The Appraiser Shortage Myth Part 43

[J Grant]

Even if one buys into the self serving spin that all the bidding appraisers are equally qualified so no harm done assigning to lower fee person, the result is that the lower fee folks will get a mass of volume, which means they have to pump out the work fast food style rote /shortcut/generic/canned comments skimp on research- or how else is it accomplished? They are supposedly that much more efficient? What a crock.

Tell us, how does the volume of appraisal orders by low fee resulting in fast food style crank them out methods, protect the public trust or lead to quality work?

The borrower is not aware of how their appraiser was chosen ; that by choosing the appraiser low fee it means their work is done at warp speed chop shop style- or by marginal appraisers at mills such as Forsythe and Metro West, who win a lot of volume by bidding low

In addition, the appraisers, who can not or will not lower their fee to the lower since they spend time on each report to research and verify /develop for best results, are being driven out of the res lending side work, restricting their practice to a few clients.

How does that protect the public trust or ensureto quality work?

If it were not about tax payer backed work I'd say fine, drive the better appraisers out of business, let the volume go to chop shop low fee providers, and let the AMC's be the profit winners. But it is about tax payer backed work. Shrug.

 

[J Grant]

I have no problem with fees set by supply and demand AT ALL. We will not operate at a loss. We will charge more, just like the appraisers in the COW states.

Why should YOU be getting portion of the appraisal fee money at all?

If your company/ AMC's want to be in appraisal management service business, then charge the lender separately, charge them a rate for your service apart from what borrower pays and apart from what gets paid to the appraiser. Stop the business model of gouging appraisal fees to run your business in every state , city and region you can, while excusing it by the fact that in a few COW states it works in the appraiser's favor .

In addition, the fees of C and R are NOT defined as to be measured by supply and demand, it is defined in Dodd Frank - the measured standard are comparable to VA fees, govt surveys, and non AMC work in an area. The fact that you do an end run around it and say supply and demand sets C and R is not what the regulations state. (or why they were made in the first place)

 

[Evincere]

It is a relatively simple assignment (in my theoretical); nothing complex and many appraisers are qualified to do the job.
But, what do you think? If the lender awards the bid at the $300 mark, are they picking the low fee?

Theoretically, hypothetically, we will never know. Theoretically, as you put it, your example is restricted to theory. The practical application of even the numbers you provided is impractical and given what we do know it flies in the face of documented broadcasted and bid orders.

 

[J Grant]

So you seem to be arguing that in a competitive bid system, the fee bids shouldn't be a consideration.
That explains your support for a fixed fee.

So, what if we go to a cost+ system? (one which you and I both advocate for, I believe).

Same dynamic; AMC fee (or lender overhead fee, whatever you want to call it) is out of the equation.
Would it matter then if the lender picked the $300 fee in the same bid-spread (with the borrower paying the set "cost" + whatever appraisal fee the appraiser bid)?

I doubt the lenders would be picking by low fee. The direct order lenders don't pick that way now, so why would it change? They want the appraisal done well as long as it is covered by what the borrower pays. Due to TRID and the way they take applications from borrowers, banks and lenders tend to charge a certain set rate for regular appraisal orders in an area. It would be sheer chaos for them to sit with a borrower at time of application and bid search for an appraiser around a fee..

But if it comes to that, it does. I am willing to take my chances with cost plus, because the main driver of appraisal fees down is the fact that AMC's make their profit and survive as a business from doing exactly that.

 

[hastalavista]

Even if one buys into the self serving spin that all the bidding appraisers are equally qualified so no harm done assigning to lower fee person, the result is that the lower fee folks will get a mass of volume, which means they have to pump out the work fast food style rote /shortcut/generic/canned comments skimp on research- or how else is it accomplished? They are supposedly that much more efficient? What a crock.

Tell us, how does the volume of appraisal orders by low fee resulting in fast food style crank them out methods, protect the public trust or lead to quality work?

The borrower is not aware of how their appraiser was chosen ; that by choosing the appraiser low fee it means their work is done at warp speed chop shop style- or by marginal appraisers at mills such as Forsythe and Metro West, who win a lot of volume by bidding low

In addition, the appraisers, who can not or will not lower their fee to the lower since they spend time on each report to research and verify /develop for best results, are being driven out of the res lending side work, restricting their practice to a few clients.

How does that protect the public trust or ensureto quality work?

If it were not about tax payer backed work I'd say fine, drive the better appraisers out of business, let the volume go to chop shop low fee providers, and let the AMC's be the profit winners. But it is about tax payer backed work. Shrug.

Here is my take:

You don't like the fact that some appraisers may bid lower than you and that those appraisers are equally qualified as you are for the assignment (note that I did not say "better qualified"... I said "equally qualified for the assignment"); and therefore, those equally but willing-to-take-lower-fees than you appraisers need to be stopped from bidding lower. The way to do this is to fix a price to an appraisal.

If that is your position, that's fine with me. I disagree with it for all the reasons I've posted time and time again. I'm no fan or foe of AMCs. I don't work for them.
The sad thing is (IMO) is that anyone who disagrees with your position must be a shill or not care about appraising as a profession. With that perspective, there is only one way to do things and it is your way (or the highway). Many people have that perspective, so you are not alone.

Cost-plus is something I am in favor of. But you didn't really answer the question about removing the AMC/Lender fee from the equation. Your fear is that it will still result in a race to the bottom and that quality will suffer. There is some truth to that; some will try to trade volume for quality. But fixing a fee doesn't change that (really); because based on your logic, the same players who trade fee for volume will then start trading turn-time for volume or value for volume. There is always a reason why someone else will get the assignment, and it is always due to some nefarious reason.

You want to create a system that will increase fees to appraisers? More power to you. I suggest, however, that rather than ignore the actual dynamic that is occurring in the market right now (when there are more assignments than appraisers, fees go up; when the opposite occurs, fees go down) you come up with a way that considers that dynamic in your solution. Because if you don't, you are going to be back a year later complaining about not getting bids because others are doing them in 48 hours. Or, not getting assignments because everyone else is hitting a value that you think is pushed.


In the meantime, go ahead and continue to label anyone else with an opposing view a shill or (whatever the term of the week is)... especially if it makes you feel better.

 

[OSU Beavers]

Even though everyone in Oregon is still booked up for a month, these small POS AMC's are sure acting like they are the cock of the walk. The way some of them talk to us. Add TRIMAVIN to the list of jerkface AMC's.

I have also had several AMC's that have moved the Due Date back from what was agreed to what they originally wanted, then start the non-stop auto harass emails and calls about a LATE REPORT. It's not late, I have not even inspected it yet!

 

[hastalavista]

Theoretically, hypothetically, we will never know. Theoretically, as you put it, your example is restricted to theory. The practical application of even the numbers you provided is impractical and given what we do know it flies in the face of documented broadcasted and bid orders.

It doesn't fly in the face of my fist-hand experience of seeing appraisal assignments and bids.
But I suppose counter-examples can be found for nearly everything.

 

[Michigan CG]

That might make sense except for one small detail - the areas with shortage have the highest fees in the country. Fees with four digits (fees to the appraiser) are common in those areas. We pay them every day.

My original question stands, are these people in these states hiring their kids now that things are so good? If not, why not?

 

[Deleted member 130081]

Yea, I can buy the supply/demand thing that AMCs cite and is the reality - I am after all an appraiser and I had better comprehend market dynamics - right?. However, the AMCs did not become the players they are through open free-market capitalism, they became big players through government regulation/interaction. Funny how that part of the story gets lost after all these years. The HVCC wiped out years of sales relations appraisers had built over-night with the stroke of a pen. Lenders, not quite understanding the laws and what to do about them, also not wanting to see a single day of down-time in their business model, flocked to the AMCs to solve their problem in the quickest and easiest way possible. Where before jobs were won the old fashioned way, the individual shop competing against the other individual shop who both happened to solicit the same client, the vast bulk of appraisers are now pooled to compete against each other, to a very small group of clients (AMCs). So, AMCs and anyone else can cry fair market all they want, but that really isn't the truth of the matter. Appraisers need to unionize, to consolidate the labor pool exactly the same way it is consolidated against us.

 

[Michigan CG]

If there is such a shortage in the COW states (there was in 2016) are those folks hiring trainees? They should if they want to maximize profits. Do they see this as a problem they need to address or do they see the 2016 business as a temporary thing that will correct itself?

The best way to gauge that is to find out how many appraisers in the COW states are advising their children to become residential appraisers. That is the true test of the market as many appraisers, back in "the day" were recruited by family members Appraising used to be a family business and used to be passed on from generations. Are the COW state appraisers hiring trainees and are some of those trainees their children?

Above is the jist of my long original post. If these people are making a boatload of money are they hiring trainees and are some of those trainees their children. At $600 per report and six reports a week one could make $180,000. Most would say it is time to hire a trainee and make more money or work less hours.