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

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Comments

25 thoughts on “Appraisals and the Real Cost of doing Business”

  1. James Dunn says:

    You forgot to mention that the AMC's "take" a large percentage of the Appraisers Fee. You say $650 for a run of the mill appraisal? I bet the appraiser was paid $300-400. With the AMC swiping the rest. They control the work and who is the cheapest and fastest are the ones who receive the appraisal assignment. What needs to be "honestly divulged" is the AMC's "cut". Right now it gets lumped into the cost of the "appraisal" and hidden from view. The AMC's have their lobbyists and lawyers. Appraisers for the most part are independent and fly solo. Appraisers are leaving the field, and retiring. Anyone want to be an appraiser? FLEE!!!!!

  2. 650 is right. That's what I charge as an appraiser for FHA and I get that full fee. I won't do FHA work for less than that with all the new requirements. A 1004 will cost you 400-450 in my area and yes I get that full fee.

  3. Tami Sonne says:

    Try getting an FHA appraisal in rural South Dakota where there are limited FHA appraisers. The appraiser can pretty much name their price. We have paid $1000 for them…..and that is without using an AMC.

  4. Divedude says:

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

  5. Natalya Hill says:

    Since TRID the cost of Closing Attorneys has more than doubled in most cases.(NC is Closing Atty State – there are a few Title companies) Prior to Trid, the Closing Attorney fees were in the $550-600 range. However, after TRID – the average cost is now $800-1200. This is TERRIBLE. There have been NO Benefits to consumer. It is more work for Lenders, frustrating for all, time consuming, it is VERY Confusing to Borrowers….not to mention the Appraiser and Attorney fees have gone up costing borrower even more money. Thankfullly, I work for an AWESOME Company & have an AWESOME Team so we have not missed a closing date since TRID – Just alot of extra things to do.

  6. Natalya Hill says:

    Since TRID the cost of Closing Attorneys has more than doubled in most cases.(NC is Closing Atty State – there are a few Title companies) Prior to Trid, the Closing Attorney fees were in the $550-600 range. However, after TRID – the average cost is now $800-1200. This is TERRIBLE. There have been NO Benefits to consumer. It is more work for Lenders, frustrating for all, time consuming, it is VERY Confusing to Borrowers….not to mention the Appraiser and Attorney fees have gone up costing borrower even more money. Thankfullly, I work for an AWESOME Company & have an AWESOME Team so we have not missed a closing date since TRID – Just alot of extra things to do.

  7. Woody Hogg says:

    Have to agree with Natalya! Our government is causing all of this to happen to protect us! when they stick their noses in, the cost of everything goes up! The people that make these regulations hane not got a clue! Everybody in the transaction has to do more including appraisers, title companies and us as agents and brokers! All of this is to protect the public just because therre are a few criminals out there when the majority of transactions have been conducted by ethical professionals! While I am at it, the "90 day rule" that requires an investor to wait to sell is a blatant restrant of trade created again by our government!

  8. David Appraiser says:

    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?

  9. Sue Sauer says:

    she should ask the appraiser directly how much of the $650. fee the appraiser received…..although they may not be able to disclose this …..the appraisers are in a catch 22 – they don't get the full fee charged the borrower & most of the time they have no idea what that fee is. We only know what fee the AMC or the lender pays us. Ask – you might be surprised just how little the appraiser received for this assignment!!!!

  10. I have been doing appraisals for a long time, Dodd–Frank Wall Street Reform and Consumer Protection Act failed greatly when they indicated "reasonable and customary appraisal fees", If the AMC's which were created by Dodd & Frank received a straight percentage of what the appraiser charged (maybe 20%); they would have argued for higher fee's for the past 6+- years when justified and would not have sacrificed the appraiser by cutting appraisers wages in half. Welcome to today, an industry with less appraisers – no one wanting to obtain a collage bachelors degree to make sub-par wages with the fear an appraisal will go South and the appraisers personal assets & retirement could be on the line (remember FIERRA). With the new FHA guidelines – you hope you did not have a bad day and miss something because the question will become are you "fraudulent or just incometent" it does not matter – we can sue for either. Most appraisers try to do a good job and sometimes that takes time to do the research and a couple of days; these reports will hang around for 5 years and most want to get it correct the first time which cost money, last time I needed to have my heating Unit or car worked on it was $70 – $80 per hour; so if an appraisal report takes about 8 hours to complete which is not the case in my area with travel time; at $75 billed per hour for 8 hours the cost should be $600 now add the AMC percentage which has been between 1/3 – 1/2 of the appraisers fee or $200 – $600; you can see why the cost has increased. With property values in California increasing throughout the state; don't loan officers and realtors making more per transaction based on a % of what the deal is? Just my two cents. Kevin in Redding, CA.

  11. Bill Cobb says:

    One Peer Appraiser commented about the author, "she must have forgotten the days when LO's were charging the borrower 2-6 points or percent per loan as a commission."

  12. Jack of Appraisals says:

    Just make sure to dress professionally when you wiggle into the crawl space during your next assignment

  13. Hans Bruhner says:

    Careful when making sweeping generalizations. I have never charged exorbitant fees. I have never put people in crazy risky loans that they could not afford. I did not get rich and leave the industry. Suzanna and I are both still here and that says a lot about us both. I suspect she did not charge exorbitant fees either.

  14. How much do you stand to make on this loan? What is your liability 5 years from now if the borrowers default? The appraisers have always been the most undervalued and overworked part of the real estate process. You get to go home at 5:00 and spend time with family or friends while the appraiser is working to finish up reports to get your deal done. Mortgage brokers and reltors have no liability, simply push paper and get paid thousands on each transaction. How about you purchase the appraisal for your client, oh wait, that would cut into your fee. There are fewer appraisers out there, the requirements to become an appraiser are greater, costs of doing business (software, technology, data service subscriptions, gas, insurance, etc.) have been increasing for years while appraisal fees were stagnant at $400 for decades. Appraisers are trained professionals that put their license on the line with every appraisal they complete and an appraisal that is the cornerstone of a real estate transaction with hundreds of thousands of dollars are worth far more than $450. In my opinion they should be equal to what the mortgage broker is getting for his or her fee.

  15. Philip Gray says:

    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. :-)

  16. stan Jacobs says:

    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.

    1. Suzanna says:

      Perhaps this will feature in my next article!

  17. Hmmm, I usually work 70 hours or more a week, I haven't left my office at 5pm in years, I work on every trip my family takes, mostly a full 4 to 8 hours a day, and we have an inordinate amount of liability. You need to read my follow up article as this was only to show the cost of increased compliance that doesn't assist the consumer in any way, and not a complaint about appraisers as I have many that I value as friends, and they give me their persepctive constantly.

  18. I did, please see my follow up article – my point here wasn't to do with the appraiser and I clearly state it is the AMC and the tiered system that inflate the cost. Please see my follow up that properly states inte injustice of appraisal fees.

  19. Harry Appraisals says:

    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.

  20. Tere Rice says:

    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.

  21. Matt Smith says:

    And what market are you working in? I know of many appraisers in outlining markets that seem to well with getting much larger fees. This has more to do with little to no other appraiser in their market to compete with. Thou they get a higher or full fee, their volume is low. This model works in those market, but is not typical for most major markets.

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  23. I don't know where you are located but in South Carolina I am doing good to get $300 for any appraisal. I'm not sure what the AMC's are charging but I've been in this business for 16 years and making less money than ever and it takes me three times as long to do a report with all the additional requirements.

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