Appraisals and the Real Cost of doing Business

12/08/2015
Appraisal house large

Over the last few weeks, as we’ve all become more accustomed to the new required disclosures, and our beloved TRID, but one thing that seems to have slipped under the radar till now is the sudden increase in the price of appraisals.

It wasn’t so long ago that the total cost of a regular conventional appraisal was in the $400 range. And, this was after the Home Valuation Code of Conduct (HVCC) was introduced by the government, requiring all appraisals to be ordered through an independent Management Company that would ensure anonymity of the appraiser. An equivalent FHA appraisal was around $450. We totally understand that, as it’s due for the most part to the additional inspection items that FHA/HUD require their certified appraisers to perform. HVCC of course added a middle man and they also had to be compensated, so that initial jump in costs was to be expected.

res appraisalOriginally, however, if you spoke to an appraiser after HVCC was implemented they would invariably tell you how little they were making out of the new increased fee, many left the business as they weren’t able to survive that initial pay cut, and others hung on hoping it would balance out. This, we’re told, has since happened and more of that fee is making its way to the appraiser.

But, since then a variety of changes have occurred, more and more stringent guidelines have been introduced, and the appraisers have had to add a  number of additional requirements to their reports, such as quality of home categories, additional comp requirements, photo requirements, and the added pressure of the Fannie Mae Appraisal portal. The appraisals have steadily climbed in cost to meet these demands, but it wasn’t so significant that we couldn’t explain it to our clients; you know, those guys actually paying for the service, like it or not, and without a choice in the matter.

TRID (The Reason I Drink) came along, and some of the Appraisal Management Companies decided it would be easier to set up a Tiered Fee System. We as the originator now have to accurately disclose fees at the beginning of the transaction before we really know anything about the property, and it has to be a valid change of circumstance for those fees to be allowed to change. The Tiered pricing system means we can go into a portal, check the region, the appraisal type, the property type, and obtain the fee to add into our Loan Estimate. Handy, right?

In addition, FHA/HUD have added a whole set of additional requirements that their certified appraisers now have to address, including physically getting into the attic, and the crawl space, instead of just snapping a photo. So, suffice it to say, the FHA appraisal cost had to increase again to accommodate the additional work load.

shocked face largeImagine my absolute horror when I ordered a regular single family home appraisal in down town Marysville for an FHA loan, on a normal tract home for $165,000 purchase, only to discover the cost for this little beauty was $650!! Yes, that’s right, $650 for a normal, run of the mill tract home in downtown Marysville. Not out in rural countryside, miles away from civilization, or a million dollar home with high end construction, or even large acreage, or difficult to comp multi-family property. No, this is a 1000 square foot 2 bed 1 bath home, on a regular lot in town.

Where will it end? I have no idea how to call my client, by the way in this instance a first time buyer 23 years old that is actually showing the millennials how it’s done, and tell her the appraisal to evaluate the property’s worth is $650! As costs have increased over time I’ve been able to explain the reasoning, talk about the additional work required, stipulate the benefits of having a HUD certified appraiser working on the file, and so forth. Now, well…I’m at a complete loss. How am I to justify and explain this? Back in the “old days” about four years ago, I would have been legally allowed to kick in some of our commission to help pay for the closing items, and soften the blow, but even that luxury has been taken away by our government for the so called “best interests of the borrower.” Don’t make me laugh!

It’s high time someone stood up for the real “best interests of the borrower,” and rather than minimizing choices, tightening rules to the point of ridicule, and forcing costs to increase with layer upon layer of compliance, maybe someone in government could listen. Oh, but now that I’m thinking about it, perhaps I should mention this to Donald Trump!


 

Ravin_1675fcropped for internetSuzanna Ravin has been working in the lending industry for the last twelve years, currently managing a retail branch Peak Mortgage, a division of Finance of America Mortgage, LLC. She maintains her top originator status by remaining very hands-on with her clients’ transactions. Often referred to as the Loan Guru, she loves to be completely informed on lending guidelines, and regulations.

You can reach Suzanna at sravin@peakmtg.com – 916-462-8811- www.peakmtg.com/suzannaravin or visit her Facebook Business Page

 

Comments

comments

Comments
  • As mentioned, the AMC cut is not disclosed. However, I will be increasing my fees after the first of the year.

    Divedude December 9, 2015 7:07 am Reply
  • All of the above is right on! AMC and Lenders add to the cost of the appraisal because they all want their cut. However my personal appraisal fees are starting to rise because of the added BS needed in the reports. My fees were $350 in 2000 (standard 1004) My fees are at $375 to $400 for conventional loans (difference in location) I can’t say these are huge increases… however in order to avoid getting screwed on a fee because of trid, I have some clients want me to raise my fee to $500 so if there is a change in the assignment I don’t have to re-bid the job. This client is at the top of my list for service and I don’t have to bid the job, because the easy appraisals make up for the once in a while difficult jobs. All that to say, When the government gets more and more involved fees go up!!! How does that help the consumer?

    David Appraiser December 9, 2015 9:13 am Reply
  • Just make sure to dress professionally when you wiggle into the crawl space during your next assignment

    Jack of Appraisals December 9, 2015 2:05 pm Reply
  • Pingback: Appraisers and Their Lack of Fees - Appraisers Blogs

  • I’m a certified residential appraiser and my new minimum FHA fee is $500. Every appraiser peer I’ve spoken to has raised their FHA fee $50-$100 after the latest handbook took affect. Some have raised their fee even higher than that simply because they don’t want to do FHA work anymore because of the increased liability.

    FYI, Suzanna, I’d bet that your client paid $1,000+ for their iPhone over a 24-month cell phone contract. I hope that appraiser got $500 for his/her work. :-)

    Philip Gray December 14, 2015 6:02 am Reply
  • Everyone agonizing over appraisal fees and never a peep about the ripoff fees from title companies who typically provide terribly flawed documents and not held accountable for it.

    stan Jacobs January 14, 2016 8:44 am Reply
    • Perhaps this will feature in my next article!

      Suzanna January 14, 2016 9:18 am Reply
  • Please let Real Estate Agents know that appraisers hate meeting them at the appraisal inspections. The agent is only in our way at the inspection, ducking and dodging to get out of the photos we’re trying to take, trying to sell us on all the awesome features of the property, trying to explain their comps, which we don’t need and if we used their comps the value would not “come in”, and trying to gain our favor. If they really want our favor, they should just give us the code to the lock box if the property is vacant, or give us the seller’s phone number so we can show up at our convenience without the agent there. Apparently, every realtor is told by other realtors that they should try to influence everyone and they should do everything they can to be at every appraisal inspection, but they have never heard from the appraisers that appraisers would rather move through their inspectons without an agent in their way.

    Harry Appraisals January 21, 2016 8:24 am Reply
  • The last RE Bubble blamed the appraisers for values rising so quickly. They became the scapegoats so to speak. This actually helped clean up the RE market. Beat up houses that were being flipped and re flipped for instant profit were the first to become REO’s and the flippers bought them for cash and fixed them and they became viable real estate instead of dogs.

    This is the first I’ve heard of the agents being a nuisance for the appraisers. If it is occupied I have to be there to open up for the appraiser. Usually they ask me to supply comps. I also include any recent repairs and updated receipts and the 433 A & D and permits and certs for well and septic if needed. It just saves time for the underwriter and the appraiser. I guess I am an over achiever. I thought I was just being helpful. I have challenged low appraisals. I did notice that the VA appraisals are much more generous than FHA and in house RE Office lenders are more stringent and appraisals come in lower. Doesn’t take being Einstein to figure that out.

    Tere Rice February 16, 2016 8:00 am Reply

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