After an overwhelming outpouring of response from appraisers all over the country, I am compelled to write a follow up article to “Appraisals and The Real Cost of Doing Business.”
I must stress that my original intent was to highlight the ever increasing cost in all aspects of our industry, passed on to our clients, due for the most part to increased compliance requirements, additional staffing required to monitor said compliance, Dodd Frank rules, HVCC, TRID etc. I had ranted previously about other compliance issues taking their toll, unintended consequences of increased fees, and this was an addition, or follow up to that. In light of all the emails, messages, calls, and comments received, and the fact that so many took time out of their busy schedule to reach out, I feel it’s only prudent to put my ten cents, or more, in on the subject of actual cost, versus paid fees for appraisals.
As I had pointed out, only recently up to a couple of years ago, appraisals in our area of Northern California were costing in the region of $350 to $400 depending on complexity, region or loan type. This was the case for as far back as I can remember, but for sure around 2002 onwards. And, until HVCC and the Dodd Frank ruling reared their ugly heads, it continued to be the norm.
So, let’s think about that for second. For at least ten years, the cost of an appraisal did not change. At that time, the fee went directly to the appraiser, no middle man, no AMC, no additional fee disappearing into an abyss that we aren’t aware of. But, surely, the cost of living has increased at least 3% to 5% a year over that time? Anyone in a regular salaried position, such as Underwriters, Escrow Officers, Processors, and so forth has likely been given a regular cost of living increase for most years over that same time period. We, as originators, are no longer legally allowed to give any of our commission to our clients for closing costs, or unexpected items that showed up to be paid, which most of us did to some extent on every transaction. So we, inevitably, are now making more money per file.
Then, let’s dissect this a little further. When the Home Valuation Code of Conduct (HVCC) was originally introduced, and most opted to employ a neutral third party Appraisal Management Company (AMC) to dish out and assign appraisals, the fees suddenly jumped. Appraisers were forced to sign up and be approved with the AMCs in order to continue to be delegated business. Yet, in order to be chosen to undertake an appraisal they also had to be subject to a bidding process. This saw their actual fees drop as low as $200 to complete the same appraisal they had recently commanded $350 for.
This debacle went on for a good few years, until only more recently, I’m being told by a number of appraisers, they are back to their original fees level of $350 to $400. But, within that time they have now been given an additional number of tasks to complete within the scope of the appraisal report, required by the majority of lenders, adding more hours to the work load, and yet still they are being paid the same fee (if they’re lucky) as they were in 2002! These include quality of home codes, market analysis, additional comps, more photographs of the home, not to mention the more stringent requirements FHA/HUD have placed on their certified appraisers to complete their report.
This indicates that our appraisal management companies are pocketing as much as $250 per file on some transactions for delegating the task to an appraiser, taking a cursory look over the appraisal, and then sending the report onto us, all in order to ensure the appraiser is anonymous through the ordering process. How is this really in the best interest of the borrower? And, how is this really in the best interest of the appraiser?
To add insult to injury, they are, just like originators, a dying breed. It’s almost impossible to attract young blood into the industry as it’s ever increasingly difficult to qualify and become an appraiser. One is now required to have a college degree, two years of mentoring/experience, and then pass numerous exams, all of which increases exponentially if you want to continue on and become FHA approved too.
It has come to my attention, although I’m not sure it’s available here in Northern California yet, that other areas have Appraisal Portals. They’re all entirely electronic, don’t require a management company, and the cost is about $10 to $24 per report. This allows an appraiser to sign up to be a part of the “round robin” type system of appraisal assignments, they can command their proper fee, and the borrower/clients will be paying at most about $25 more for the report! How fabulous is that? For my own piece of mind, I want to investigate this further, discover the success rates, quality of appraisal reports, and so forth, then determine why we can’t use this locally here.
The culmination of all this is the Tier System I had commented on in my previous article. In order for us to attempt to accurately disclose a fee for an appraisal on a property, a home that we likely know nothing about at the time of the order, unless our Realtors have the wherewithal to give us some information, but nonetheless are bound by TRID to disclose right at the beginning, it seemed a good option to categorize regions, and appraisal types and we can pick and choose accordingly.
But with this system the fees have increased once again, however not it seems for the appraiser. The Middle Man is sopping up the surplus. And, while we are forced to disclose as accurately as we can for fear of having to start the entire loan file over should we mistakenly misquote something (due to TRID rules and still not in the best interest of our clients), the AMCs are somehow not required to specify exactly how much of the total fee is being funneled to them. Does that seem a tad unfair?
If we must quote our fees to the penny, our processing fee, the underwriting fee, the owners’ title policy, the full lenders’ title policy along with the discount that is never seen, alongside a myriad of items such as home insurance, escrow/impound accounts, prepaid interest and more, shouldn’t there be absolute clarity on the appraisal fee, how much the appraiser is being paid, and just how much is being added on for the AMC?
In this age of complete transparency, required by our government, one would think something as important as the appraisal, a report that is required on pretty much every transaction, should be properly disclosed. And, in the meantime, that our appraisers would be allowed a cost of living pay increase or two, instead of a pay decrease each time something changes above and beyond their control. Again, I’m thinking perhaps I need to chat with Mr Trump!
Suzanna 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
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additional comments on "Appraisers and Their Lack of Fees"
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What exactly is an appraisal portal? First time I’m hearing that term.
I was told about these portals yesterday from a few appraisers from around the country
in reference to the Appraisal portals,we enjoy our relationship with Mercury Network. go to http://www.mercuryvmp.com we get our full fee & the loan officer seems to get the appraisal faster & no headaches 🙂
Mercuryvmp.com is a portal that charges $13.75 per appraisal (paid by appraiser). It was originally developed by Alamode (the most widely used appraisal software in the industry) but recently acquired by an independent 3rd party due to vast expansion. It works seamlessly with the appraisal software and very inexpensive, yet maintains compliance. As an appraiser, I can join Mercury for free by creating a profile with coverage areas and products/fees available. I encourage any lender looking to utilize an appraisal portal to use the Mercury Network. Appraiser’s use it and love it!
Your comments mirror my thoughts exactly. Thank you for voicing them so eloquently Suzanna.
You have written an unbelievably accurate article. Appraisers’ businesses have been turned upside down and we have been struggling to survive since 2009. Many are probably unaware that in addition to our fee loss, just about every job we accept requires some sort of payment just to accept it or upload the completed report to the AMC. Many AMCs use the portals as well which is a redundant process, because they do not have their own platform and pass the fee on to the appraiser. Many times they charge the lender a fee as well. So who benefits when appraiser independence guidelines do not require an AMC? Lenders need to consider using in house rotations through their own partitioned appraiser department (one staff person can perform this function) or use a portal with an appraiser roster made up of folks that they have put together and approved. You have no idea what a big business this has become for these middlemen who actually do nothing. Their role is only to pick up the phone and call an appraiser, yet often they take half of our fee for doing only that. There are many good amcs, but the ones that use this business model are doing a lot of damage to our profession.
What can be done about this “highway robbery” by the AMC’s?
Use an appraisal portal versus AMC. Cost can be as little at $13.75 per appraisal (paid by appraiser) through Mercury Network (mercuryvmp.com) and it satisfies industry compliance. There’s 1000’s of appraiser profiles already in the network because it is tied to our software that we use.
Many lenders use an inhouse process or also a portal that only costs a minimum flat fee of $10 or $15. that’s all this function is worth. not hundreds of dollars per order.
Thank you for this. Most folks are unaware (and generally could care less) about what the appraisers have endured over the past five years. Our costs are significantly higher than they were in 2002, and fees are only now beginning to increase to offset the costs.
The appraisal portals? We pay around $1,000 per month for the pleasure of transmitting our files through the portals. We thought once the files became electronic, our courier fees of $1,000 per month would go to the bottom line. Not so fast. Now, for some reason, the lenders pass this cost on to us.
As the number of appraisers continues to dwindle, our fees may actually get to the point where it is worth training new appraisers. But until then, the attrition continues and in ten years there will be an epic shortage of appraisers.
Where did the concept of “due process” go? When before, in the history of US business, has a segment of professionals been singled out, declared guilty, and had their business (clients) taken without “due process”, without so much as a hearing to allow appraisers a chance of defending themselves??
Now appraisers often work for half the fee paid by lenders/borrowers and middle men raking in 1/2 of the fee for what??? For increased liability?
Forget Fannie Mae, Freddie Mac, VA, FHA/HUD, guidelines. If the AMC reviewer does not like the appraisal report (often for minor issues such as disagreements over “proper wording”) the lender/client never sees the original report – the AMC will “force” the appraiser to alter the report or not get paid. If the appraiser refuses to alter the report, the AMC sends the order to another appraiser who will yield to their whims…
The only appraisers I know who think the AMC model is a good one are the appraisers that wouldn’t get the work if they had to walk into a clients office, present themselves, demonstrate to that client that they are professional, knowledgeable and able to instill confidence in the process to that client customers, the homeowners.
….as opposed to sitting in a dark room in front of a computer and surrounded by old pizza boxes in their underwear……Wow!! Now that I think about it, anonymous does sound good!!!….
Now I also know who is taking all those $200 deals.
Suzanna, I have read your article on Appraiser Fees, and you are correct that transparency is lacking when it comes to appraisal fees.
When your borrower applies for a loan that borrower writes a check for the professional services of an appraiser to complete the required appraisal on their real estate. At that time, that amount should go directly to the appraiser. If a company is using a third-party ordering system, then the borrower should be made aware of that service and the fee for that service.
The additional "Cost" that consumers are experiencing at this time is not necessarily coming from the appraiser although some fees are increasing and rightfully so due to the requirements and general cost of living increases.
No what is happening is borrowers are being charged in some cases $600-$700 for the "appraisal", but that amount of money is being diced and slice by middlemen that their primary goal is to keep as much of that money as possible regardless of whom they can get to complete the professional services of completing the appraisal assignment.
Thank you for coming back and making your article clear on the intent. The lights are getting turned on and people are beginning t see the injustice that is happening to consumers by some of the AMCs that are not being transparent.
Use an in-house process or use a portal that only costs $5-$15 per order. That is all the function is worth anyways, not hundreds of dollars per order.
Agree that transparency is needed.
This article really hit home in my case as I am an appraiser, there are a few lenders who require the AMC pay a "reasonable fee" to the appraiser ranging from $300-$340 yes in 2015! Those are prices from a decade ago. However, the majority of AMC's pay $200-$250 per report. RE colleagues might say "you set your fee" but if one request higher fee we don’t get orders, the lowest you charge and fastest turnaround time, the busiest an appraiser is regardless of his/hers competency. Let’s not even mention added inspections, photographs, comments, revisions, etc…Have a great day!
Thank you for your additional comments on the wild & wacky appraisal world. You wote a very clear artice on the "Facts". Some of the "appraisal ports" actually "data mine" our appraisal reports & re-sale this data for a profit. This is another BIG spin off industry (title co's, corelogic, etc also do this). Fannie's UAD – is a collective of all the appraisal reports data they have received & "mined" over the last several years…. Another issue that we appraisers have no control over…..
Great article! I'm still a licensed appraiser, however, I have not practiced in four years due to exactly what you talked about in your article. I have a 100% clean record, no complaints, always on time, and and management companies calling me asking to start taking assignments again, as they need more appraisers. My answer, I'm selling real estate, as I can provide for my family as a Realtor, and struggle as an appraiser.
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Since Appraisal Portals are online, they should be available everywhere. I'm a broker in Northern CA and I work with a lender who uses Value Trac and charges a $75 fee to the borrower which covers the portal fee and probably some to the lender's appraisal dept. There is no fee to the appraiser for either signing up or using the portal. The fee is shown on the LE as a separate line item to the borrower than the appraisal fee. So the borrower pays $425 to Appraiser and 75 for Appraisal Transaction Fee. The other benefit is to turn around time, you don't have some unlicensed dumbasses in an AMC "quality control" dept reading the appraisal for days and making the appraisers add idiotic statements. Since this HVCC nightmare began, a lender's appraisal ordering process and fees have been my biggest criteria with the lenders I chose. I discontinued my relationship with a lender who I loved, because they insisted on using a horrid AMC. If all lenders/brokers did this, we could squeeze the dirtbag AMCs out of the market – you know the ones who charge $550 to the borrowers and keep 225. All AMC's fees should be disclosed separately and every lender/investor out there has the ability to make that happen by insisting it be that way on the LE. If you are a broker, work with lenders that itemize it. If you are a retail lender, demand transparency with your corporate, and insist that AMCs set their fees and disclose them separately. Good article, it frustrates me that the appraisal and amc issues have sort of fallen by the way side so I'm glad to see it brought up again.
Very nice follow up article. I am an appraiser and am all for full transparency. Seperate get out the AMC fee from the appraisal fee on the HUD statement would go a long way. And if lenders used the portal system you described, borrowers would save a ton of money.
Thank you for the great article.
The run up between the announcement and the implementation of the HVCC was an 18 month opportunity for AMCs to market themselves with mostly false claims that lenders MUST use a third party vendor.
It is simply not true, but has become an urban legend that lenders have to use an AMC.
If their services are so valuable, why don’t the lenders pay for that service?
Because they know what it’s worth.
What about the AMCs’ that are owned by major banks? RELS owned by Wells Fargo for example. This is the consumer paying undisclosed, additional fees to the bank they’re getting their mortgage from. Transparency or scam? What do you think the consumer’s reaction would be? I met one and he demanded to be reimbursed!
I am a retired appraiser, mainly for the points you guys made. The system has been rigged since I got into it straight out of college, with a major in Real Estate. My instructors were PhD’s and MAI’s with lifetimes of real world experience. They taught us the nuts and bolts extremely well, but they left the part out it that the real estate industry in the USA is as infested with thieves as is a junkyard dog is infested with fleas. The mortgage industry not only tolerates fraud and theft, it DEMANDS it. It craves it, and handsomely rewards it. I spent over 30 years in this sewer, thinking that those of us that behave ourselves, maybe we can run the scum out. WHAT WAS I THINKING?? Regulation is as limp as granpa’s…err potted plant. Regulation as we now have it is merely window dressing. When was the last time we saw a mortgage guy go to prison? Not the country club prison, but the one they describe in the movie “Office Space”? All the regulation punishes those that play by the rules by putting them at a competitive disadvantage by the LCT’s (liars cheaters and theives) because the LTC’s gain more business because their loans go through smoothly and faster than the good ones who do what they are are required by law to do. Any one of us who have spent more than 3 months, let alone 30 years, know all this and it will never change. The appraiser has been the whipping boy by an uneducated, fraud driven system. I have personally known hundreds of LO’s, UW’s and closing agents. I was an LO myself coming out of college, and was married to an LO for over 20 years. (yeah, I’m a glutton for punishment) her brother was a regional manager, so I see this from all sides. Throw in such gems as the NY Governor (former director of HUD who also served on the board for one of the biggest AMC’s and spearheaded HVCC) and the sponsors of such things as HVCC, Dodd-Frank, and there is really no hope that this industry will remain nothing but a rip-off business. I’d rather change gramma’s diaper, at least it’s clean and honest work.
Have fun, boys and girls, is this what you wanted? Is this what you had in mind? Because this is what you’re getting. Gotta run, T time is in 20 minutes at the muni golf course.