Voice Of Appraisal

[BRCJR]

The AMC model "breaks" when the Appraiser will not work for/with them. Simple as that......

 

[gregb]

Even if AMC's pay full fee to the appraiser, there are currently enough other reasons for an appraiser to stick with private party and direct lender engagement. It only takes one AMC nightmare experience (20 stips, going on for 4 weeks etc.) for an appraiser to learn about the impact having a pimp between the source of work and the talent. Schurman's 2012 article was never embraced by AMC world, now it is too late, from my perspective.

http://appraisalnewsonline.typepad.com/files/the-AMC-full-fee-hypothesis---jeff-schurman.pdf

 

[TRESinc]

Even if AMC's pay full fee to the appraiser, there are currently enough other reasons for an appraiser to stick with private party and direct lender engagement. It only takes one AMC nightmare experience (20 stips, going on for 4 weeks etc.) for an appraiser to learn about the impact having a pimp between the source of work and the talent. Schurman's 2012 article was never embraced by AMC world, now it is too late, from my perspective.

http://appraisalnewsonline.typepad.com/files/the-AMC-full-fee-hypothesis---jeff-schurman.pdf

from your link, page 3:

19. Opens the door to a better borrower experience because the appraiser doesn’t enter the home angry.

if any appraiser is stupid enough to operate like this then they should turn their license in and get a job in a factory driving a tow motor alone...

Somewhere in the conversation, usually during the fee discussion, AMC candidates are told that if they meet a competitor’s price they’ll get a portion of the work. But wait! What about the client’s non-fee-related interests? Those that one or another AMC excels in? Those that an AMC has spent tens of thousands of dollars to automate? The features the client insisted upon in the RFP? Does it all boil down to matching the lowest fee? “Is this the ultimate measure of our worth?” an AMC sales representative might ask. Often it is. For as much leverage an AMC might use to squeeze fee concessions from appraisers, the same leverage is being applied to them by potential clients.

wow. so lenders are doing to AMCs what AMCs are doing to appraisers. gee, who would have thunk that?

 

[hastalavista]

I get what you are saying. I just think that some of these companies will be able to adapt or evolve in the future.

I agree, Joe.
Many of us believe the current "general" AMC model is not sustainable.
Look at their history:

• Pre-HVCC, they existed, but not as prevalent as they are today. And, their ability to compete was based on their geographic coverage. For some larger lenders, while they had their own internal panel, as they began to grow (regional and then nationally), they could not staff-up quickly enough to develop more local panels. AMCs could fill this role.
• Pre-HVCC, it should be remembered that there were a number of small-to=medium sized residential fee shops. I had one (15 appraisers and a staff of 5 support). Pre-HVCC, we were the largest vendor for WAMU (pre-AMC for them) in the SF Bay Area. I had a similar relationship with US Bank. Back in the day, they would engage our firm and because of the personal/professional relationship I had developed and would rely on me to ensure that the appraisers we used were qualified and competent. That isn't unique to me; that is the way it was.
• Post-HVCC and certainly Post Dodd-Frank, the appraiser-engagement world changed. I knew of a lot of fee shops that became AMCs (only a couple that I can think remain in business). Under the current regulation, had I stayed with my fee shop model, I would have had to register as an AMC. Unfortunately for me, this is where personal/professional relationships lost their significance (unfortunate at the time, a blessing in retrospect for me as I simply changed my business model and migrated to a new set of clients where personal/professional relationships did matter).
• Post-HVCC/Dodd-Frank, the reaction to regulatory change by lenders was to offload their appraisal management process to a 3rd party vendor. Not all the lenders did this, but many did. As you know, I've sang this song since Dodd-Frank: The migration of the larger lenders to AMCs was the biggest misdirection of all time. Not only did the lenders reduce a cost of doing business, but the regulation created a veneer of regulatory risk-substitution from the lenders to the AMCs.
• During this time, the AMC model exploded. It wasn't a pretty picture and a lot of companies who had no business doing business were doing business as AMCs.
• Since that time, we've had a lot of consolidation in the AMC space. Smaller companies still exist, but it is very difficult to be competitive outside of larger metro areas and certainly across state lines due to the state regulatory costs for AMCs. I'm not complaining about that, I'm simply stating a fact.
• In the consolidation period, the larger players have become more sophisticated and better capitalized. Their sophistication is excellent when it comes to geographic coverage. Where they were less sophisticated is in quality assurance and compliance. However, some of this falls directly on the lenders, as lenders require different service levels from AMCs. Some want concierge service; others, effectively an ordering platform and automated QC. However, the larger AMCs are now making strides to increase their ability to appropriately qualify appraisers and credibly review the quality of their work (It cannot be stated enough that the level of review is dependent on the service agreement they have with their client, the lender). This is still a weakness, but it is improving.
  
• In Denis' History of the AMC, I'd place us in the Third Era: The first being pre-HVCC, the second being Post-HVCC/Dodd-Frank, and the current being the consolidation and transformation. Yes, some lenders will take back some of the appraisal management in-house. If I'm Wells Fargo, I'm going to have staff appraisers in my 10-20 biggest metropolitan areas. But that staff is going to cover about 50% of my volume because I never want to be in the position of having surplus staff when I can 3rd party the service out. I'll keep a "core" group and outsource the rest. But, for the outlying areas, I'm not going to staff there and I'm not going to directly manage the process. I'm going to outsource that process and manage my outsource-vendors, the AMCs, through audits and reviews.
• Now, AMCs will compete on area coverage, engagement and scheduling process, and (always) turn time. Quality is a given, and quality is measured by meeting the minimums standards. An AMC gets penalized when the appraisal report doesn't meet the quality standard; the lender simply rejects it and the AMC usually has to pay for the replacement themselves (no tears here, I get it; again, this is the way it works). Unfortunately, some lenders use quality as an excuse for not hitting a value; again, this is what happens in the real world. Notwithstanding this, as the regulatory focus returns to the lenders for the entire appraisal process (outsourced or not), I believe the value-shopping, while not disappearing, will shrink significantly.

So, I do agree with you: "...some ofthese companies will be able to adapt or evolve in the future." That will occur, and is happening now. The landscape will change, but AMCs will be part of that landscape (a smaller, but still significant part).

The world according to Denis!

 

[Eli]

More like a 90% share. The same was said about mortgage broker appraisals with 2/3 market share in the bubble. Not saying they will go away, just that their model will change significantly or they will go away. The current model is not sustainable.

I agree. Who knows what legal forces could do too. LA may bury a few before it is over if the Feds don't change some things.

Their AG has just as much power as anybody to enforce antitrust law within their boundaries.

 

[Jonathan Miller]

Whatever the share is, apparently lenders are fine with AMC's and continue to use them 10 years later. The only reason mortgage broker appraisals went away is because they were outlawed after the last meltdown. If there is another meltdown and the laws are changed to outlaw or severely restrict AMC's, then the AMC model will perish. But unless and until that happens, there is no reason to think that the AMC model is going anywhere anytime soon.

Perhaps, but mortgage broker ordered appraisals weren't outlawed. The economics/rules changed (HVCC/Dodd-Frank, Risk Awareness) and suddenly lenders were incentivized to pursue other means. The mortgage brokerage industry cratered overnight.

 

[Meandering]

Mortgage Broker ordered appraisals are still allowed for "non-covered" transactions; investment properties, and others. It's a small percentage, yet it exists.

.

 

[Eli]

Perhaps, but mortgage broker ordered appraisals weren't outlawed. The economics/rules changed (HVCC/Dodd-Frank, Risk Awareness) and suddenly lenders were incentivized to pursue other means. The mortgage brokerage industry cratered overnight.

Cratered kind of like fees to single family residential appraisers due to change in market structure from more of a free market to less of a free market.

LA ain't done. Timd is like dreaming they are done. They just shifted it to the attorney general.

 

[Eli]

Keep in mind that the FTC probably don't know half what LA knows about relative antitrust issues. Keep in mind their AG is in charge now.

 

[TRESinc]

Keep in mind that the FTC probably don't know half what LA knows about relative antitrust issues.

that makes perfect sense... i'm sure the LA real estate board, who can no longer make any decisions without it first being reviewed by someone else, knows more about antitrust than the FTC.