More AMC and PDC Bull

[Non Sequitur]

I never suggested it was the only reason, but for raw impact, it is the most important by a big margin.

If 600,000 loans were being originated per month pre-COVID, and that volume has dropped to less than 400,000 per month in the past three years, that alone is a drop of over 200,000 potential appraisal assignments. Look at the waiver numbers that one can get at the AEI web site and tell me which is the bigger factor, volume drop or use of appraisal alternatives? Sure, they both have an effect, but only the smaller one seems to get any significant discussion.

Again, why do you continually ignore the corresponding drop in unique appraisers submitting reports through UCDP?

 

[DWiley]

Again, why do you continually ignore the corresponding drop in unique appraisers submitting reports through UCDP?

I do not ignore that. I watch that pretty closely. What would you expect to happen to the number of appraisers when the number of loans drops like it has? The drop is no surprise to anyone with a basic understanding of supply/demand. As of right now, the reduction in active appraisers is less than the reduction in work, and some think that means that even more appraiser reductions lie ahead.

I have repeatedly said that it is a tough time to be an independent fee appraiser - in fact, I discussed that very topic with one of the appraiser orgs today. There simply is not enough work to support all the appraisers right now. And those that have work are facing extreme downward fee pressure because of the intense competition for the work that is there. And, it is not just appraisers; it is affecting all who rely on new loan originations - agents, LOs, UWs, appraisers, home inspectors, closing agents, etc. They are all suffering the longer term effects of uniquely low interest rates of a few years ago.

 

[Terrel L. Shields]

that volume has dropped to less than 400,000 per month in the past three years, that alone is a drop of over 200,000 potential appraisal assignments

Does that justify slashing the fee to the appraiser by a third but not reducing the fee to the borrower by a third? Asking for a friend.

unique appraisers submitting reports

The best appraisers I would bet, are leaving residential lending. I noticed in one post that while CRs were fewer over the years, they had an actual increase in CGs and I would bet that is a response to fee pressures. Yes, commercial can be more difficult but at least the fee is not dictated by the AMC. And lets not fool ourselves, if the AMCs hold the whip hand on residential fees and appraisers have to make the choice between low fee or losing the work, then why do CGs get to set their fees more often and don't simply have to "take it or lose it."

 

[J Grant]

Does that justify slashing the fee to the appraiser by a third but not reducing the fee to the borrower by a third? Asking for a friend.

The best appraisers I would bet, are leaving residential lending. I noticed in one post that while CRs were fewer over the years, they had an actual increase in CGs and I would bet that is a response to fee pressures. Yes, commercial can be more difficult but at least the fee is not dictated by the AMC. And lets not fool ourselves, if the AMCs hold the whip hand on residential fees and appraisers have to make the choice between low fee or losing the work, then why do CGs get to set their fees more often and don't simply have to "take it or lose it."

Direct order lenders are not lowering fees and they are not asking appraisers to fee bid against each to get orders when volume slows down.

 

[Terrel L. Shields]

Direct order lenders are not lowering fees and they are not asking appraisers to fee bid against each to get orders when volume slows down.

exactly

 

[George Hatch]

Direct order lenders are not lowering fees and they are not asking appraisers to fee bid against each to get orders when volume slows down.

Lenders are in the lending business, not the appraisal business. They make their money when they make a deal not regardless if the deal goes through. AMCs are in the appraisal business, not the lending business. And are operating at a different economy of scale. These are not equivalent operations nor are they operating off of the same priorities.

You know this, and you also know that fees vary by locale and market conditions.

 

[J Grant]

Lenders are in the lending business, not the appraisal business. They make their money when they make a deal not regardless if the deal goes through. AMCs are in the appraisal business, not the lending business. And are operating at a different economy of scale. These are not equivalent operations nor are they operating off of the same priorities.

You know this, and you also know that fees vary by locale and market conditions.

Yes, I do know this, and it indicates the divide.
Lenders are in the lending business and make their money from making loans. Thus, as long as the appraisal fee is covered by the borrower, the lender has no interest in driving fees down or selecting appraisers based on low fees. Typically, a lender pays their panel the same agreed-on fee for regular work in a region ( VA does as well). Fees quoted are for complex/high-value orders, not regular work.

Appraisal management companies are in the management business of taking on the administration work with appraisals for lenders. Unlike a normal business which charges its customer a cost, the AMC does not typically charge their lender customer a cost, but instead gets compensated by taking a split of the borrower covered appraisal fee ( courtesy of the bundeled HUD fee) Thus, the AMC has a specific interest in driving appraisal fees as low as possible ( by bidding assignments or comparing fees on assignments) and the low fee is an important factor in selecting the appraiser.

( the exception being when an AMC works on an agreed set cost plus basis for a lender. )

Appraisals were not designed to be a wholesale product that financially supports a third-party AMC business. Let the lender pay a cost to the AMC for the service that benefits the lender, the way every other business has to pay a cost for a product or service that benefits them. The fierce pushback against it by stakeholders indicates that they know the AMC's would not be able to compete in a free market environment if the lenders had to pay the cost for using them, and the lenders only think the AMC service is worth it if they can get it for free.

IDK what it will take for appraisers to refuse the low fees or simply not respond to fee bid requests, but it does seem that more appraisers are leaving the field or taking part-time work or upgrading to commercial rather than accepting garbage fees or submitting bids so that the AMC can use fee bids against each other to find the lowest one.

PS - I know this is wishful thinking, but one way that appraisers could cure the AMC;s of sending fee bid requests is this: Tell the AMC you will submit a fee bid if they pay your bid charge of $15 (or other amount) and that if you get the appraisal order, the bid charge will be deducted form your fee. If it costs the AMC money to get fee bids, that would stop the practice. Why should appraisers bid it for free, when it cost the appraiser time to look up the property and then respond and often the AMC does not give them the order but instead uses their fee as a comparison for their own purpose.

 

[George Hatch]

PS - I know this is wishful thinking, but ....

 

[J Grant]

can still put it out there. Appraisers should charge $ for a fee bid, just as an AMC charges to use a portal. Reference is regular AMC lender orders, not complex orders or commercial work.
That would clean up the auction-style fee bid pretty fast.

 

[George Hatch]

That's fine, but you already know its wishful thinking and the reasons for why it's probably not going to happen.