The New Appraisal Industry

[Joe Flacco]

It looks like even Guaranteed Rate has no such requirement, and they are a non-bank.

 

[Joe Flacco]

Only one of the banks I work with right now has a requirement that appraisers signing the report must be approved in advance. I don't know if they approve trainees, so I assume they probably don't accept trainees.

 

[gregb]

chatgpt-

Below is a time-sequenced explanation of how the rise of Appraisal Management Companies (AMCs) coincided with the decline of mortgage brokers, and how that structural shift reshaped the real estate appraisal profession.

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1. Pre-Crisis Structure (≈1990s–2007): Broker-Driven Appraisal Ordering​

Who dominated:

• Independent mortgage brokers
• Retail loan officers inside banks

How appraisals were ordered:

• Brokers and loan officers directly selected and contacted appraisers
• Appraisers competed on turn time, fee, and “deal-friendliness”

Economic reality for appraisers:

• Higher fees (often $400–$600+ in today’s dollars)
• Stable, repeat relationships
• High volume but significant pressure to “hit the number”

Key issue:
This structure created a clear conflict of interest—the person who needed the loan to close was choosing the appraiser.

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2. 2007–2009: Financial Crisis and Regulatory Shock​

The housing collapse triggered intense scrutiny of appraisal independence.

Critical inflection points​

• 2008: NY Attorney General investigation into lender pressure on appraisers
• 2009: Home Valuation Code of Conduct (HVCC) takes effect for conventional loans sold to Fannie Mae and Freddie Mac

Immediate consequences:

• Mortgage brokers and loan officers lost authority to order appraisals
• Lenders rushed to outsource ordering to third parties → AMCs

This is the moment AMCs move from fringe players to gatekeepers.

---

3. 2009–2012: Ascendancy of AMCs / Collapse of Mortgage Brokers​

Mortgage brokers​

• Thousands exited the industry
• Warehouse lenders and investors cut them off
• Market share shifted sharply to banks and correspondent lenders

AMCs​

• Explosive growth
• Became the default compliance solution for lenders
• Later codified under Dodd-Frank Act (2010), which:
  
  • Mandated appraisal independence
  • Explicitly recognized AMCs
  • Required AMC registration/licensing in many states

Timing relationship:

Mortgage broker decline preceded and enabled AMC dominance, but AMC growth accelerated fastest after brokers disappeared.

---

4. 2012–Present: Structural Impact on the Appraisal Profession​

A. Fee Compression​

• AMCs insert themselves as intermediaries
• Typical split:
  
  • Borrower pays $600
  • Appraiser receives $300–$375
  • AMC retains the rest
• Inflation-adjusted appraiser compensation declines sharply

B. Loss of Client Control​

• Appraisers no longer:
  
  • Negotiate fees
  • Control scope creep
  • Select clients
• “Take it or leave it” engagement terms

C. Commoditization of Appraisal Work​

• Appraisers treated as interchangeable vendors
• Emphasis on:
  
  • Turn time
  • Checklist compliance
  • Automated review scores
• Professional judgment de-emphasized

D. Demographic Consequences​

• Fewer trainees enter the field
• Aging appraiser population
• Shrinking panels, especially in rural and complex markets

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5. Causal Chain (Time-Wise Summary)​

<span><span>Mortgage broker dominance (pre-</span><span><span>2008</span></span><span>)<br> ↓<br>Appraisal pressure scandals<br> ↓<br>HVCC (</span><span><span>2009</span></span><span>) → appraisal ordering removed from brokers<br> ↓<br>Mortgage broker collapse<br> ↓<br>Lenders need scalable compliance solution<br> ↓<br>AMC dominance (</span><span><span>2010</span></span><span>–present)<br> ↓<br>Fee compression + commoditization of appraisal work<br></span></span>

---

6. Net Effect on Appraisal Business Models​

Winners

• Large national AMCs
• Lenders seeking regulatory insulation
• High-volume, low-complexity appraisal providers

Losers

• Independent fee appraisers
• Small appraisal firms
• Complex property specialists (unless diversified into litigation, review, or non-lending work)

---

7. Bottom Line​

From a time-wise perspective:

• Mortgage brokers declined first (2008–2010)
• AMCs rose immediately afterward, filling the control vacuum
• The appraisal profession shifted from a relationship-based professional service to a centrally managed compliance commodity

 

[RCA]

Wonder why your volumes are down, and waivers and PDC reports and the like can't explain the entire matter? Well, what many of us know, and our clients don't care about and are encouraging and supporting, is that everyone else is lying, cheating, and stealing with abandon and the regulatory system simply does not care. They are more focused on ensuring anyone with a pulse can become an appraiser without cost or effort, and ensuring everyone, regardless of how ethical or competent do not have their ability to "earn a living" is compromised even when found to be violating every rule many of us waste a lot of time and effort complying with.

"
There is a widening gap in this industry between the people who actually protect the public trust and the people who only talk about it. A recent Reddit post from a Georgia trainee captured that gap with uncomfortable clarity. Not because his experience was unusual, but because it showed exactly what happens when the demand for fast and cheap collides with a profession built on accuracy, accountability, and real judgment.

The trainee described a year of being sent out alone to inspect properties, told to introduce himself using the name of a licensed appraiser who was never present, instructed to drop that person’s license into the file, and discouraged from adding supervisor details because the supervisor did not actually supervise. His so called trainer lived in another state, ignored most of his questions, and only appeared long enough to nitpick minor clerical issues. After twelve months, he could measure a house with precision, but no one had walked him through developing a sales comparison grid, reconciling approaches, or completing a report from start to finish. He was not being trained. He was being used.

Appraisers responding to the post said the part the AMC industry and its fast and cheap partners won’t acknowledge publicly. This is fraud. One appraiser reminded him that the certification section of the URAR literally states “I personally inspected”. Another pointed out that he should be signing these reports as a trainee, with the supervisory section completed, because that is what USPAP and common sense require. Instead, he was being told to impersonate someone else at the door while that person signed off on an inspection they never performed. That is not a gray area, not a training issue but a criminal issue.


And then came the comment that exposed the ecosystem. An appraiser described a local AMC that sends trainees out to inspect because they are cheap, fast, and most importantly invisible to the client. Many lenders do not allow trainee inspections, so instead of disclosing the truth, the AMC buries the trainee’s role behind a vague line in the addendum about a clerical administrative assistant who aids in X, Y, Z. The licensed appraiser signs the report, collects the fee, and keeps the volume flowing, while the trainee gets a small cut and a log of hours that will not lead to competency because no one is training them beyond measuring and sketching. They are kept in trainee status longer, not because they need more experience, but because the system needs their labor. As one appraiser put it, they send someone else out to inspect, have another person type the report, and slap their name on it. We call them appraisal mills. And the worst part is that they are nice people, but they have no qualms being completely unethical, dishonest, and providing poor products.

This is not an isolated incident. It is a business model. We have seen it in Reggora’s breathless “24-hour appraisal” marketing pieces that promise a one day appraisal as if physics, geography, and USPAP were optional. We have seen it in the push for hybrids and modernized valuation workflows, where someone unlicensed gathers the data and someone licensed signs off from miles away. We have seen it in the racial bias smear campaigns that drove seasoned appraisers out of the profession, only for the same institutions to now complain that there are not enough mentors for trainees. We have seen it in the way AMCs slice fees, demand impossible turn times, and then act bewildered when the training pipeline collapses.

And then the very push for fast and cheap appraisal products ends up creating the opposite of what was promised. The same groups that championed speed over substance are now the reason lenders want more photos, more commentary, more proof, more everything. When you normalize low quality, minimal oversight, and assembly line valuation products, trust erodes. And once trust erodes, the burden falls on appraisers to over document every inch of a property just to prove they did what they have always done. The problem is not the appraiser. The problem is the system that keeps rewarding the fastest, cheapest, least transparent operators in the chain.

The trainee on Reddit was not confused because the situation was subtle. He knew impersonating a licensed appraiser was wrong, and he still did it for a year because the people directing him told him this was normal and expected. When he finally posted on the appraisal subreddit, he was looking for confirmation from other appraisers that what he was being instructed to do was illegal. And they told him exactly that. The real problem is not the profession. It is the company and the licensed appraisers who exploited him, instructed him to violate USPAP, and sent him out to present himself as someone he was not. That is not training. That is misconduct carried out under the cover of a trainee program.

Appraisers are not the problem. They never were. The problem is the ecosystem built around them, the one that demands speed over accuracy, volume over training, and optics over integrity. The one that undermines the very people who are actually held accountable. The one that pushes trainees into the field unprepared, unsupported, and invisible, then blames appraisers when the results are not perfect.

The trainee wanted validation. What he uncovered was a truth appraisers have been shouting for years. If the industry wants competent, ethical appraisers in the future, it has to stop rewarding the entities that undermine them in the present. Because the real threat to public trust is not the appraiser at the door. It is the system that sent him there under someone else’s name."

The Trainee Inside the Fast and Cheap Model - Appraisers Blogs

The trainee exposes how the fast and cheap model turns training into impersonation, shortcuts, and systemic misconduct.

appraisersblogs.com

I tend to believe that the central problem is poor protocols that appraisers are given to work with. As it stands, Matched-Pair Analysis has long since been proven to be highly flawed, and yet we see MAIs who worship the process. -- mostly because they suffer from tunnel vision. And of course you have the "flying-by-the-seat-of-the-pants" adjustments" that are nothing more than the appraiser's intuitive understanding, i.e. totally subjective judgements. So multiple appraisers appraise the same property at about the same same time and show 50% differences in value. No protocol. But the Appraisal Institute says that value conclusions are "only opinions' - so all is OK.

The problem is the infinite number of conflicting valuations. Valuations have little value due to lack of strict protocols: Thus, their conclusions are easily attacked by lawyers, and expensive lawsuits are the result.

I would say, I don't believe intentional discrimination is a problem. Perhaps unintentional implicit discrimination -- But traditional valuations ar really guided by the selected comps and I am sure most appraisers just choose the closest and most similar comps to the subject.

The other problem, is that to use MARS and methods like RCA, you have to get the appraiser to understand the mechanics. You can describe it in sufficient detail, but the logic doesn't really sink in and they really do believe that getting all of the adjusted sales prices to the same value is some kind of sorcery. Which it isn't of course. [They can't figure out the little obstructions you run into with method and how to get around them, because haven't really acquired a broader and full understanding of the method. For example, they might ask: How do you estimate the Value Contribution of Condition? Answer, you have a residual value that all of the unmeasured attribute value contributions have to add up. The appraisers is free to push, pull, add, subtract to all value contributions until percentage wise they reflect his understanding (subjective understanding) of the composition of the residuals. Maybe the appraiser find's it impossible to get to the residual. Something is missing - and that could very well be that the buyer paid more or less than what the house was worth. OK. Call that. feature/attrubute "Over- or Under-priced". and be done with it. But appraisers, don't understand enough to get that far. They can't really think independently. ....]. And that IS the problem.

 

[Fernando]

I have this 1,100 sf fixer and don't know how much to adjust for bad condition so I asked CoPilot.
It said for low basic complete remodel, it will cost between $170,000 to $200,000.
So does it mean to be conservative even a $150,000 adjustment should be reasonable?
Because with such an adjustment, my appraised value comes out perfectly. Thanks AI.

 

[TerryRohrer]

I tend to believe that the central problem is poor protocols that appraisers are given to work with. As it stands, Matched-Pair Analysis has long since been proven to be highly flawed, and yet we see MAIs who worship the process. -- mostly because they suffer from tunnel vision. And of course you have the "flying-by-the-seat-of-the-pants" adjustments" that are nothing more than the appraiser's intuitive understanding, i.e. totally subjective judgements. So multiple appraisers appraise the same property at about the same same time and show 50% differences in value. No protocol. But the Appraisal Institute says that value conclusions are "only opinions' - so all is OK.

The problem is the infinite number of conflicting valuations. Valuations have little value due to lack of strict protocols: Thus, their conclusions are easily attacked by lawyers, and expensive lawsuits are the result.

I would say, I don't believe intentional discrimination is a problem. Perhaps unintentional implicit discrimination -- But traditional valuations ar really guided by the selected comps and I am sure most appraisers just choose the closest and most similar comps to the subject.

The other problem, is that to use MARS and methods like RCA, you have to get the appraiser to understand the mechanics. You can describe it in sufficient detail, but the logic doesn't really sink in and they really do believe that getting all of the adjusted sales prices to the same value is some kind of sorcery. Which it isn't of course. [They can't figure out the little obstructions you run into with method and how to get around them, because haven't really acquired a broader and full understanding of the method. For example, they might ask: How do you estimate the Value Contribution of Condition? Answer, you have a residual value that all of the unmeasured attribute value contributions have to add up. The appraisers is free to push, pull, add, subtract to all value contributions until percentage wise they reflect his understanding (subjective understanding) of the composition of the residuals. Maybe the appraiser find's it impossible to get to the residual. Something is missing - and that could very well be that the buyer paid more or less than what the house was worth. OK. Call that. feature/attrubute "Over- or Under-priced". and be done with it. But appraisers, don't understand enough to get that far. They can't really think independently. ....]. And that IS the problem.

Well, depreciated cost assumptions are taking the place of what little analysis has typically taken place. The blind are leading the gullible.

 

[chad hampton]

Any runners going on in the 2000s was childs play compared to the scams the hedge fund backed AMCs are currently participating in.

 

[Fernando]

I just checked my appraised value with Zillow and it's almost the same. WTF!
Is Zillow getting more accurate in estimating home values. Oh no!

 

[RCA]

Well, depreciated cost assumptions are taking the place of what little analysis has typically taken place. The blind are leading the gullible.

If you can get a cost estimate for updating the home so that it has the same overall appeal of a couple of recent sales, then subtract the cost to upgrade from estimated sale price to get depreciated value. Of course, you are implicitly right - most appraisers won't go to the trouble.

No, I need to wake up here. I don't know what the above is. But I do think subtracting upgrade cost from cost new, would be a check against you strictly depreciated cost.

 

[OSU Beavers]

Looks like STARS also had the supervisor must inspect requirement.

Is STARS still around?