The Truth about Running an Appraisal Management Company – Part I of V

1. It is the appraiser’s competition, not the management company, which determines the appraisal fee.
This is simple supply and demand. If appraisers are located in a rural market area where there are very few appraisers, the appraisal fee will be higher than in metropolitan areas where there are a lot of appraisers. When management companies are sourcing their orders, they determine the market fee for that particular area and pay their appraisers accordingly. When pricing contracts are involved, management companies lose money on some orders.

2. Although some management companies pay market rates to the appraisers, the three largest do not engage in this industry-promoting practice.
There are a handful of appraisal management companies, US Appraisal Group included, that pay market rates to their appraisers. The reason you don’t hear about them is because the three largest AMCs that handle close to half the mortgage transactions in the country, have adopted a 40% fee-split model, where the typical appraisal fee for a full appraisal is between $150-$200. The truth is that management companies can operate and be profitable with a full-fee model but it’s not in the best interest of the bank to do so if they happen to own the AMC.

3. Appraisers are selected based on geographical competence, not necessarily where they live.
A downtown Chicago leasing agent’s suburban address has no affect on his ability to accurately lease downtown office space. The same is true for appraisers. Where the appraiser primarily works, not necessarily lives, is the determining factor for market competency. Appraisers are typically selected based on their primary market area with a secondary coverage area assigned in rare cases.

4. Getting quality reports is not difficult.
Again, following the full-fee model, finding appraisers that can provide reports of impeccable quality is not difficult. Most appraisers are competent, educated, and ethical. As with any industry, there are good and bad players, but most appraisers just want to do a good job and, for some, working for management companies provides value protection that they would not have otherwise.

5. HVCC is not the cause of consumer’s problems.
Consumers should be blaming the housing market. HVCC was intended to “promote independence in the appraisal process and, thus, help ensure that appraisers and the appraisal process may be relied upon as part of sound underwriting for financial institutions.” While convenient to blame, HVCC is not the cause of low home values and the restrictions of financing.