The New Appraisal Industry

[Zoe]

Is the borrower /private individual allowed to choose the provider of the termite inspection, the well report, and the environmental assessment? YES
We know the borrower or other individual is not allowed to choose the appraiser. Which makes the comparison incorrect.

Does the title report, termite inspection, and well report have a third-party involved, keeping a big chunk $ of the total charge? NO. Which further makes the comparison incorrect.i

You: The fact that payment is being passed through the lender instead of out of their own pockets only means the AMC and appraiser are getting paid.

It does not ONLY mean the AMC and appraiser are getting paid. It means the lender customer of the AMC incurs NO COST for using the AMC service. That is not an "only". That is everything. That is what drives the lender's decision to use an AMC - a no-brainer. It costs the lender nothing.

But an AMC can not work for free. They get compensated for taking as much of a split as they can gouge from the borrower's covered appraisal fee. It is kept secret from the borrower exactly HOW the appraiser gets selected: ( a flea market reverse auction to get the cheapest bid) - often bypassing a more qualified appraiser. Is the consumer who wrote out a check for the appraisal made aware of this upfront? NO

Does any of the above remotely resemble the free market economy? NO.

This is what me and Joan Trice went round and round about. Fastest and cheapest and commingling of fees. AMCs probably are paid a base fee by the lender in many cases but they make more money by going for fastest and cheapest and making money off the appraisal fee the lender charges the borrower.

It is basically an illegal market structure. It violates anti-trust law.

 

[Zoe]

Many on this forum are involved with AMCs so get ready for somebody to challenge me. I'm ready. If I could handle Joan Trice challenging me, I can handle all comers.

 

[Zoe]

If fees were separated on truth in lending disclosures, it would create intense competition between appraisal management companies and would almost force the lender to pay the appraisal management company fee completely. The AMC would no longer be interested in fastest and cheapest. The AMC would have no financial incentive for fastest and cheapest appraiser. The borrower would pay the appraisal fee or the lender directly to the appraiser like VA does currently.

Lender or AMC don't make money off VA appraisal.

The appraisal fee is the appraisal fee. No commingling of fees on VA appraisal.

The market structure don't have market power on price. VA controls the price. The appraiser can negotiate fee with lender and veteran on complex assignments.

VA has no incentive for fastest and cheapest.

 

[Essexfenwick]

The penalty that AMCs that gouge appraisers during slow periods when nobody is making much money anyway is....

When the boom comes appraisers dump the abusers and take care of the good clients and it's too late for AMCs to hire. Then the lenders drop the slow time gougers. When the real money hits they lose. They scrounge for survival for peanuts then get screwed when they need help to finally make money.

 

[J Grant]

This is what me and Joan Trice went round and round about. Fastest and cheapest and commingling of fees. AMCs probably are paid a base fee by the lender in many cases but they make more money by going for fastest and cheapest and making money off the appraisal fee the lender charges the borrower.

It is basically an illegal market structure. It violates anti-trust law.

Like a girl a day over sixteen in a state where 16 is the min age of consent, it is not "illegal" but might not be ethical.

The AMC hires lawyers to keep their actions "legal", at least on the surface of compliance. It is legal for the AMC to keep as much of the bundled appraisal fee split as they can, however, their fee splits are enormous compared to normal fee splits in the business world for management (which average 10-20%) .

That is why the verbiage used by AMC's is to call appraisers a "valued vendor partner ) ...we are not their partner, but calling us a partner means they can justify keeping a whopping 40-60% of a bundled appraisal fee.

Not allowing a fee split as the compensation to the AMC or capping it at a maximum of 20%, would solve the problem. But since the only parties that suffer the problem is low resource to fight back appraisers, it continues -..which is why the appraisers who can manage it avoid AMC work and why so few are entering the field for a res license despite PAREA.

 

[John Hassler]

Their economic interests don't count in the safe/sound lending matrix, either. Same as the lenders' savings WRT outsourcing 100% of the appraisal process. They weren't even doing a pass-through of those costs or any of the accounting or payment processes. Those MB-controlled appraisals literally WERE 100% free to the lenders before the HVCC and D-F got to them.

You are on a tangent that needs more explanation before I can respond.

Those appraisals were never “free”, they just weren’t an out of pocket cost. Not sure why this matters.

Bottom line is consumers of loans were negatively impacted by the elimination of MBs. You could make a case that the public at large gained protection via safeguards but there’s an argument to be made against that as well.

 

[Surf Cat]

Let's ask AI since it's all the rage shall we?

How can any licensed appraiser be on their side? I mean.... with the exception of needing to pay the rent or put food on the table.

Why do appraisal management companies get away with taking a big portion of the appraisal fee?

Appraisal Management Companies (AMCs) are able to retain a large portion of appraisal fees—often 60% to 80% or more—due to a combination of regulatory loopholes, lack of transparency, and systemic industry practices.

Regulatory Gaps: The Customary and Reasonable (C&R) fee rule, designed to ensure fair compensation, was weakened by a "safe harbor" provision that allows AMCs to bill based on either customary or reasonable fees, rather than both. This change, pushed by lenders and AMCs, eliminated the threat of $10,000–$20,000 daily fines for overcharging, effectively legalizing inflated fees.

Fee Secrecy: AMCs prohibit appraisers from disclosing their actual fee to borrowers or including invoices in the appraisal report. This hides the true cost, allowing AMCs to charge borrowers significantly more than what the appraiser receives—e.g., a $695 fee where the appraiser gets only $301.

Power Imbalance: AMCs are often wholly owned by banks or large lenders, undermining the intended independence of appraisals. They control access to appraisal assignments, blacklisting appraisers who speak out, and rewarding those who accept lower fees and silence their clients.

Industry Consolidation: Since the 2008 crisis, AMCs have driven over 150,000 appraisers out of mortgage lending, shrinking the pool of independent professionals. This gives AMCs near-monopoly control over assignment distribution, enabling them to set low pay rates and high markups.

Lack of Oversight: Despite evidence of deceptive practices, such as those exposed in the Timmins v. Clear Capital lawsuit (2025), AMCs operate with minimal state-level regulation. The Consumer Financial Protection Bureau (CFPB) has received complaints, but enforcement remains weak.

In short, AMCs exploit opaque billing, regulatory loopholes, and monopolistic control to extract massive profits—often at the expense of both appraisers and borrowers—while facing little legal or financial consequence.

 

[alebrewer]

While some find the MB model undesirable, it was of significant benefit for consumers. The MB would have a loan packaged and ready to pit lender against lender with the winner being the borrower (and probably some extra big to the MB.

There was a statistic out circa 2012, after the MB system was all but gutted, that the spread between what the lender paid for money and what they sold it (their spread) at was at an all time high. This made sense since borrowers were effectively locked into a single lender instead of having a MB who had the ability to find the best deal.

The current system has been detrimental to borrowers.

You forgot to point out the benefit to the borrower of the MB's bullying the appraisers into hitting whatever value made their loan work. That was HUGE for the borrower. Not so much for the taxpayer...

 

[alebrewer]

Why do you even give a damn who orders the appraisal? If it were up to me, borrowers would order appraisals and then the lender could decide if they want to accept it or not.

This is a valid ask. Prior to the crash, the lenders/users didn't really have the ability to verify the data included in the appraisal (other than to order a desk/field review from another local appraiser). Not so much any longer. Lenders and other users spend billions a year on collateral diligence. If that's the case (and it is), it doesn't really matter much any longer who orders the appraisal and whether there's a potential conflict of interest - it's pretty easy for the users to ascertain the validity of an appraisal anyways.

 

[J Grant]

You forgot to point out the benefit to the borrower of the MB's bullying the appraisers into hitting whatever value made their loan work. That was HUGE for the borrower. Not so much for the taxpayer...

Now there's no need to have an MB bully the appraiser into hitting a value to make a loan work.

The GSEs instead greenlight a waiver/value acceptance, where the mortgage lender fills in whatever property value they need to make a loan work ! (no appraisal is done. ) That is HUGE for the borrower. Not so much for the taxpayer.

As long as the mortgage lender's value or the sale price fit within the GSE AVM range - the AVM is done first to see if it works...like the forbidden comp checks of yore.