We're Back To The Beginning

[George Hatch]

You're zooming yourself if you don't think lenders are making the choices they make out of any reason other that "making profit". A bank that chooses to directly control their choice of appraiser even if it means paying more for the appraisal is doing so because they think that is the best way to make their profit, whether they're taking the short view or the long view.

It doesn't matter exactly why a client shops primarily by price; the effect is the same. You've talked yourself into believing that the AMC model stands alone as being profit seeking and that our business should not involve a profit motive. I wish you luck with that line of thinking.

I think the smart move going forward is to anticipate the environment that you see coming and decide how you're going to interact with it. If that means more closely parsing exactly what a client needs in an assignment so that you don't waste your time giving them content that they don't value, or if that means incorporating more tech to be more productive on the assignments you're working on , or even arranging your process so you can upload a finished appraisal while you're onsite then some of these strategies may pay off for you in the long run.

Wishing for the lenders to go back to 2007 is like these guys demanding that Wall Street restart trading for the day because the Dukes have had a seat on the Exchange for 100 years. And you saw what happened to them.

 

[J Grant]

You might want to note that I never expressed wishing it could go back to 2007. You assume that is the case, however. What I wish for now, being that using an AMC serves a purpose for many lenders is complete severance of how appraiser is paid from what a lender pays the AMC for a service that benefits the lender.

My personal business is built around 80% direct lender work, with about 20% working for the few better paying AMC's. As far as my personal future, if the direct lender model gets pushed out due to their not able to compete ( hope that is not the case), then I will likely "adapt" by fully or partially retiring doing a few complex other/ hybrids- if available. Whatever the product is, appraisers speeding through it will only come back to an appraiser, not the lender or AMC who ordered it.

Appraisers continually cutting back content and getting even faster, as you suggest is a tread water to keep from drowning strategy, rather than a sustainable career / income . Still, there are those will will try, hamsters on wheel till they burn out and are replaced by younger hamsters. I don't want any part of that but realize it might suit some who will view it for what it will be, a survival level job.

 

[djd09]

Fraudulent Appraisals
Lagow says it didn’t take long for him to realize that Landsafe’s executives weren’t interested in quality appraisals. The original suit filed by the DOJ alleges that in early 2005, a Landsafe executive called a meeting of appraisal managers and made it clear that (1) they needed to quit thinking of an appraisal as a separate unit, (2) that Landsafe appraisers were there only to “help facilitate closing,” and (3) that they needed to change their “thought process.” (You can find the suit at WorkingRE.com; Sidebar Information (left column); Lagow vs. Countrywide Original Complaint.)

“An appraiser would turn in his or her appraisal. If it was low or didn’t meet value, it went to a reviewer. If the appraiser didn’t meet value, the reviewers were instructed to go and look at the market to see if they used the best comps and to try to discredit the appraiser. The kicker is that I have an appraiser who I trusted, hired and put on my fee panel because I believed they would do a good job. But at Landsafe, the entire review process was designed to ensure the appraisal came in at value. If one of my appraisers didn’t meet value, they were blacklisted. Our own company would turn them in to the state and call them a bad appraiser,” says Lagow.

http://www.workingre.com/wp-content/uploads/2013/10/appraiser-who-blew-whistle-NL.html

You cannot revise all history.

 

[J Grant]

Boo hoo where is that executive of Landsafe now, running an AMC?

Some lenders were corrupt then and some honest, some lenders are corrupt now and some honest, and the corrupt ones use AMC;s who do their bidding, Myself, and other appraisers on this board reported same, having work flow cut off from an AMC if we came in low on more than a rare occasion. It's just done differently now, they are too slick to bombast the way a mtge broker used to. Instead, they merely stop assigning work. If the appraiser calls and asks why, they say they are "slow" in the area.

So in that sense " we are back to the beginning" applies as well.

 

[Terrel L. Shields]

Do you think that is because all the banks suddenly turned altrustic?

No. It is because post S & L crisis banks knew or thought they would suffer consequences for dissing appraisers. I know more than one bank called to task for inadequate evaluations done by their own loan officers and were told to get appraisers doing them. One of those "safe and sound" letters from the FDIC builds a fire under them. They became more comfortable with the SOP in the 2000's but with the great recession it hit them. There is no moral hazard and appraisers can be turned into a cash cow. If supply and demand dominate, why does closing cost and application fees remain high? Why are abstractors and title lawyers not taking a hit? Why do surveyors still charge high dollar? And which of those services has to work thru a third party agent?

 

[J Grant]

You're zooming yourself if you don't think lenders are making the choices they make out of any reason other that "making profit". A bank that chooses to directly control their choice of appraiser even if it means paying more for the appraisal is doing so because they think that is the best way to make their profit, whether they're taking the short view or the long view.
It doesn't matter exactly why a client shops primarily by price; the effect is the same. You've talked yourself into believing that the AMC model stands alone as being profit seeking and that our business should not involve a profit motive. I wish you luck with that line of thinking.

?? Wrong in your assumption of my thinking. Lenders , AMCs and appraisers are all out to make a profit. Understood. The problem with the free of cost service of AMC to lender model is the "free" is subsdized by the appraiser's reduced porrtion of $ from the borrower paid appraisal fee. .

AMC's should earn their profit the way other businesses do, by charging a customer for their service, (AMC's customer is the lender.) The "payment" a lender sends to an AMC is a pass through from borrower paid appraisal fee, not a charge that costs the lender as normal business service is charged.

I'd like to see AMC;s compete on a level playing field, where the AMC charges a lender for their service, with AMC compensation is severed from appraisal fee and from fees paid to appraisers.

The AMC provides a management service, fine, let the lender pay for the management that benefits them, just as they pay for computer IT support or an accounting service that benefits them.

 

[Bob Ipock]

You're zooming yourself if you don't think lenders are making the choices they make out of any reason other that "making profit". A bank that chooses to directly control their choice of appraiser even if it means paying more for the appraisal is doing so because they think that is the best way to make their profit, whether they're taking the short view or the long view.
It doesn't matter exactly why a client shops primarily by price; the effect is the same. You've talked yourself into believing that the AMC model stands alone as being profit seeking and that our business should not involve a profit motive. I wish you luck with that line of thinking.

?? Wrong in your assumption of my thinking. Lenders , AMCs and appraisers are all out to make a profit. Understood. The problem with the free of cost service of AMC to lender model is the "free" is subsdized by the appraiser's reduced porrtion of $ from the borrower paid appraisal fee. .

AMC's should earn their profit the way other businesses do, by charging a customer for their service, (AMC's customer is the lender.) The "payment" a lender sends to an AMC is a pass through from borrower paid appraisal fee, not a charge that costs the lender as normal business service is charged.

I'd like to see AMC;s compete on a level playing field, where the AMC charges a lender for their service, with AMC compensation is severed from appraisal fee and from fees paid to appraisers.

The AMC provides a management service, fine, let the lender pay for the management that benefits them, just as they pay for computer IT support or an accounting service that benefits them.

So after 10+ yeas of talk and complaining on this forum, what has changed? It seems to me there is more talk and complaining than in the past. If there is a course of action or plan I would like to see it. The banks are loving it, the AMCs are loving it, nothing illegal has been proven and Congress is not going to upset the apple cart unless the banking lobby tells them tot I suppose the AMC issue/problem will continue to be discussed until there are no more appraisals/appraisers to manage.

 

[George Hatch]

The lenders do it because they can. They can because they have the upper hand with both the AMCs and the appraisers. What the AMCs want and what the appraisers want is immaterial because - with the exception of the COW type markets - it's mostly a buyer's market for what we do.

Here's what I would do if I was working on your side of the fence with the property types that are amenable to it: I would re-order my process so that 80% or more of the appraisal report was already complete prior to my inspection. I'd have the neighborhood and market segment and site analyses and most of the Cost Approach finished; all the commentary about adjustment factors, site zoning, HBU - all of it finished. I'd have the most 7-8 likely sales comps gridded and ready to adjust before I set foot onsite. Perform the inspection and do the diagram in my car while onsite, drive my comps, pick my most similar for the report and make whatever mods were necessary. Package it when I got back to the office and upload on the same day.

I'd plan to do no more than 1/day and I'd turn down work unless I was sure I could handle it in my process.

No updates, no rushing to meet deadlines. I'd be killing my competition on the service side because most of them aren't taking full advantage of everything they can do prior to the inspection. .

 

[J Grant]

Get a Ralph Nadar caliber attorney for a class action suit

Barring that, there likely is no "plan" that would work, and certainly not with this administration which is dismantling consumer protection and safeguard regulation wherever it can.

It would follow then that if things deteriorate further, more competent appraisers will be leaving or forced out of res lending and what the results will be is not foreseeable. Imo appraisers doing good work on the res lending side may still have a market for their services from the better lenders or clients but how long that will be viable I can't say either.

 

[J Grant]

The lenders do it because they can. They can because they have the upper hand with both the AMCs and the appraisers. What the AMCs want and what the appraisers want is immaterial because - with the exception of the COW type markets - it's mostly a buyer's market for what we do.

Here's what I would do if I was working on your side of the fence with the property types that are amenable to it: I would re-order my process so that 80% or more of the appraisal report was already complete prior to my inspection. I'd have the neighborhood and market segment and site analyses and most of the Cost Approach finished; all the commentary about adjustment factors, site zoning, HBU - all of it finished. I'd have the most 7-8 likely sales comps gridded and ready to adjust before I set foot onsite. Perform the inspection and do the diagram in my car while onsite, drive my comps, pick my most similar for the report and make whatever mods were necessary. Package it when I got back to the office and upload on the same day.

I'd plan to do no more than 1/day and I'd turn down work unless I was sure I could handle it in my process.

No updates, no rushing to meet deadlines. I'd be killing my competition on the service side because most of them aren't taking full advantage of everything they can do prior to the inspection. .

That plan may work for somebody but most are not embracing it for good reason...verification, time management, etc it simply will not work. If that is what it takes to compete, working at such warp speed with instant turn around it is first of all not possible to do on many assignments and in normal course of business takes a couple of days to verify and gather information. And OMG an assignment may need a modicum of analysis and thinking to get it right.

What you describe, though efficient, is not really possible . First of there is no such instant verification and pre inspection info gathering possible at all times, esp with the uneven way assignments come in and the way owners and RE agents can accommodate appointments and then unpredictability of ROV or revisions slowing things up means it is simply not feasible as a business plan, -if we are appraising , that is. If we are data dumping with a signature and someone else inspecting, maybe.

The fact that you are not actually working our side of the fence might explain the detachment from reality of some of your feedback, even though academically it might sound reasonable it does not reflect real world conditions, there comes a time what it might take to succeed, such as warp speed or low fees is so inane it simply is not worth it, considering the cost and effort to stay in the business current with education .

I have one client that pays extra for super rush. In general, appraisers including myself are delivering faster than ever. There comes a point where when such inane solutions are the only way to get an edge it would be an untenable business, fortunately it is not there yet, if it is in future I feel bad for those that will be in it and predict it will be a revolving door job not a career if all it is is fee and speed. But unless USPAP is absent or nobody is reviewing or caring any longer, it is not feasible to achieve speed and credible results. so one or the two is sacrificed.