The Appraiser Shortage Myth Part 43

[djd09]

What flavor is the AMC kool aid today? Grape?

 

[J Grant]

There is no perception problem at work, when in the same regional area, for the same type of regular order lender work, with the same supply of appraisers available, when fees paid by direct lender order are 30%-50% higher than what an AMC pays, it is reality. ( it is not a perceived fee issue, it is a real fee issue)

If DW thinks moving to cost plus will not solve appraiser fee issue, that is his opinion, but I doubt SL and the rest of the AMC lack of taking initiate to move to cost plus is out of any concern for appraiser fee issue, it is concern for their fee profit- It is more probable with cost plus the flat fee paid for management would be lower, but whatever their profit or fee would be that is their concern. My view for reasons explained in posts on this thread is that cost plus would be better for appraisers fees,. At present I am not aware of any AMC's volunteering for it, the cost plus where it exists comes from individual lenders who arrange that with an AMC.

Lacking immediate solutions, the best solution for appraisers is to avoid AMC work if possible, or limit it. The dilemma is that it is not possible to avoid AMC work entirely for all appraisers with a res license. One can advise res lice appraisers to charge better fees with an AMC. but that leaves the reality that outside of the 3 COW states, if appraiser charges anything above lower fee tier they get no work. (unless AMC is desperate at that particular moment)

DW can keep putting the blame back on appraisers, we don't want to compete etc. The reality is that we can not compete on the low fee model, and stay in the profession and make a living, which is why so many appraisers are leaving , or refusing to train, and few are entering to work on the res lending side. AMCs have a pool of appraisers now who entered the business at a better time and are "stuck", or heading for retirement. Any "stuck" appraiser who can possibly do so is trying to upgrade their license or move to better clients. In addition to the "stuck " group, there is a core of appraisers who work for AMCs at the low rates, either on staff or doing volume or through mills such as Forstyhe/Metro West. However, the AMC's realize that is a limited group of people and people are not rushing to join their ranks; thus the drive to lower education and training requirements to get more newbies on board.

 

[Eli]

LOL. I said no such thing. I did say that a cost plus model would not address the perceived fee issue, and by that I did not mean that there is not a fee issue - I meant that the problem (which is very real) is not what many perceive it to be, and because of that they are pursuing incorrect solutions, IMO.

Those in the "Eli camp" assert that AMCs control prices. Yet, they cannot then explain the current prices in places like Portland, Seattle and Nashville. If fees are really controlled by AMCs rather than being market driven, then how do you explain fees in those areas? Do the AMCs just love the appraiser in those cities more, and so they decided to give them a big pay bump? Or did supply and demand simply drive the fees up?

I ask appraisers to tell me what their fee is. I then compare that fee to other appraisers in the same market who provide similar quality and service (i.e. I run the comps) and by doing that I measure market rates. What about that is contrary to a free market? The ones who dislike that system the most are the ones who want to charge more than most of the appraisers of similar quality are charging. I understand how anyone who sells a product or service would prefer to operate in a non-competitive environment. And, truthfully, appraisers did get to operate in a non-competitive environment for a long time. So, I understand the longing to return to those days, but that is not the world that a large percentage of appraisal business (residential appraisal business in particular) runs through today.

My opinion ( I don't have a camp). That's you !

AMCs have enough market share to have an impact on price. Not control, but have market power on price.

Get it straight! Lol

 

[Eli]

How many camps do you have D?

You could go into health insurance. Don't worry. Lol

 

[DWiley]

If DW thinks moving to cost plus will not solve appraiser fee issue, that is his opinion, but I doubt SL and the rest of the AMC lack of taking initiate to move to cost plus is out of any concern for appraiser fee issue, it is concern for their fee profit- It is more probable with cost plus the flat fee paid for management would be lower, but whatever their profit or fee would be that is their concern. My view for reasons explained in posts on this thread is that cost plus would be better for appraisers fees,. At present I am not aware of any AMC's volunteering for it, the cost plus where it exists comes from individual lenders who arrange that with an AMC.

Well, my opinion is based on observation of actual data. We work with a LOT of different lenders, and they don't all have the same arrangement. Although most lenders resist it due to the disclosure issues noted earlier, I do have clients that operate with my company under a cost plus model, and I have seen first hand the effect (lack of effect, to be more accurate) on appraiser behavior. And why should it affect appraiser behavior? If an AMC (or anyone, for that matter) asks you what your fee is, then you should quote YOUR fee, regardless of any fee arrangement the AMC has with a lender.

 

[J Grant]

Those in the "Eli camp" assert that AMCs control prices. Yet, they cannot then explain the current prices in places like Portland, Seattle and Nashville. If fees are really controlled by AMCs rather than being market driven, then how do you explain fees in those areas? Do the AMCs just love the appraiser in those cities more, and so they decided to give them a big pay bump? Or did supply and demand simply drive the fees up?

Reminder: DF regulation, is for AMC's to pay C and R fees,not fees driven by supply and demand . You can argue that market forces ( supply and demand ) will shape C and R fees, but the final rule, excludes AMC paid rates as C and R. So market forces, which include supply and demand, are paying a substantially higher fee for non AMC work for the same type of assignments in teh same regional areas with the same supply of appraiser. There is one glimmer of hope, states /state boards are charged with enforcing C and R, which is slow and chaotic as each state is different, but the ruling by the few states who have started does seem to have some lenders departing form using AMC's and ordering on their own.

The fact that it is only recently in only 3 COW states, that AMC's are paying C and R , is because those areas are experiencing an extreme appraiser shortage. If a profession is so battered by reduced compensation and conditions that it takes attrition and resulting shortage to get enough leverage for decent fees, that is unhealthy and far from normal. Most professions operate in the true free market with an over supply of ample supply of professionals and are able to command a range of fees at good levels, which may lead one to question what is so drastically different about the AMC business dynamic and reasons affecting fees and supply/shortages as it does.

The regulators understood that due to regulations around the res lending side of appraisals is not a true free market and that the blended HUD appraisal fee with AMC's splitting that fee could create imbalance, to address that they legislated C and R.

The problem is, since the final rule came so late, and state actions sporadic /just getting started, C and R has been successfully evaded by AMC's Their arguments are ever changing, but the popular one is to talk about "free market" and "supply and demand" to justify evasion of paying C and R fees- which serves to also divide appraisers, since those words are a hot button for many.

 

[djd09]

There is a reason why fee data is not collected on a federal level.

 

[Terrel L. Shields]

truthfully, appraisers did get to operate in a non-competitive environment for a long time

Is that why you went over to the dark side? Money?

I don't recall a "non-competitive" environment. I do recall an environment where appraisers were treated as professionals. Do the banks negotiate legal fees? Accounting fees? Survey fees? Title fees? When banks had a personal relationship with appraisers whom they could not only trust but could select the appraiser with the appropriate experience, yes, fees were higher. So was the quality of the resulting work. As Phil pointed out, making a USPAP compliant report is easy, but how accurate is it with all the caveats necessary...it skirts the very fringe of what is "credible". And that's all SL wants, to pass muster and make the deal work.

Sloppy work is the result of 72 hr. turn around, low fees, and that all began with the AMC model well prior to the crash or even the influx of newbies in the early part of this century. The nationalization of lending where people don't use local lenders is much to blame. But the idea that Street Links, of all parties, selects the appraiser from a pool of vetted professionals is a joke. They select on the basis of fee and fee alone...save some consideration of rapid turn time, never once making the connection between low fees, fast turn around and QUALITY.

But why should they? Banks don't want appraisers. They are mere a regulatory obstacle to overcome. So I suppose I cannot blame SL anymore than the scuzzy clients they keep. SL's selection process that would include eblasting a non-residential appraiser 90 miles away from the subject, in a different MLS area when I know that the market in that area is dead slow compared to my own residential markets in NW Arkansas, means that they have been rejected by many local appraisers. Why would they ever email me seeking an appraiser like they did last week for a job outside my region? There are other appraisers, just not a lot that want to work for low fee SL, do all the hoops they pretend "vets" a party and have their constant harping with stips. So I reject your argument that SL pays competitive prices. No. They pay well below local bank fees.

So what other professional group is selected solely on the basis of price? Lawyers? Surveyors? Title companies? Abstractors? Auctioneers? Selecting by price is like going to the cheap barbecue place...it has a down side. "Competition" existed but prior to 2000, I saw little in the way of pressure from banks. They respected our place in the pecking order, but again that was when, at least locally, almost all loans were originated for local banks. "Rocket mortgages", etc. didn't exist. But local banks knew their appraisers and selected them based upon their ability not on their price. Even those who charged far more did get bypassed until a real problem appraisal happened then they was the go to guy. My neighbor (RIP) was a CG and locally had a reputation of high fees, but high quality work, and he was an USPAP instructor. He would never have gotten any work under the AMC model. A few other firms were also highly sought for their quality work in non-residential property. So why is there a presumption that all residential is the same, and not worth much? I don't know. The only reason SL cannot find appraisers isn't because they don't pay well and they don't treat people well, and only the desperate work for them....except when paid a salary If they paid well, then some loyalty would have accrued and in those boom towns, the price would have been much less. We all did that years ago. We tried to take the occasional "hard" assignment in stride with some assurance we'd get a couple of "easy ones" to make up for the extra time we spent. No such loyalty exists today and that is the fault of the likes of SL, not the appraisers. Loyalty and respect is a two sided coin.

 

[J Grant]

Well, my opinion is based on observation of actual data. We work with a LOT of different lenders, and they don't all have the same arrangement. Although most lenders resist it due to the disclosure issues noted earlier, I do have clients that operate with my company under a cost plus model, and I have seen first hand the effect (lack of effect, to be more accurate) on appraiser behavior. And why should it affect appraiser behavior? If an AMC (or anyone, for that matter) asks you what your fee is, then you should quote YOUR fee, regardless of any fee arrangement the AMC has with a lender.

I call out once more about quoting YOUR fee, since it in effect gets no work, or scraps, from SL unless it is low . I know first hand, your company solicited me to join, I did, quoted MY fee, which was very reasonable but I know above the basement level where I would get orders, and sure enough, in 2 years active, I got NOTHING, no orders , nothing at that fee. I suppose if MY fee was 50% lower I 'd be swamped. I have a friend in California who is on your panel ( she won't be renewing ) who only got work at HER fee when it was very low- then she was busy, if she raised it, the work dried up. Appraisers in all different states report this same experience with different AMC's, it is the business model. Dont blame it on appraiser behavior, when the AMC business model and control of large volume share rewards only that segment of appraiser behavior of charging low fees.

This is all spin to avoid paying C and R. You know what a legit lender does regarding C and R? Even If MY fee is lower than C and R, ( they pay me above "my" fee, if the C and R rate is higher. I know because this very thing happened to me with a well respected lender. THAT is what compliance with C and R looks like.

 

[Non Sequitur]

LOL. I said no such thing. I did say that a cost plus model would not address the perceived fee issue, and by that I did not mean that there is not a fee issue - I meant that the problem (which is very real) is not what many perceive it to be, and because of that they are pursuing incorrect solutions, IMO.

Spot on.