Appraisal management companies

<<>> In a normal business, owners are able to get work by referrals, advertise to other businesses or talk to their neighbors to get more business.

In contrast, the real estate appraiser really can’t get their business this way. They used to be able to get business via loan officers, banks, and financial institutions. Now the system changed and the appraisers must go through a third party. In other words, there is a middle man.

At this time, the third parties are Appraisal management companies (AMC's), for the most part. The big problem with these companies is that they want incredibly fast turns times, high quality and low, low prices. Sometimes, the AMC’s are demanding ½ of the appraisal fee. This system is simply not sustainable for the appraiser and you’ll soon find every appraiser bagging for work or bagging for food or both.

The funny thing is AMC's have been around for years. Some appraisers like to work with AMC’s and some appraisers will work for other clients or both. Appraisers used to be able to choose and get work from AMC’s, lenders and financial institutions and even home owners, almost like a normal business. The appraiser can decide to bid a variety of work and set their own price. Now, for the most part, they can’t do this.

Another disadvantage to this system is that the AMC is the proverbial “horse’s mouth.” This means that they are getting the full fee from the banks and the AMC’s are taking most of the money and feeding the appraisers peanuts in comparison. Now AMC’s pretty much own the entire appraisal market and they are controlling the prices. If the appraiser doesn’t want to complete appraisals for such a low fee, they will soon go out of business. There are no other real choices for appraisers now, because they must go through a third party. But guess what? The home owner will continue to pay high appraisal fees, regardless of what the appraiser gets. Even though there are quite a few disadvantages, there are a few advantages, too.

One of the big advantages to AMC's is that they help the appraiser stay up to date with all of the regulations and rules. Many appraiser work from a home office and don’t have a large social network and just can’t afford to go to trade shows and keep up with lender request. Sure they take a few classes every year or two but sometimes it’s not enough.

These companies will give you a list of items that the bank feels is important and must be addressed by the appraiser. Secondly, once an appraiser establishes a relationship with a few appraisal management companies the appraiser only has to deal with the company that hired them, not the loan officers, home owners, and any other party that has a complaint or would like to see if they can convince the appraiser to change the value of the appraisal. There will be a less likely chance that other parties will influence the appraiser with this new system in place.

Here’s how these companies work.

These companies manage the database of real estate appraisers for banks and credit unions and financial institutions that lend money. The advantages to the banks are that they do not have to call or speak to the appraisers or look for appraisers or maintain an appraiser database. Just like any database, appraisers will move to new cities and change jobs so maintaining these databases of good appraisers is a big part of their work.

The banks will order the appraisal through the AMC. The AMC will send an order to the appraiser. But before they do, the AMC will shop for the cheapest price and the fastest turn time and only assign appraisal orders to those who agree to work for low prices and fast turn times. Regulations are now changing as a write these words and new laws may allow appraisers to be paid a fair wage. Of course, this is in debate and will take months to decide exactly how they will do this.

It used to be said that a dishonest appraiser was able to earn 30% more than an honest appraiser. This is because once the Loan officer (and many times, the one ordering the appraisal ) found out that an appraiser would lie about the value or the condition and quality of the home, the loan officers would find this appraiser and give them all or most of the work.

The honest appraiser would have to find another career choice or take less work. While this seamed unfair, it worked, because there were always some loan officers and banks in the market that liked and needed an honest appraisal and there were enough ways to get business to stay in business.

The new system will allow for more honest appraisals, but at a big cost. While there are always some bad apples in the group, some appraisers were considered good apples too. As a result, you can almost hear the sucking noise as appraisers try to get out if the industry. What used to be a profitably business model is turning out to be a nightmare for most appraisers. Appraisal management companies are taking over the market. Appraisers are scrambling and working unreal hours just to stay in business. Many have already quit. And banks and regulations make it difficult to become an appraiser, as most banks do not want trainees completing appraisal assignments.

With many appraisers leaving the industry and a lack of trained appraisers and increase restrictions for appraisers to enter the field, there will be a shortage of appraisers in the future.

Like I keep telling my wife, what’s the point of being a real estate appraiser if you’re not allowed to tell the truth, isn’t that’s why they were invented.

And now my new line, what’s the point of being an appraiser if you can’t support your family. Isn’t that the point of a job?