“Management companies are taking over the appraisal business”

Here is another news article about appraisers preparing for the implentation of the Home Valuation Code of Conduct. From the Daytona News Journal:

“The industry has changed, and over the past five years, management companies are taking over the appraisal business,” said Circelli, who earned about $400 each for more than 150 appraisals in 2007. Since becoming certified on the lists for some appraisal management companies, during 2008, he did 362 appraisals. But the management companies collect the larger fees and individual appraisers like Circelli are paid little more than $100 per appraisal for the same amount of work.

It has been mentioned in the comments of this blog, but It bears repeating. The HVCC does not require the use of Appraisal Managment Companies. It doesn’t even recommend the use of AMC’s. It just seems to be the direction the industry is heading. However, if individual appraisal companies can position themselves as quality appraisal providers, than it seems they should be able to beat out the AMC’s for the lender’s business.

  1. David

    You mention that HVCC does not require the use of AMCs.
    Keep these facts in mind however:
    At the time HVCC was proposed and a deadline was stated the wording was considerably different.
    Lenders were required to restructure their entire ordering process with very little notice in order to meet the original January 1 HVCC deadline. There were no third party/firewall options available for them to choose from in order to avoid using AMCs if they were to meet that deadline.
    Oddly enough, my office has still yet to receive a single call from a third party/firewall company that is not compensated out of the appraisers fee. On the other hand we receive 30-40 calls a week from AMCs asking us to do work for them for $150.
    Can you name a third party/firewall company that places appraisal orders for lenders and that is not compensated out of the appraiser’s fee?
    What I am suggesting is this: Just because the language of HVCC does not require lenders to use AMCs by name does not mean that it has not forced lenders to use AMCs. There is no other viable option at this point in time. Had the OFHEO sat up a rotating roster much like the VA used for years, there would have been another option.
    There is no doubt in my mind that the full intent of the OFHEO was to channel nearly all appraisal orders through the hands of AMCs.
    IF YOU REQUIRE PROOF ask James Lockhart of the OFHEO to provide you with convincing evidene that that alternatives to AMCs were made available to lenders (alternatives that did not lay claim to 1/2 of the appraisers fee).
    If alternatives were to be provided lenders would be using them today. A government agency figured out a way to construct the atomic bomb and send man to the moon. I rather suspect that a government agency would also be capable of providing lenders with other alternatives to using AMCs (had they wanted to).

  2. Justin Morton

    I’m genuinely curious, where in the HVCC does it say that lenders have to use third party/firewall companies when ordering appraisals?
    Why couldn’t a lender just call up an appraisal company an order an appraisal? What language in the code would prevent that?

  3. David

    Sure a bank can avoid using AMCs. The problem is that banks have every incentive in the world to use an AMC since they are allowed to own them. You would be a fool to not use an AMC that you own since it insures more profits.

  4. AJ

    The extent to which management companies are forced on the industry is an issue than can be debated, but it ignores the primary problem with the HVCC. When the rules were originally drafted it said that the management companies could not be owned by lenders or title companies because they both have a VESTED INTEREST in the outcome of the appraisal. The bottom line is that these rules are pushing business through AMCs on a massive scale, and the fact that the lenders and title companies will own these AMCs WILL RESULT IN A NEAR MONOPOLY.
    What benefit can the consumer expect? Collusion on a massive scale is not only possible, but is virtually guaranteed. That is the reason why these rules were written in the first place (AMC/lender collusion), and now the solution is to encourage use of AMCs for all orders? Why did they change the rules to allow lender/title company ownership? It only benefits 1/2 dozen to a dozen companies and screws small business, consumers, and let’s throw tax payers into the mix since we are on a bail out binge. The HVCC will lower quality, create profit centers for the lenders, allow control of the appraisal industry but the lenders, and generally is the complete opposite of what was needed. But what do I know, I’m just an honest appraiser looking for a new line of work.

  5. Justin Morton

    My reading of the Code is that Lenders cannot own AMC’s.
    Section IV A. (2)(c) states – “In underwriting a loan, the lender shall not utilize any appraisal report, prepared by an appraiser, otherwise retained by any appraisal management company or any appraisal management company affilliated with, or that owns or is owned in whole or in part by, the lender or an affiliate of the lender.
    There are some exceptions in Section B, but those exceptions are fairly onerous.
    If appraisers use the code and hold these AMC’s and Lenders accountable to the Code, then ultimately, I think they can eliminate any collusion.

  6. David

    Are you reading last year’s draft? The most recent draft certainly allows lenders to own AMCs

  7. Justin Morton

    Are you reading last year’s draft? The most recent draft certainly allows lenders to own AMCs.
    I’m reading the Revised Code. I mean, maybe I’m wrong, but you gotta show me where I’m misreading it.

  8. Lanny Freng

    AMC’s=Lower Fees=Quality appraisers leaving the proffession=Lower quality appraisals=Your next mortgage meltdown=The gov’t scratching their head wondering why they are in the same mess again.

  9. David

    Larry I believe you’re just written out the exact equation for next mortgage disaster. I am still in awe that the gov couldn’t not see the current mess coming. The fact that every appraiser in the country has tried to warn them of the next disaster should make it a jolly good show to watch.
    We’ve lost around 80% of our work to AMCs. The few that actually will agree to a higher ask for everything under the sun (after they’ve negotiated your fee of course). We’ve decided to leave the business on March 31 and sit it out for a year or two. If the 1004MC and AMCs are put in their place we may consider coming back.
    I’ve run the numbers a thousand times and simple logic tells me that you can’t survive in the business doing the new $50 precomps (restricted reports) or $175 appraisals. During the coming year I suspect that most appraisers will come to the same conclusion (either through sound reasoning or through the U.S. bankruptcy courts).

  10. AJ

    David, you have an old copy. The concern of “corporate independence” has been stripped from the rules, that is why I’m so upset. When initially presented, the code read as you indicated; no AMC ownership by lenders and title companies. That is now over:
    If that part of the code was still effective, I would deal with it. The fact that they changed it just proves they are out for the banks and the rest of us may go to hell. Banks and title companies will now dominate the industry and have an unfair advantage. If your up for a few thousand of my words on the subject:
    These jerks are all in an outrage in Washington over the AIG bonus issue, but no one will respond to me on these rules which will set up another large scale raping of the public.

  11. Tim

    We all know that of the major lenders they all deal with the same title company. If you take any of the major lenders plus this title company you will get one of the five biggest AMC’s. Currently the market share for these folks is 75%. (and increasing).
    IF YOU CARE…get on the horn, write an email, solicit letters of experiences from borrowers who have no idea what the appraiser makes. It is not shown on the HUD 1 and a “bundling” of services that includes title and valuation is ILLEGAL. Check what other states have done; the latest being Illinois. Appraisers are fighting for their career all over from the west coast to the east to south, everywhere. If you want to keep your profession get INVOLVED. Mostly I hear fellow appraisers tell me “well I guess I’ll just sign up with as many AMC’s as I can”…NO…Do not roll over and die ! Check the net for lawsuits..there are many against AMC, Title and Lender collaboration. Provide evidence or even check to see if you have a report that has been altered from the original. If you are with an AMC it is most certain that you do. E-Appraise it ADMITTED IT IN OPEN COURT !!
    Quit bitchin and start to pitch in !
    They can be beat…now.

  12. Just check out the underlying owners of the AMC’s and in many instances they are owned and controlled by the major banks.
    HVCC wanted to keep the appraisers anonymous – so how anonymous is an appraiser working for an AMC for XYZ Bank, when XYZ Bank is the owner of the AMC?
    Banks want the AMC’s – they can not only control who does their appraisals, they can take 1/3 to 1/2 of the appraiser’s fees as well. We are told the banks don’t have to go through AMC’s – but tell me one bank that isn’t using BPO’s or going through the AMC’s for values. Even the BPO’s that used to pay $80 to $100 each are now being done by fly by night agents for $35 and the banks are charging their clients $100 and pocketing the difference.
    What does all this say about the validity of the values? As the market stabilizes, the banks will more than ever be in total control of property values. My guess this is their answer to not being allowed to be their own Brokers – and this will be far more lucrative for the banks and detrimental to the home buyers, let alone putting the best of the independent appraisers out of business before the government realizes what a stupid move the HVCC is – too late!

  13. David

    I believe you intended that last post for Justin rather than David. I am arguing the same point that you are. My point was to point out to Justin that banks ARE now allowed to own AMCs. He was under the impression that they are not allowed to own them. The original HVCC document sought to limit bank ownership of AMCs. If you are seeking absolute proof that banks were behind HVCC; look no further than this part of the revision.


    This another entity trying to make easy money without regard to the consumer or what i can do to the industry.
    Servicing cos that will doe automated appraisals based on computer data and drive-bys.
    Guess who is going to pay for the service, the homebuyer. and without obtaining a fair market value for their property.
    The corpse is not cold yet on the sub-prime mess and here is another scam in the works.
    Just like those amublance chasers with the Short Sale, why hasn’t any one addressed the eithics? The go neogotiate with lender and if the lender does not give the 6%, they get it from the buyer a full $5,0000.00 at least here in Houston, TX. Now is that right? Oh, but there are seminars, there is Stewart that praised a realtor for having such success in short sales, a guy that even sold his CD at realtor seminar at the ned of last year here in Houston.
    Drive-bys are no indicative of a prperty value, I am not an appraiser but have taken enough classes per professional knowledge. At the end of the day the servcing cos will end-up charging as much as a regular appraiser. I personally believe that for the time it takes to prform an appraisal, they do not get paid enough. An appraiser can take up to 4 hours of searching and study the data, compiling the report, measuring the property, adjusting data.
    Best reagards

  15. David

    We appreciate your vote Mollie. I wish that more people understood the predicament that appraisers are facing. One comment on the time it takes to do an appraisal. A seasoned appraiser takes around 4 hours to complete an appraisal on a 1,000 square foot easy home (a newer appraiser could spend 8 hours on the same job). A semi-complex appraisal (historic home, log home, 6,000 sf home, Y shaped home, unique home with acreage can easily take 16 hours to complete. You rarely make over $100-$200 extra for those type of assignments. Realtors who complete BPOs for $40 just can’t understand this. They insist that their BPO research (done at the comfort of their own desk in 15-20 minutes is more accurate). BS
    Over the past 17 years appraisal costs in our area have only risen twice $25 and $50. This was only allowed by lenders because additional forms and research was required. The cost of living has increased 50% in those same 17 years. My my estimate that means that appraisers are already working 50% less than the rest of the working stiffs in the country. Lenders who complain about appraisal costs have never understand this. Oddly enough they have no problem ordering $500 appraisals from AMCs.

  16. Johnny

    Never in my life have I seen a place for joining a UNION.

  17. Tommy

    Just as the huge relocation companies have placed themselves between the Agents and the Consumer, so have the AMC’s placed themselves between the appraiser and the Banks with the intent of sucking up all the money they can. Do the appraisers have a strong lobby. I bet they don’t. Union or lobbyist maybe you better start thinking about it and fast before this Walmart symptom takes over the industry.

  18. Colleen Kelly

    I entered the appraisal field four years ago and thought it would be a good fit for my experience and the way my brain operates, objectively but what I have found out about the basic problems in the way appraisal business operates are depressing. AMC’s have no business existing unless they are agent’s of appraisers and not agents of the mortgage companies. It boggles my mind that we as appraisers can not see that this is a simple matter of looking out for ourselves by creating or utilizing the appraiser groups to systematically and objectively distribute appraisals. We need to get others out of the mix who do not look out for us. This is ridiculous already. It actually comes down to basically unionizing our efforts so we have buffers and resources against the normal and natural tyrant of any capitalistic endevour–Greed. I think it is time to just wake up and face the not so scarey but actual reality of the situation.

  19. Lou

    I am forwarding a portion of an email I received from Ron Stickelman, Jr.
    ron@saigroupllc.com. I believe it addresses the heart of the matter.
    Fellow Appraiser:
    It may have come to you attention that RELS has began a “phased” appraisal process that begins with a $45 desktop appraisal report
    Appraisers on the RELS list are given the “opportunity” to participate in a program intended to save their customers time and money. Appraisers are asked to perform desktop appraisals to be used to evaluate a borrower’s equity position.
    Please click on the link to view the email from RELS dated March 5, 2009 announcing this program, the RELS required appraisal report and our formal Letter for A Call to Action. https://www.stickelman.com/si/si05.phtml
    This program is dangerous on several levels:
    1. It is comparable to the “comp checks’ our industry has fought so hard to eliminate.
    2. It amounts to coercion and other possible ethical issues including determining a predetermined value based upon the outcome of the appraisal. The appraiser is told that if they participate in this program they will have a greater chance of being offered the assignment upon upgrade of the report.
    3. Appraisers are enticed into providing discount fee products with the carrot of additional new work and higher appraisal order volumes.
    4. The desktop appraisal opens appraisers to increased liability since their analysis and reporting are fully accountable with USPAP and any additional state code.
    5. If RELS is so “concerned with what borrowers or clients are paying” for appraisal services and reports, they could reduce their current override of up to 75% over contract appraiser fees (The appraiser is paid a fee of $200 and RELS charges the borrower $350).
    6. There is nothing to stop RELS customers from utilizing this summary appraisal report to underwrite a real estate loan.
    7. The continued abuse of valuation management is contributing to the slide of residential real estate markets, Wall Street, the US economy and the World Economy from a severe recession into a depression.
    8. Banks like Wells Fargo are subject to federal regulation and this type of activity is prohibited under FIRREA, The Interagency Guidelines of 1994, the proposed HVCC and proposed Joint Agency Appraisal Guidelines. In recent years regulators and appraisers have fought this type of behavior that supports appraiser pressure, appraisal value shopping, threats of removal of business, making real estate loans without qualified appraisal reports and values. What is going on here? Who is watching and monitoring this type of reckless activity?
    9. Discounted appraisal fees and rushed reporting, especially in this complex and dynamic market, is inadequate to allow the appraiser the ability to provide an accurate and reliable appraisal report and analysis. This type of allowed activity in the past has lead to our financial markets troubles. The appraiser must be provided adequate compensation and time to provide much needed accuracy and reporting. RELS $45, $185, $200 and other low demand fees destroy creditability in appraisals and appraisal analysis. The “client”, “bank” or “borrower” can not continue to be allowed to control fees in the analysis, reporting times and adequacy of reporting based upon the Scope of the Appraisal Assignment, the Intended Use of the Appraisal or the Intended User of the Appraisal.
    As you are probably aware RELS is jointly owned by Wells Fargo and First America, two companies who stand to profit from these discount appraisals. This country and many banks are facing financial collapse because of the proliferation of toxic mortgages based upon inaccurate appraisal alternative products or fraudulent or flimsy appraisals. The customers, shareholders and public must be made aware of the intent of these companies to water down the valuation process of many properties with declining or at best stagnant values. Wells Fargo Bank (WFC) has lost 73% of shareholder value this year; almost $92 Billion Dollars in 2.5 months or $1.7 Billion Dollars per business day (The price of the common stock on March 5, 2009, the date of the RELS email to appraisers was $8.12 and the price of the stock on January 2, 2009 was $30.00). When is enough, enough? It has been estimated that the World Economy (NBC News reported yesterday, March 9, 2009) had lost in excess of $50 trillion dollars in 2008.
    As appraisers it is time to make a stand against this type of bullying by appraisal management companies and banks. It is our responsibility to protect public trust with the highest level of professional expertise. The Real Estate Appraisal profession was founded on the need for accurate asset valuation and is a result of the Great Depression in the 1930’s. Our profession was created by the Federal Government to protect the “Public Trust” in real property value. This power and responsibility was not given to Settlement Service Companies, Title Companies or Banks, it was given to us, the real estate appraiser. It might be interesting to note that the Great Depression did not begin because of the Stock Market Crash of 1929, but by the Real Estate Speculation Crash in Florida of 1916-1928.
    We ask that you review this e mail documents attached on the web link. You can then endorse and agree by filling out the information that serves as authority for support.
    At this time it is critical that our voice is heard and we thank you for your interest and support. To Review and Support this effort Click https://www.stickelman.com/si/si05.phtml.
    Ron Stickelman, Jr.

  20. Doug Quenzer

    I just got done doing CE in Minnesota. The number of appraisers have dropped from over 4,000 to about 2300. Almost all the appraisers in the class are over 50, with many at the point of retirment. I believe in the next five years the number of appraisers will dwindle considerably. But it is time that we as appraisers simply say, “NO.” No to the low fees. No to the stupid turn times. If just half of us did it the AMC’s would either go out of business or change their fee schedules. But too many are willing to work cheap. They only hurt themselves in the long run. But sooner or later this whole thing will come grinding to a halt, because there won’t be many appraisers in the business anymore. There is no way people will work for nothing.

  21. AJ

    Ron, I would like to support the effort. The link is not working so please check it out.
    Johnny, the AMCs ARE the banks, that is the problem. How can you put yourself between yourself and another person/entity?
    It occurs to me that the HVCC is a politician’s dream. It APPEARS to protect the public so they can support the rules while looking like a good guy and still get a nice payoff from the banks in the form of political constributions (or more likely cash in a paper bag). The fact that they are helping no one but themselves and a few large corporations is irrelevant to them as long as the mainstream media continues to ignore the appraisers screaming at the top of their lungs.
    I can’t wait to see the spin when the public realizes that they got screwed again.

  22. Tim

    First American + Wells Fargo = Rels
    First American + Chase = Quantrix
    First American + Country/BOA = LSI
    Ect, ect, ect
    Currently First American has a 75 % market share in the valuation services industry..NOT BAD FOR A TITLE COMPANY..
    and I wonder what they do with all that property data they collect..hhmmm

  23. David

    You know exactly what they are doing with all of the data they collect.
    Each of those companies uses a plugin for appraisal software. Pluggin is simply another name for “data mining software”.

  24. David

    I noticed an article in Forbes magazine that ranked an appraisal career as number 4 on the Top 5 Least Profitable Businesses. This article was published prior to HVCC. Care to guess what 2009’s Least Profitable Business may be?
    I recommend day trading to appraisers. They say the average Joe’s chance of failure in trading are around 90%. As an ex real estate appraiser I would consider 10% odds of success a bonanza over an HVCC infested appraisal career.

  25. Lerret

    [quote]”Collusion on a massive scale is not only possible, but is virtually guaranteed.”[/quote]
    AMCs need massive regulation and a bill waits on the desk of the Arkansas governor and other states are considering similar, regulate them….now.

  26. Mike

    Think about it.
    All the educational requirements, liablity and stress for a job that will probably soon be the same as making $10 per hour with NO benefits. The folks who work customer service for the AMC’s probably make more per hour and have health insurance, vacation time, 401K’s etc..
    At the end of the day, I think the rate of folks leaving will increase rapidly. Many folks I know stay only because they like working from home and creating there own schedule. At some point, those pluses can’t overcome all the negatives.
    Teaching is similar in that way. I know a few who kill themselves all year long making $30K per year. They stay because they love the summer vacation, and that overcomes the negatives. However, when i heard Obama start talking about making teaching a 12 month job, I wondered if many, especially in high needs areas like Math, would head for the door.
    We will reach a tipping point eventually. Who would go thru the college, primary and CE, 2+ years of training to work a low wage/no benefit job? Even if you can do it from home?

  27. Kris

    I keep seeing the suggestion for a UNION. IS anybody staring one? Where do I join?

  28. hallie stone

    Working for a management company, they tell you what you must do even above the requirements for hud. If you don’t do it your are not professional and either you do what they say as non appraisers or be terminated.
    A servant would not be told that they must do something up and above what is required.
    You become a first class servant with low pay.

  29. Peter

    I’ve been an appraiser for 20 years.My Dad was an appraiser.
    First, you have to admire what the banks have done. They used to have a staff in their loan department that had to deal with hundreds if not thousands of appraisers across the U.S. That cost them money. They were able to get rid of that cost and assign it to an AMC. The AMC’s were able to pass that cost on to the appraisers.
    You have to admire that action. The banks saved money..
    We can’t think of ourselves as professionals that protect the public. Rather we are vender’s that provide a product to a lender. What ever that lender wants, we should be able to supply him with that product.
    The lender now wants a cheap, Walmart, plastic car that breaks down. We have to supply him with that product.
    So many businesses and products are becoming obsolete because of technology that we can’t spend all of our energy trying to preserve something that is becoming obsolete.
    We have no lobby and no public support. Thats a fact.
    We need to think ahead of the curve, not behind it.
    The AMC’s are not our friends. They are our competition…

  30. David

    Peter how do you propose we provide them with the cheap plastic cars that bankers seek? If you can explain to appraisers exactly how to provide appraisals (which now require twice the work) to AMCs who are willing to pay 1/2 of recent appraisal fees you will go down in history as the biggest genius of 2009.
    We’re all ears.

  31. Kris Riley

    I think that a UNION is definitely in the works. But realistically, AMCs ARE meant to protect the appraiser from pressure from Lenders trying to make their numbers… that’s why I am starting an AMC. I have been doing a lot of research on the subject and my partner has been as well. He’s a mortgage broker/originator and I am a designer/engineer. We decided to do this because we saw a need to put something together to help people. Its going to be tough and we’re going to need all the help we can get. I thought to get licensure but I cannot be an appraiser or even have taken the test if I want to own an AMC… so I am counting on you guys(and girls) to be a sounding board.
    In the next couple of months I will be putting the website together and starting to get opinions on how operations should run and how the process should work. Any advice/suggestion/input/best practice would be great.
    What do you think? Email me…

  32. Kris

    I think that a UNION is definitely in the works. But realistically, AMCs ARE meant to protect the appraiser from pressure from Lenders trying to make their numbers… that’s why I am starting an AMC. I have been doing a lot of research on the subject and my partner has been as well. He’s a mortgage broker/originator and I am a designer/engineer. We decided to do this because we saw a need to put something together to help people. Its going to be tough and we’re going to need all the help we can get. I thought to get licensure but I cannot be an appraiser or even have taken the test if I want to own an AMC… so I am counting on you guys(and girls) to be a sounding board.
    In the next couple of months I will be putting the website together and starting to get opinions on how operations should run and how the process should work. Any advice/suggestion/input/best practice would be great.
    What do you think? Email me…

  33. It is a shame Appraisers don’t communicate with Appraisers. It has been so competitive a profession – and may be again soon, when the ranks of decent, honest and accurate Appraisers have diminished to a bare, small number from lack of work, fees that are on the level of Wal-Mart greeters and early retirements of many good and not-so-old Appraisers who just will give up, in disgust. This is a sad day in a sad profession, in a sad economy – and the home buyers and sellers of the future will be sadder than anyone when the Market Values collapse.

  34. I learned something here. Thanks for posting.