paid by AMC's to appraisers.

It's is my contention that for decades, lenders have conspired together to keep appraisal fees as low as possible - because they DO discuss appraisal fees amongst themselves when at conventions, seminars, etc.

But then we appraisers are told we CANNOT discuss our fees amongst ourselves when we gather at various functions. That's a monstrous double-standard.

So how then can C&R be established in an area where there has been no 'third party survey' done, and where appraisers don't know a range of fees in their area for a particular type of appraisal service because they don't talk with one another?

 

[bnmappraisal]

I would like to think they'll finally figure something out, and even though I'm an optimist (generally), I do wonder if C&R will ever really become a reality. Yes, AMC's are supposed to be paying us "C&R" but it boils down to what they consider C&R for us/our area(s). We're not supposed to talk about fees? They get tossed around here a lot. I guess that's like Realtors not supposed to talk about their commission percentages, meanwhile it seems "everyone knows" they get X% in a transaction. IDK.

Do you think the mortgage brokers/lenders are "supposed" to talk about the fees? I would venture they are NOT. But, as you state (and I agree with), they do and therefore have a baseline to set fees. Are we supposed to? I guess not. Do we? (again, I know fees have been tossed around on this forum in the past). I do know that in my area, typically fees are $300-350. Some are getting $375. I guess it depends.

But this also, then, would bring up the question. If many fees are $300-350, what is C&R? $325? $350? $300? Anything in that range???? THAT part of C&R I don't understand. From a Third Party survey, is the set C&R fee going to be $329 based on some statistical interpretation? I think this whole C&R is going to take a couple/few years to work out; if it ever gets worked out

 

[Mike Kennedy]

Simple: Mortgage/HE Loan Consumer is charged $$zzz for appraisal fee. <<<< 100% of the documented appraisal fee paid by the Consumer is earned by, and paid to (drumrolll..........) the Appraiser who delivers a completed, compliant appraisal report.

That's all she wrote.

 

[bnmappraisal]

But Mike, how can it be that simple? Especially when you throw in AMCs?
Even (as in my case) if I charge $325. The AMC charges the borrower (for the example sake) $425 and makes $100. I wish the "appraisal fee" charged was paid to the appraiser, but as we know, it is not when dealing with AMCs.

Unless one cannot/does not work with AMCs (I know some don't, but I know many do, including myself - yes, I have some NON AMC work, but...) how is it that "simple" ????

 

[Mike Kennedy]

Utilization of either a captive, or third party AMC is ENTIRELY optional at the discretion of any Lender. Neither FIRREA nor Doofus-Funk made use of an AMC - mandatory.

IF, When a Lender chooses to use one - noooo problemo. A Lender makes that choice - that Lender pays for the service(s) rendered - INDEPENDENT of the appraisal fee EARNED by Contracted, Independent Fee Appraisers. How they compensate employee/Staff Appraisers is outside the realm of contractual agreements with Independent Fee Appraisers. NO different when they pay Fees (not "wages") to Independent Title Companies or other "Vendors".

Gosh darn - instead of grossing several, or many, Million$$ in Unearned Fees - simply reduce the Gross as a paid, earned Expense (a tax write off anyway). Piece o' Cake.

 

[CANative]

But then we appraisers are told we CANNOT discuss our fees amongst ourselves when we gather at various functions. That's a monstrous double-standard.

As far as I know that notion (so called "price fixing") is only common among some ninnies on this forum.

 

[bnmappraisal]

The appraiser provided a case study where two separate appraisals were done on two different properties across the street from one another - but the appraisal fees paid were different. In the appraiser's opinion, that was wrong.

I re-read some of your points and this one jumped out at me. I've run into MANY neighborhoods where this may be the case. Property A may be 1,950 sf and Property B (across the street) may be 3,800 sf. I, personally, start increasing my fee around the 3,000 sf mark.

 

[Howard Klahr]

because they DO discuss appraisal fees amongst themselves when at conventions, seminars, etc.

How many of these conventions, seminars, etc have you attended?

 

[CANative]

I go to those conventions for the dark wood paneled walls and cigars.

 

[Randolph Kinney]

So how then can C&R be established in an area where there has been no 'third party survey' done, and where appraisers don't know a range of fees in their area for a particular type of appraisal service because they don't talk with one another?

Price discovery can be accomplished by an individual appraiser by setting the fee as high as the appraiser thinks he can get. If no activity occurs at that price, lower the fee until the buyer of their service accepts.

Instead, in the AMC process of price discovery, the lowest fee is published to a list of appraisers. If no appraiser accepts the offer, they raise the fee until they get acceptance. This works well when there is an oversupply of appraisers.

When a shortage of appraisers occur, lenders will bypass AMCs and hire the number of appraisers they need to keep their business functioning. it is more important to lock in the supply than getting the bargain price for a service that can go to their competitor along with their missed opportunity of business.

C & R fees should be elastic and fluctuates according to supply and demand, both for the number of appraisers and the number of loans requiring appraisers.