We're Back To The Beginning

[J Grant]

Mich CG - Here is what I said..".unless there is such a severe imbalance such as in the COW states. "

It's not just S/D in the COW states, it's a severe imbalance of low supply of appraisers, which 1) should not be needed to leverage fees, a severe under supply is not needed in other professions and it is not needed in appraising either outside of AMC work.2) The under supply in the COW states led to other problems of long turn times, and difficulty getting orders filled ( which lenders and AMC;s milked like crazy to threaten about a looming shortage of appraisers and used it to get college and AA degree dropped and trainee period lowered and get Bifurcated on the menu for 1004 work )

I recognize that supply and demand has an impact on fees, but the AMC model and the way they exploit s/d due to their combination of control of market share and agenda to lower fees for profit stream puts individual appraisers at a tremendous disadvantage with them. Supply and demand does not always work in a vaccuum, it can be tied in to policy and custom and organizations.

For example , look at RE agents. There is a huge over supply of them in many areas, thousands of people take a 2 week course and instant license in an area . Yet their commission ( typically) stays high aprox 6%. (I realize some agents make little $ but this is not about that it is about despite an over supply of RE agents, their fee /rate of commission stays high.

The reason that is so is because the agents are not allowed to accept and set commissions, their brokers are. So you might have 20 -40 RE agents in an office under one RE broker, and it is the broker who sets the 6 % omission. Thus, in an area of 1,000 RE agents, they are in effect far more limited in # as far as ability to set rates because they are organized ( by law ) working under a broker. So instead of 1,000 agents competing on possibly lowering a RE fee, you might have them working under 60 brokers in the area, and all 60 brokers have the agenda to keep the 6% omission rate at 6%. In addition, the public at large can choose any RE agent or broker they want, so the 60 area brokers and 1000 RE agents have potentially unlimited # of customers who can hire them direct. (eveen though only X # of homes get listed and sold in any time frame )

Compare the same area with appraisers, perhaps there are 80 active appraisers in that area doing Res work. For non AMC res work they get better fees. For private party res work, where a customer is allowed to pick an appraiser, they get better fees. But for the AMC segment, they get lower fees ( so maybe 30 out of the 80 refuse to do AMC work). What is left is a rather limited amount of 50 appraisers in that area to do AMC work. But, the AMC's have the leverage, because the AMC's intend to only assign to the cheapest, and there are only 16 active AMC's in that area and of the 16 only 10 have volume. The control of volume coupled with incentive to hire the cheapest creates a downward fee pressure for the AMC work in the very same area where the same appraisers get higher fees for the same kind of work from non AMC clients.

I agree supply and demand are a factor but the particular channeling of it for AMC work combined with regulations that favor their model are also in play.

 

[J Grant]

Raising fees won't produce a better appraisal from those who do crappy work ( unless they are wiling to learn). But raising fees allows a lender or AMC a far greater choice of appraisers, as a number of better appraisers simply won't work for the low fees.

 

[Overimprovement]

Mich CG - Here is what I said..".unless there is such a severe imbalance such as in the COW states. "

It's not just S/D in the COW states, it's a severe imbalance of low supply of appraisers, which 1) should not be needed to leverage fees, a severe under supply is not needed in other professions and it is not needed in appraising either outside of AMC work.2) The under supply in the COW states led to other problems of long turn times, and difficulty getting orders filled ( which lenders and AMC;s milked like crazy to threaten about a looming shortage of appraisers and used it to get college and AA degree dropped and trainee period lowered and get Bifurcated on the menu for 1004 work )

Again, the imbalance was an OVER-DEMAND for reports, not an under-supply. The # of appraisers in any given market and even state, and certainly nationwide, is remarkably stable. It is the demand which greatly fluctuates.

 

[J Grant]

In most professions or services, in any given area, for a certain type/specialty/kind of work, most end up charging ( and getting ) very similar rates, otherwise known as C and R. There are usually a few low price outlet types and a few elite high $ providers, but most end up charging a very similar range of fees .

I'll give the example of my own subdivision and lawn service guys ( they happen to all be guys). We have 600 homes and every home owner is free to hire whichever lawn mower/trimmer they want. Seems about 10 different ones are working in the subdivision. Remarkably, they all charge about the same rate. Used to be 30, a month ago they all as if by magic raised it to $35.. No problem, $5 more so what.

Now suppose next week there was a decree that individual homeowners could no longer select their lawn guy, it had to per a regulation be selected by another party. A cadre of 5 groups emerged as the parties who would choose teh lawn guys. And each group approach the lawn guys and tell them we won't pay any more than $20 ( because the group gets to keep $15 from the $35 they collect from each homeowner if they pay lawn guy $20, that is how they get reimbursed for hiring and oversight)

Now the lawn guys have little choice.. They no longer have 600 individual homeowners to offer service to, just these 5 groups and all 5 groups want to pay $20 or lower. Yes, there are a few private people outside the subdivision with lawn work , but the main work is in the subdivision. Thus, if they want to work in the subdivision, the lawn guys accept the $20 per lawn.

That is the analogy of affect on why AMC;s have the leverage to pay lower fees (simplified). It is not just pure supply and demand, its supply and demand channeled with regulatory issues and policies that favor one set of interests ( AMC's and the lenders that use or own them ) at the expense of another set of interests ( appraisers)

 

[George Hatch]

Nobody is saying the AMCs aren't part of your problem. I just don't think they're the biggest part of your problem. It's somewhat of a moot point by now, anyway. The AMC play has been the thing for 10 years now. Lenders now have experience with the idea that there are enough appraisers out there who will trade part of the fee for more work. There's no way to stuff that genie back into the bottle. Your next stop after the AMCs get outlawed is the E-Bay model where assignments get exposed for 12 or 24 hours and whoever is the cheapest gets the assignment. Of course, they'll also include the "buy it now" button for $195 which probably means most of their assignments won't accumulate more than a couple bids before someone snaps it up at $195. Or $175. Or whatever fee will net the appraiser $15/hr.

Say goodbye to the frying pan and hello to the fire. 'Cause you still have some peers who think you need more competition and who are still digging your hole deeper for you.

 

[J Grant]

Nobody is saying the AMCs aren't part of your problem. I just don't think they're the biggest part of your problem. It's somewhat of a moot point by now, anyway. The AMC play has been the thing for 10 years now. Lenders now have experience with the idea that there are enough appraisers out there who will trade part of the fee for more work. There's no way to stuff that genie back into the bottle. Your next stop after the AMCs get outlawed is the E-Bay model where assignments get exposed for 12 or 24 hours and whoever is the cheapest gets the assignment. Of course, they'll also include the "buy it now" button for $195 which probably means most of their assignments won't accumulate more than a couple bids before someone snaps it up at $195. Or $175. Or whatever fee will net the appraiser $15/hr.

Say goodbye to the frying pan and hello to the fire. 'Cause you still have some peers who think you need more competition and who are still digging your hole deeper for you.

That's really silly because appraisals would never be bid on ebay or similar for lender work. Lenders charge a certain rate for appraisals and for title and for other services. They are not going to hold up a loan or lose a customer when applying to hold a ridiculous auction to get a service cheaper. And besides, if a lender is not allowed to keep any difference between appraisal fees, why do they care if one charges $195 or $175 or $300 ( or whatever). Since the loan officer is prohibited from keeping any fee differential they have no incentive to fee bid out, they just want to get the service done at a reasonable rate similar to what others pay to move the loan forward.

A scare tactic- it could be worse. It could be better, too. Certainly there is a point where appraisers would weigh the stress, pressure, liability and expense to stay in business to make $15 an hour, since that is such a low wage many low stress jobs or gigs offer that and benefits besides.

BTW despite the fact that lenders are aware thanks to AMC;s some appraisers will be idiots and lower fees to get work, but lenders who assign outside of AMC;s still pay C and R over AMC low fees, presumably for better quality /control and perhaps they satisfy a different group of investors. That has not changed in the last 10 years either.

 

[J Grant]

Going forward, what might impact fees more would be if technology becomes accepted as an alternative and/or hybrids. But for quality appraisals themselves, probably not ...but one never knows. Oddly enough AVM alone (tech ) are no longer allowed for lender work thus the "desktop"...which does not pay much but if provides an additional income stream, could be one avenue of work that was not there prior. Low fees for a desktop sitting at computer makes more sense than the more involved appraisal. Desktops still are an appraisal but so limited and rote it's hard to think of them that way,.

 

[Terrel L. Shields]

is that some sort of anomaly?

Again, explain why title lawyers, surveyors, and credit services are not discounted like appraisers nor do they operate under an Management Company.
Explain why banks with less work are not dropping their fees, lowering their prices, reducing application fees?
What is good for the goose is good for the gander....why are only appraisers slaves to the "supply and demand" model?

 

[TRESinc]

After all, if reduced demand was all that drove down prices, MLS fees, software costs, data costs, etc. would fall too. And they haven't here.

demand for those products are not reliant upon the housing market. even when things slow down appraisers still need to pay for MLS access, software, data and all the other bills we have to pay.

A stereotype. While the worst of the mtg brokers did that, we had choice whether to work for them or not and most were not that bad. There were direct lenders back then too and believe it or not, decent mtge brokers as well. I I never got stiffed on an appraisal invoice because of value. I got dropped by a few mortgage brokers back in the day but always found other work. I also got no more orders from some outfits (and so have other appraisers ) for "coming in low" post HVCC so it has not been a cure all.

you still have a choice to day to work for AMCs or not, and you are a shining example of that. if you can find non-AMC clients why shouldn't anyone else be able to?

 

[J Grant]

II lost a tremendous amount of $ post HVCC building back my client base and not accepting low fee work. I did a lot of reviews in those early years which paid bills, only in last few years have I rebuilt client base enough where most is non AMC work. And I feel vulnerable as if the clients are bought out or fold, it it could disappear overnight. Yes it eventually worked out for me but not without great cost.

While some appraisers settle for AMC lower paid work because they lack the experience or samples to get on non AMC panels, others just hit a wall where the large majority of work in their area goes through AMC's. I think, rather than blaming appraisers , we should support those appraisers who do AMC work, in holding out for better fees and not getting into stupid bid wars to "win" an order at low pay.