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If you outlaw Appraisal Management Companies, then only outlaws will have Appraisal Management Companies.

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In reading through the comments on this post about Congresswoman Biggert’s (R-ILL) promotion of appraisal independence, it is clear that appraisers have a lot of problems with Appraisal Management Companies (AMC’s).

Coincidentally, yesterday I was reading though a 2006 NAR Survey of Appraisers that asked several questions about the appraisal profession. One of the questions had to deal specifically with whether there should be regulation of Appraisal Management Companies:

Seventy-three percent (73%) of respondents believe there should be Federal or State regulation of Appraisal Management Companies. Eleven percent (11%) believe this regulation should not exist and sixteen percent (16%) are not sure.

Seventy-three percent is a fairly high number. And I suspect that if the survey were offered now in 2008, that number would be even higher.

Which poses the obvious question without an obvious answer? How do you regulate AMC’s?

-Do you ban them completely? (Seems pretty heavy handed.)

-Do you place them under the federal regulations that oversee appraisers? (Due to the lack of state funding, that does not seem to be a very effective solution.)

-Do you enact new legislation or regulations governing how AMC’s operate? (Politically Difficult)

There doesn’t seem to be an obvious answer. And ultimately, I think that the marketplace could handle this problem. Appraisers need to demand better from their clients. Because if AMC’s just put a greater emphasis on the quality of the appraisal, and in turn, paid more for that quality appraisal, I suspect that a lot of the complaints about AMC’s would fade away.

Now I recognize that demanding better is easier said than done. And in a down market, when you’re trying to put food on the table, any little bit of money is useful. But when the US pulls out of this economic downturn, (and we will), it would be good for appraisers to start demanding better of themselves and better from their clients. Don’t accept comp checks. If you can’t produce a quality accurate appraisal for $180, then don’t accept the assignment. If your client or AMC starts pressuring you to reach a predetermined value, then report that client, and stop working for them. Ultimately, I think appraisers could solve a lot of their problems with AMC’s, if they simply demanded that the AMC pay more for a better appraisal.

Anyway, those are my thoughts. But maybe I’m missing the real issue. What do you think? How would you improve the AMC structure?

-Justin Morton
Manager of Appraisal Specialties

Comments
  1. Joe Traynor

    Justin,
    I have been exploring this Indiana and have discovered a few things. The state woudl be very reluctant to pursue additional licensing and most likely would not initiate such legislation.
    The Indiana Association of Realtors might do this but they would need a whole lot more information before going forward. One of the big challenges is defining what an Appraisal Management Company is. Another difficulty is having jurisdiction when the AMC is located in another state.
    Indiana currently does not have any law that covers AMC’s. Our apraiser board has no jurisdiction unless the principal of the AMC is also a licensed appriaser in Indiana. One idea that I have is to require that a principal in an AMC be a licensed appriaser in the state that they are ordering appraisals. I would be very interested in what other readers of this blog think.

  2. Rita Bradley

    Yes- place AMCs under federal regulator that oversee appraisers – the funding will come from AMCs paying fees/dues just like appraisers must.
    Why should AMCs get a free ride?

  3. Woody Fincham

    The should not be in business. AMCs are appraisal companies without licensing. They reduce fees to such a level that good appraisers can’t afford to work for them. That means that the shoddy appraisals, in large part, are coming from these companies. Most of the appraisers that work mostly for these companies in the last several years are responsible for not doing their job correctlty. Bottom line, they control such a large part of the business now, that they are setting the market rates low for the profession. It is allowing 5-10 companie sto affect the pricing of fees for the majority of the industry. It is price fixing by a segment of my industry that is not even an appraisal company. How is that even right?
    If this was happening to realtors, NAR would be all over it. INstead you guys are jockeying to affiliate with the AI, and now appraisers will have 2 major entities not looking out for appraisers best ineterst. Instead of affiliating how about helping us show these companies for what they are

  4. One idea that I have is to require that a principal in an AMC be a licensed appraiser in the state that they are ordering appraisals.
    Not a bad idea, Joe. I wonder if that would change how the AMC went about supervising their appraisers in that state. It’s an interesting idea.

  5. Yes- place AMCs under federal regulator that oversee appraisers – the funding will come from AMCs paying fees/dues just like appraisers must.
    Why should AMCs get a free ride?

    If you’re going to do this, I would rather see a completely separate federal agency oversee all the AMC’s. Or leave it up to the individual states to regulate the AMC’s. This hybrid that appraisers currently fall under (where the fed requires the states to regulate appraisers, but gives them no funding) is essentially an “unfunded mandate”, and I’m not sure it’s the most effective form of regulation.

  6. It is allowing 5-10 companies to affect the pricing of fees for the majority of the industry. It is price fixing by a segment of my industry that is not even an appraisal company. How is that even right?
    I don’t doubt that this has happened over the last several years. I do wonder if the market is moving away from this model, though. I genuinely think lenders are looking to pay for better appraisals.

  7. sam

    AMC’s are producing such poor quality appraisals, lenders are throwing the appraisal industry under the bus, and going to BPOer’s. Nothing like having the fox tend the hen house huh?

  8. Doug Meyer

    The appraiser has a choice to either work for the AMC or not. Most should just say no. The problem that I am hearing is that the AMC companies are changing reports, unlocking signatures and most importantly, threating appraisers with undue pressure and to commit possible USPAP violations. If the appraiser does not “play ball” they are removed from the lenders list. Removing appraisers from their “approved lists” for not going the company route is a form of black mail. Appraisers need to be able to report these companies to their state boards/AG’s so the state board can (if possible) do some investigations (especially is these companies are promoting that appraisers violate USPAP).

  9. Eric

    GET RID OF AMC’S NOW!!
    THEY WILL ONLY MAKE THE MESS WE ARE IN WORSE!
    AMC’s will never protect the public trust, they will be a burden to the borrower and the process by being an unqualified 4th party riding the back of the appraiser which will raise costs for no reason. We don’t need to be “managed” – we need enforcement and insulation from predatory lenders working on commission.
    The VA has it right in using a rotating panel of qualified appraisers assigned to a geographic area. The states should copy this model and become the AMC for all lenders. You don’t have to outlaw the AMC’s (although I think it is a good idea) – just make them useless instead of just predatory. We already pay for an impotent appraisal board. Let’s restructure it and allow appraisers to get back to their jobs and not have to rely on our “relationships” at the bank – become a professional community instead of the most paranoid “professionals” on the planet.
    But that’s just my opinion – and I think I’m right.

  10. Jim

    It is against the law for appraisers to discuss appraisal fees, so why can an appraisal management company “fix” the fee? On the comment about “simply not working for such companies”, it is easier said than done. Many larger lenders are using these companies so there isn’t much choice. The question is, does the lender realize that the appraiser is getting paid substantially less? Since most appraisal management companies prohibit the appraiser from discussing or showing the exact appraisal fee, it proves that they are either not being honest with the lender and/or the borrower. Maybe the FBI should investigate this, along with Freddie/Fannie?

  11. You better regulate AMC’s or the bad appraiser that gets his/her license revoked can open an AMC the next day, and continue to advocate a value spin for their clients by pressuring appraisers that get work from them.
    Make them get certified and subject to USPAP.
    Even the playing field, or the Lenders (bankers) will continue to exploit the weakness.

  12. Jerry Ball

    The problem, Justin is that most of these AMC’s have multiple lenders which have “signed” with them. In addition, most of those lenders have elected to turn a “blind eye” to the fact that the AMC’s DO in fact change the report during the conversion process. Even after being notified that the appraisal has been changed, AND that the e & o company will NOT cover the converted (read changed) appraisal – the lenders are “choosing” not to do anything. They’re acting like if they ignore it, it’ll “go away”. Meanwhile, the AMC’s have instituted, “Market Based Pricing” – which is actually their form of ripping us off and increasing the AMC’S PROFIT. It’s quite obvious the lenders are not being responsible, the AMC’s are becoming “Accumulating Money Companies” at our expense. Problem is, I don’t have a solution, other than to get rid of the AMC’s. Frankly, they’re not regulated at all – and no regulations are a license to steal – which is what they’re doing.

  13. Rich

    How about the fact that if your appraisal does not meet the needs of the loan officer he simply changes the pdf. Yes people your reports are being changed as we blog. These people are corrupt and we are just starting to see the damage they have done and now they want a bail out.It makes me sick

  14. Kelly Rodriguez

    Ok, so we all sit around complaining and wanting them out of business. What do we do as a whole?

  15. Curt Studebaker

    I know this sounds financially impossible for the majority, but think about the effect it would have on the AMC’s and their clients if the appraisers, nationwide decided, took the month of March 2009 “OFF” “STRIKE” from accepting any orders from any AMC. The client who works on commition would likely make contact with ” LICENSED APPRAISERS”

  16. Anonymous

    Lets plan a date nationwide and walk out. Go on strike, then the lenders and AMC’s will listen. Interest rates are going down with the new president, good time to consider this.

  17. K Wiener

    The only way to get rid of AMC is to not accept any orders from them then the lenders will have no choice but to go back an order directly. I’m calling for all appraisers to not accept any orders from AMC for the first 2 months of 2010.

  18. K Wiener

    The only way to get rid of AMC is to not accept any orders from them then the lenders will have no choice but to go back an order directly. I’m calling for all appraisers to not accept any orders from AMC for the first 2 months of 2010.

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