Strategies for raising fees

[George Hatch]

Is there a new legislation that has repealed the existing customary and reasonable laws that are on the books that spells out in plain English the ways that determine standard appraisal fees?

Do you mean "spells out" in terms of how the lawyers will argue and the courts will adjudicate? Because that's the standard by which all laws, rules and regs are resolved in the courts. Lawyers exist for the purpose of parsing - on the adversarial basis - what the meaning of "is" is.

If the lawyers cannot or will nor even advance an argument far enough to get it in front of a judge for fear of losing then that speaks directly to THEIR perception of the strengths of that argument.

 

[Zoe]

This thread dances around the real issue. Setting the fee for which WE will do a particular job for a particular client is MICRO economics. We totally control that. That is free market. Raise fees until you start losing the clients/work that you like, then back down to where you were. Simple.

But the MACRO economic side of the equation says we will not impact overall fees. Unless you are one of a few appraisers in a county, it is the group which will set the competitive market rate. And with the proliferation of national firms and AMCs taking more and more control of the industry, the appraisers against whom you are competing are increasingly not even local. That is sad, but reality.

Not one single AMC or direct lender gives two turds about how much longer it takes Jane Doe to complete a report. Even one's 'best' clients. I had so many good bank clients move to AMCs in my last 2-3 years it was staggering. I predict that trend will continue. Most of the time, the orders simply stopped coming in. Those were mostly clients I had personally sourced in brick and mortar branches, speaking with presidents and VPs of lending through the years. Tough to lose those to AMCs.

Know your BANTA--"Best alternative to a negotiated agreement". If you NEED to keep clients to put food on the table, you can still negotiate, but eventually you will have to settle for what the going market rate is unless you find different clients. If (as was the case for me), you have a fallback career or income source, you can be more aggressive in not accepting fees below your preferred threshold. When my incoming flow of work at my minimum fee dropped below my family's daily nutritional content needs, I decided to exit the industry. Didn't want to, but again, I had a decent BANTA. I understand not everyone does.

If one happens to live in a lower populated area, or has rural work available, the odds of getting better fees increase. But if you compete with 150 other appraisers, including large national puppy mills, good luck.

Okay. You have to go back to market structure on how it changed. Many appraisers are engaged by local lenders and have had established relationship for a long time. The local lenders engage them directly. Many appraisers don't deal with appraisal management companies.

I will revert and say if fees between appraisal management companies and licensed appraisers were separated on truth in lending disclosures, it would be a different market structure. You are preaching supply/demand. The problem is not supply/demand. The problem is market structure with fees being commingled on truth in lending disclosures.

 

[J Grant]

Yes it does. The AMC's goal is the same as yours. To maximize its profits at an acceptable level of work. Who decides that acceptable level of work product? The AMC's clients. If lenders routinely rejected crap reports sourced by the AMC, they would adjust. But for the most part, that has not happened. The GSEs have apparently had no issue buying the mortgages sourced by the lenders using the skippy appraisal reports created by the skippy appraisers selected by the AMCs.

I know your life's mission is to get 100% agreement from all stakeholders that every AMC is evil and must be destroyed. I contend they are simply operating within the framework granted to them by the regulators and their clients, the lenders.

If a local contractor does crappy work, that will quickly circle back as negative word of mouth, bad yelp/google/whatever reviews, and that contractor will have a hard time getting work. Crappy "just meet the number with no support" appraiser work? That seems to be just fine. But it is NOT the AMCs allowing that, it is the regulators, GSEs, state boards, and lenders.

The AMCs have a mass power advantage that you or I lack via market share.

They maximize their profit by exploiting appraisers as vendors, because typically the AMC does NOT charge a cost service to their lender customers - we, on the other hand, must charge a cost to our customers - be they lenders, AMCs, or private individuals. It is because the AMC can offer free hard cost service to their customers that they pressure vendor appraisers' fees so low. I would bet anyting that if this change dovernight and lenders had to pay an AMC a hard cost for service, most of them would shut off the AMC and return to order direct panel, or they would beat the AMC charge down to $50-$75 per appraisal - the days of making $200-$400 for processing as a middleman would end. That is why the AMC's and stakeholders fight tooth and nail to keep the bundled fee-free service for banks and AMC's huge market share since they need not charge a cost to their lender customer. I am aware that the lender makes a pass-through payment (from the borrower ocered appraisal ) to the AMC, which is not the same as paying a cost.

 

[Zoe]

Have you ever heard of fastest and cheapest? Don't ask @DWiley . He works for Freddie and is a very good appraiser and also worked for AMC. He also had a very good private practice previously.

Danny is rare GSE person that posts on here sometimes.

 

[Overimprovement]

Okay. You have to go back to market structure on how it changed. Many appraisers are engaged by local lenders and have had established relationship for a long time. The local lenders engage them directly. Many appraisers don't deal with appraisal management companies.

I will revert and say if fees between appraisal management companies and licensed appraisers were separated on truth in lending disclosures, it would be a different market structure. You are preaching supply/demand. The problem is not supply/demand. The problem is market structure with fees being commingled on truth in lending disclosures.

No one FORCES any appraiser to accept ANY fee. Appraisers, of their own free will, take salaried jobs at AMCs and large appraisal shops for various reasons. Each appraiser makes an individual choice to accept or not accept every assignment. Show me the coercion or undue pressure...

 

[J Grant]

Okay. You have to go back to market structure on how it changed. Many appraisers are engaged by local lenders and have had established relationship for a long time. The local lenders engage them directly. Many appraisers don't deal with appraisal management companies.

I will revert and say if fees between appraisal management companies and licensed appraisers were separated on truth in lending disclosures, it would be a different market structure. You are preaching supply/demand. The problem is not supply/demand. The problem is market structure with fees being commingled on truth in lending disclosures.

The problem is a terribly skewed supply and demand to favor the AMC's ( and lenders) by narrowing the demand channels for appraisal work. The bundled fee needs to go, or have a cap % put on the split to a third party. If their lender customer wants ot pay the AMC above the split from their own funds, a lender is free to do so.

Disclosing a fee split will not solve the problem except in the most egregious cases. Take away the fee split, period. The appraiser should be paid by the lender the C and fee the borrower paid, and let the AMC do all the rest of the admin work.

 

[Zoe]

The AMCs have a mass power advantage that you or I lack via market share.

They maximize their profit by exploiting appraisers as vendors, because typically the AMC does NOT charge a cost service to their lender customers - we, on the other hand, must charge a cost to our customers - be they lenders, AMCs, or private individuals. It is because the AMC can offer free hard cost service to their customers that they pressure vendor appraisers' fees so low. I would bet anyting that if this change dovernight and lenders had to pay an AMC a hard cost for service, most of them would shut off the AMC and return to order direct panel, or they would beat the AMC charge down to $50-$75 per appraisal - the days of making $200-$400 for processing as a middleman would end. That is why the AMC's and stakeholders fight tooth and nail to keep the bundled fee-free service for banks and AMC's huge market share since they need not charge a cost to their lender customer. I am aware that the lender makes a pass-through payment (from the borrower ocered appraisal ) to the AMC, which is not the same as paying a cost.

Yes. It is market structure. I am surprised FTC has not got involved. CFPB too? I hate it HUD has not got involved.

 

[Overimprovement]

No one FORCES any appraiser to accept ANY fee. Appraisers, of their own free will, take salaried jobs at AMCs and large appraisal shops for various reasons. Each appraiser makes an individual choice to accept or not accept every assignment. Show me the coercion or undue pressure...

If anyone has a problem with Jack accepting an assignment for $200, they need to talk to Jack and ask him why. Seriously. Get into the mind of the appraisers pushing the fees down. Educate them. Raise awareness. Someone's behavior doesn't change simply because we don't like it.

 

[Zoe]

Okay. We are guaranteeing the lenders and gse and we want fastest and cheapest on market structure? What does that spell?

 

[George Hatch]

The AMCs have a mass power advantage that you or I lack via market share.

They maximize their profit by exploiting appraisers as vendors, because typically the AMC does NOT charge a cost service to their lender customers - we, on the other hand, must charge a cost to our customers - be they lenders, AMCs, or private individuals. It is because the AMC can offer free hard cost service to their customers that they pressure vendor appraisers' fees so low. I would bet anyting that if this change dovernight and lenders had to pay an AMC a hard cost for service, most of them would shut off the AMC and return to order direct panel, or they would beat the AMC charge down to $50-$75 per appraisal - the days of making $200-$400 for processing as a middleman would end. That is why the AMC's and stakeholders fight tooth and nail to keep the bundled fee-free service for banks and AMC's huge market share since they need not charge a cost to their lender customer. I am aware that the lender makes a pass-through payment (from the borrower ocered appraisal ) to the AMC, which is not the same as paying a cost.

Nobody is arguing the observation of how the AMCs operate. They are exploiting their available options. Same as appraisers except on the larger scale.

If the lenders are allowed to engage this way then that's the true source of your complaint. I don't know why your continue to blame the AMCs for what the lenders are choosing to do. If the lenders wanted to use your preferred alternative and pay the AMCs end separately then they are free to do so. There's not one thing stopping them, least of all the AMC preferences. I doubt there is a single AMC that would object to that setup if they thought their end of the fee was right.

The fact that almost no AMC/Lender relationships exist in that form speaks to the lenders' preferences, not the AMCs resistance to separating fees.