My latest article for Inman News spoke to the new rules for appraising properties ushered in through what is known as the Home Valuation Code of Conduct, or HVCC. The comments on that post and the firestorm of emails I received as a result all shared the same sentiment – bad idea.
Since Inman is a subscriber news service, I can’t link. But at great personal risk (I am not, technically, supposed to republish since the content there is supposed to be “original”), I am going to reprint the article for our two readers here. It’s a bit long, but hey, it’s the weekend. What else have you got to do?
(Note to Inman and to the presiding judge: It is still original content. I left out two or three sentences.)
If you read nothing else, please skip to the bottom where I have reprinted with permission an email I received from John Carlson, a Certified General Real Estate Appraiser from Diamond Bar, in which he shares his concerns about the state of appraisals under the new rules. His thoughts pretty much sum up the concerns of the entire appraisal community and whether you are an agent or a principle in the transaction, it’s important that you know what’s going on.
The Home Valuation Code of Conduct, according to Freddie Mac, is all about “enhancing the independence and integrity of the appraisal process.” Good ideas, those. Go, Freddie!
If you were a licensed real estate agent in 2005 (which, according to the most recent census, includes everyone over the age of eighteen except some guy from Des Moines named Carl), you undoubtedly understand the need for a code of conduct. Back in the glory days when homes, or as we liked to call them, debit cards, were in high demand, the typical conversation between the listing agent and appraiser went something like this.
Appraiser: “I have been asked to appraise the property at 347 Falling Downs. May I meet you there at 3:00 today?
Agent: “Great, yes!”
Appraiser: “What is the sale price?”
Agent: “The price is $5,257,000, which is a little higher than the price of the last one-bedroom condo that sold in the neighborhood, but it’s really nice, and we had multiple offers!”
Appraiser: “Good one! Were there any concessions?”
Agent: “Well, the buyer did offer to raise the seller’s children as his own.
Appraiser: “Alrighty, then. We should be fine. Just bring a copy of the contract.”
So, something clearly had to be done. And this is where the Code of Conduct comes in. Who says you can’t legislate ethics? The lenders were bad, bad children. The argument is that in their youthful exuberance to give all of their money away, they established relationships with appraisers who would consistently return the magic number, all too aware of on which side their paycheck was buttered. Maybe some lenders did influence the valuation process to their own benefit and to the consumer’s detriment. Or maybe, and I’ll just throw this out there, a home’s value is in fact loosely related to what a buyer is willing to pay, and when the lenders were giving out free money, buyers were willing to pay a lot – a lot of the lender’s money. Either way, the regulating parents have stepped in.
So, we are now living under a new lotto system for assigning appraisers. And, now, our first point of contact with the appraiser goes something like this.
Appraiser dispatcher: “We have been asked to appraise the property at 11283 Peep Holes Court.”
Agent: “You mean ‘Peoples Court’?”
Appraiser dispatcher: “Whatever. When can we get in to see it?
Agent: “When would you like to get in to see it?”
Appraiser dispatcher: “Please hold.”
On the last such call, I held at this point for exactly 13 minutes (I counted). And while I enjoyed the musical stylings of Paul Anka, I sat mildly amused with the irony that it was she who had called me. A better woman would have hung up, but I knew she had me over a barrel. I needed that appraisal, and I was at the mercy of this person who did not really work for the buyer or his lender, much less for me or my selling client. I guess that is what true independence is all about.
Appraiser dispatcher (returning from lunch): “Where is the property located again?
Agent: “San Diego.”
Appraiser dispatcher: “That’s in California, right? Please hold.”
Paul Anka: “Havin’ my baby…”
Appraiser dispatcher: “Our next opening is at noon on Tuesday, in the Year of the Dragon. Oh, and bring a copy of the contract.
While we used to encounter the same stable of appraisers on each outing, we now only occasionally run into one that didn’t have to stop at the Jiffy-Mart to ask directions. And when we do see the rare, familiar face, we get an earful.
Appraisers who have spent years building their reputations and their relationships are now seeing their businesses regulated into the trash can. The costs to the consumers are going up, but the income to the established appraisers is going south because of a combination of fewer assignments and lower fees. The latter is because somebody has to pay for the administration and oversight which now is typically dispensed by an appraisal management company.
And, just in case anyone even thinks about getting ornery and gaming the new system, Fannie and Freddie will be funding an Independent Valuation Protection Institute to “maintain the integrity” of the very Code of Conduct intended to maintain the integrity of the appraisal process. Perhaps we should have a system in place for maintaining the Institute’s integrity. After all, you can’t be too careful.
So, back to my IRL (in real life) grab bag. First there was the home which sold at full-price first day on the market. Our lucky quick-pick ticket gave us an appraiser who refused to actually go inside the property. It was what they call a drive-by appraisal, and I am being generous here because there was no evidence that anyone bearing even a slight resemblance to a valuation professional had been within twelve counties of this home. With no model-match sales within the last two years (what we, in the industry, might call “latent demand”), the appraiser relied on sales of homes whose only similarities were in the fact that they too had mailboxes. Our requests to provide relevant data, appeal the appraisal, and even to simply speak to the mystery appraiser were denied. It cost the seller $5,000.
More fun yet was the appraisal process for our most recent listing. This one involved an FHA appraisal and, admittedly, the level of difficulty here is slightly higher. The appraiser is also an inspector of sorts. The assigned out-of-area appraiser did his routine appraiser-guy thing. He measured and took pictures and asked for a copy of the contract. And he identified a couple of outlets which, although not a grandfathered code requirement, he said would need to be GFCI protected. The FHA likes GFCIs – a lot.
Two days later, while foolishly thinking that because the property had been appraised, we had fulfilled the requirement that the property be appraised, we took a call from a second inspector. This is routine with FHA, doing things twice. In fact, many conventional loans now involve private screenings of “Appraisal: The Redux.” Better to be cautious. The first guy might have not have acted “independently” as the Code requires, having suffered from impaired vision due to a seller headlock or too much time spent squinting at the shiny red buttons on electrical outlets. Or maybe he didn’t act with “integrity” and lied about stuff in his report (like GFCIs).
Our second appraiser came and conquered, and as inconceivable as this might sound, he too found that we needed some outlet upgrades (the same ones). And, crazy as it may seem, his estimate of value, like the first-string appraiser-guy, was exactly what the buyer had offered to pay. Buyers are so smart!
So, off to underwriting we go, but not so fast. All of you veteran agents know that the FHA appraiser would have to first come back to make sure that those outlets of death were properly addressed, which he did. So, now, off to underwriting we go – but not so fast. What if the first appraiser did not act independently, but instead believed us when we told him that the toaster oven was really a new GFCI? What if he lacked integrity, and he didn’t really push the reset button to confirm that the new outlet was browning evenly? The second appraiser, we were told, would have to return to look at the same outlets.
Twenty-seven days into a thirty day escrow, and we are still playing tag-team appraisal. I have spent so much time looking at the wall sockets in this home that if it burned down tomorrow, I could draw up detailed electrical plans with a box of Crayons and confidence. But I don’t blame the appraisers. In trying to win the right war, a bunch of well-meaning people just picked the wrong battle. We may find a lot of unintended casualties as a result.
Imagine you are an agent with a decade or more of experience. You have gained knowledge, you have established credibility and a loyal client base from which your future business will be sustained, and then suddenly someone tells you that the system is not fair. Instead, your client database is commandeered and each person is now assigned the next licensed agent in the rotation, neighborhood specialist be damned. And then, like a relocation company, they will essentially charge you for the privilege — when your number comes up. It might be enough to inspire Carl from Des Moines to finally get that license, but for the established agent, it could hurt the bottom line.
Imagine that, and you can imagine what a lot of appraisers are feeling right now. One could argue that the appraisal management companies are the winners and the rest of us, well, that’s another story.
I was speaking with a loan officer at Wells Fargo this week when he confessed, “This was supposed to improve the quality of appraisals. What it has really done is tank the quality of the product and the levels of service. It’s a mess.”
Maybe the Valuation Protection Institute can take that up at their first meeting.
Now, from John Carlson in response:
Ms. Berg,
I read part of your article on Inman News entitled: “Appraising the new Appraisal Problem”. Welcome to the wonderful world of the HVCC!! Courtesy of Mr. Andrew Cuomo, venerated Attorney General of N.Y.
I am a Commercial Appraiser in Diamond Bar, CA (www.jccrea.com) and am a moderator of one Appraiser’s Forum and a member of two more. My practice deals with both residential and commercial/industrial properties. If you would like I’ll forward the posts of my fellow appraisers about their experiences with the Appraisal Management Companies. (AMCs) It is a horror story. Get used to it – it’s going to get worse.
First, if you don’t know by now, AMCs are interested in two things and two things only:
1. Which appraiser can do the appraisal the fastest AND
2. Which appraiser can do the appraisal the cheapest
That’s it! Competency and experience don’t even enter into the equation. My Forum members have posted that when they are called by an AMC, the only thing they are asked are the above two things: How Fast & How Cheap. Forum members have also posted about conversations with “former” mortgage broker clients where their former clients talk about AMC appraisers traveling 100+ miles from their office to where the property to be appraised is. Think about this! Can an appraiser from 100 miles away be geographically competent to appraise a property in a neighborhood they never even knew existed before?
Did you also know that Reviews from the AMCs are coming in VERY low. Reviewers are basically “bottom feeding” Comps & correlating values toward the median value. What this means for your profession is that if you are selling a home with a large addition, or perhaps significant upgrades, there will be no consideration made for extra square footage or the upgrades. In addition, if the property you have listed is “unique” in some manner, forget any consideration for the unique qualities of the home.
Most AMCs are located far away from CA. For instance, Countrywide’s AMC, Landsafe is located in Texas. These companies are offering to “insure” their review values that they come in at – the hitch: The lender has to agree with the Reviewer’s value. You want to challenge the appraisal?? Fine, pay for another appraisal. Appraisers on our Forum are saying lenders are not challenging, but either killing a deal, or accepting the lower value.
My fellow appraisers who work with AMCs have no incentive to prepare a competent appraisal, as a matter of fact, there is a significant disincentive. Most AMCs require delivery of the completed report within 24 hours of when the appraiser sees the property. If appraisers do not meet the delivery time – they don’t get any more business! Do you really think that any AMC appraiser will pay attention to details?? I think not.
In addition, appraisers are only getting paid from $125 to $200, maybe $250 for a report. Your Clients, on their RESPA document, will see a charge of between $450 & $600. The difference between what the appraiser is paid and the total fee on the RESPA document is being pocketed by the AMC. Think about this, an appraiser now has to do twice the work to make the same money they made a year ago. You really think there is going to be attention to detail?? Residential appraisers are now a “commodity”, basically form-fillers banging out reports as fast as possible. By the way: Is this fee structure a RESPA violation, borrowers are not being informed about the fee differential – we think so – but we’re not legal experts, right?
I think it is absolutely critical for you Agents to meet whatever appraiser there is and be prepared to give the appraiser Comps. Remember, the appraiser may be coming from miles and miles away and probably won’t have access to your local MLS. Don’t try to mislead the appraiser; that could backfire on you. Present all Comps available and talk about the low ones and the high ones also. Tell the appraiser why those properties sold low & why properties sold high & provide documentation. Remember, you’re probably dealing with less experienced appraisers willing to work for “McDonalds” wages.
Finally, I think that Agents should inundate Mr. Coumo’s office with e-mails letting them know what a huge mistake this was. For some reason, Mr. Coumo thinks that AMCs have less incentive to control the appraisal process than the big, bad mortgage brokers did. Nothing could be farther from the truth. The actions of AMCs are totally unregulated and pressure on the appraiser is even more intense than ever before.
Thanks to Mr. Carlson for allowing us to repost his remarks. If you are a buyer or seller and you have been wondering why your appraisal took so long, why it cost so much, or why it was off be a factor of ten, now you know.
ABOUT THE AUTHOR Kris Berg is Co-Owner and Designated Broker of San Diego Castles Realty. If not-so static web sites are your thing, go here at once where you will find loads of real estate information including homes for sale, market trends, floor plans and more. Kris's hobbies include fencing and spot welding. She likes kittens. 
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Thanks Chris, We are experiencing numerous problems such as yours.
Good article Kris – I read it on Inman and am glad you posted it here so I can comment. Many of my fellow appraisers are kicking and screaming because the HVCC is killing their business. Luckily I haven’t witnessed these horror stories first hand or had to deal with low paying AMCs.
Like anything new, the kinks still need to get worked out. But overall I think this is a step in the right direction.
From news reports it sounded like the appraisal process was undeniably broken before, in practice if not in theory. These changes don’t sound like they fix it much, but that doesn’t mean the original motivation for fixing the problem was lacking. Unfortunately the pattern you tend to see is if the industry (or equivalent professional association) doesn’t police itself, then outsiders will step in and do it. Often the outsiders don’t know how to do it, so you get these kinds of messes. Without any disrespect intended to the honest and hardworking appraisers out there, if no professional appraiser organization exists or one exists but it is incapable of self-regulating the industry, this kind of outcome is what you expect, isn’t it?
I read this too at IN and you sure are busy writing (this was a long one) about what I called the “X-factor” recently in a vlog post on my site. Really, agents are walking on egg shells with buyers and sellers… because we have learned that the deciding factor may be an over-worked, under-paid, inexperienced, out-of-the-area appraiser who is afraid of too much contact with an agent for fear of appearing to be influenced.
I’m really not sure who benefits here?
Dwip,
I like your comment more than you know. It is transferable to a lot of folks other than appraisers. Agents, maybe?
Doug,
I’ll take “Who Benefits” for $200. Who are the AMCs?
Thanks Kris. It’s not often I get to laugh out loud in an empty office on a Monday morning and I appreciate your part in that.
I hold both a certified residential appraiser license and real estate salesperson license in Massachusetts. Until HVCC I had been keeping one toe in the appraisal pool to help pay the bills until the next closing. I would like to wholeheartedly thank HVCC for helping me cut the cord and push me off the fence. Of course I am (was) one of the “good” appraisers and I built my business over the last 7 years on trust, respect, performance and competency as well as the relationships I developed with my colleagues in the mortgage business. HVCC changed most of that for me on May 1st. And rather than agree to do the same work for half the price, I’ve opted to pour myself 110% into growing my real estate business. Coincidentally, May was my best month in real estate to date and June is tracking better.
Thank you Mr. Cuomo and HVCC. Your check is not in the mail.
You are correct with your “Who Benefits” response Kris, but unfortunately the AMC will be taking $100 of your winnings to facilitate the transaction.
I am a certified real estate appraiser who works in the San Diego area, and have been doing work for AMC’s for a couple of years now…….Much of what is described in the article and comments is true. If anything, the problems are probably much worse. What the AMC’s along with lenders have put in place in the last few years is a system that promotes speed and little else. It is a machine that operates 24/7 without stop for weekends and holidays, and it is evident that there is little regard for really wanting good quality reports. The important thing is to feed the machine.
Much of the review is performed by overseas personnel with no knowledge of real estate, or someone obviously untrained here in the States. The pressure is really put on the appraiser to look at a property and then submit a completed report within 24 hours or less. But this is where the fun really starts. The appraisal is reviewed by the aforementioned reviewers, and if they don’t understand something, (very frequent), the appraisal is rejected and sent back to the appraiser for clarification. The appraiser must answer these “requests” free of charge, and some go on and on.
Someone reading this might think the problem must be caused by the appraiser not doing a good enough job. In some instances, yes, but the vast majority are simply mind-numbing ventures in anal retention. In one appraisal, a vacant, bank-owned home was noted as vacant (there is a checkbox for this), the narrative stated the home was vacant, and the pictures showed a vacant interior. The report was rejected with the objection, “please confirm the home is vacant.”
Take a property in Valley Center or Fallbrook with a septic system on a private road, and describe that such features are typical of the area. “This is unacceptable. Appraiser to supply data on why public roads and sewage systems are not available.” Or how about, “The appraiser says this property is a single family home, yet it also is in a PUD. This is contradictory as a SFR cannot be in a PUD. Appraiser to comment.”
There is one lender, who will not be named, that constantly changes, without notice, the formats of fields it will accept. So all of a sudden, “N/A” in a field becomes overnight unacceptable, and the report is rejected and all the fields have to be made blank.
I used to do 2, sometimes (every once in awhile) 3 appraisals/day. With the AMC fee structures, that’s just not economically feasible, so I ‘m currently doing 3-4 day. I try to do a good market analysis, and a good, honest job, but the hours are horrendous, and I really don’t know how much longer I can keep going at this pace.
The sad thing really is that I am told (by the AMC people) that there are guys out there doing 5-10 appraisals/day. Now I have no idea how thats done, and I am not sure I want to know. You can be sure that such work is riddled with errors and slip-shod info, but as long as the boxes are checked, and it gets past the crack reviewers who are looking for details, and not analysis, it doesn’t matter.
With this current “system,” there will be no new generation of appraisers. To get a license, requires working for at least one year under a licensed appraiser. In the past, an appraiser could afford to split some of the fee with the trainee (thats how I got trained and licensed). Since there now isn’t anything left of the fee for the appraiser, no one can afford a trainee. I really wonder with the E&O insurance I have to carry, the continuing education I have to take to maintain my license, not to mention gas pricing and the wear and tear on my car, just how AMC’s and lenders think these fees are fair compensation.
I know that many agents have regarded appraisers as a necessary evil. Well, the way things are going, there probably won’t be any in a few years. What then? Just how will banks get values on homes for mortgage financing?
Okay, I am off my soapbox now…. Good luck to all out there….
I came over here on a referral from Jonathan Miller. I appreciate your tongue in cheek comments. For those appraisers who insist on working in mortgage end of the residential real estate market, face it, you must be “for sale” or perish. That fate has been residential appraiser destiny for some time and HVCC is designed to make it permanent.
The unfortunate thing is that real estate sales require buyers and most buyers need to borrow money so someone will take them seriously. That needs to change or we need a new financing system, like lenders who know and care about their community.
Most 1-800 lenders we have no interest in buyers buying homes or a stable economy, but in making money from ephemeral assets without risk.
If real estate agents and appraisers en masse refused to be involved in transactions where the money is coming from these national lenders we could fix this thing, but my guess is we won’t. Oh, I classify Fannie as one of the national lenders. After what Fannie put the taxpayers through does anyone really believe HVCC is meant to make things better? Fannie wrote it and for some reason as yet unknown Cuomo bought it in lieu of exposing Fannie’s records.
Answer to the above writer’s mystery question:
You asked why Cuomo bought HVCC in it’s current format rather than expose FNMA’s secrets. The fact is that Cuomo wrote HVCC and threated to expose FNMA if they did not require HVCC to be used. Why? Cuomo has contacts in both the banking and AMC industries that go back many years. His threat to expose FNMA’s “secrets” was an example of political extorsion so that his contacts and friends could benefit from HVCC. Now that you realized why it came about; most of you will probably agree that it was pure genius. It eliminated most of banking’s competition (mortgage companies) and created a new multi billion dollar profit center for banks (which own the AMCs) at the appraiser’s expense. Now you know the rest of the story and now you know why Congress refuses to take on this issue.
Thanks for clarifying Cuomo’s agenda for me. I had thought HVCC was the Fannie alternative to exposing its secrets. Guess not. Cuomo was apparently representing the banks under the guise of prosecuting predatory lending for the people.
After reading my own post it now occurs to me that Cuomo should be disbarred and possibly prosecuted himself.
To Appraiser Anonymous:
In my haste to post I skipped your comments, but I want to respond to this question:
“Just how will banks get values on homes for mortgage financing?”
My experience with AMC work is very similar to yours, but I have concluded that the banks don’t want appraisers to establish the values for mortgage financing.
I cannot complete two or three appraisals per day and quit trying to do that several years ago. I just simply cannot sustain that pace and do a competent job, but that is me. There are a lot of appraisers around here doing that many appraisals daily and more and they claim their appraisals are credible and reliable.
Perhaps it will take the pressure off if you quit worrying about the intended users and just pitch your appraisals to the so-called reviewers. I refuse to do that because I can’t figure out how to do it and maintain the standards and quality I want my work to reflect.
Personally I am convinced the mortgage appraisal malaise will not change for the better until a strong majority of appraisers refuse the work. How we make living in the mean time remains a mystery. A friend of mine said, “As it is, only the independently wealthy can be independent fee appraisers.” It is tough when the bulk of the available clients are loan sharks.
Thanks for the comments. I would add something thoughtful and poignant, but I think you all have done that for me. Fortunately, enough appraisers and agents are in an uproar over this that some change may come. The question is, will is come before too much damage has been done to the appraisal industry and to the appraisers who have built their careers and livelihoods in the business?
Now, ironically, I am off to an appraisal. Pray for me.
Good luck Kris. Just don’t do it fast or cheap. I’d say don’t do it on a Fannie form either, but that may too much at this point.
Keep up the comments about appraising. HVCC is just the latest topic. The root problem is that appraisers have very little control over their own profession and until we take it back there will be HVCC like episodes.
Kris: We got one of those HVCC appraisers. The guy who measured the house missed 800 sqft and turns out that the appraiser who signed the appraisal never set foot in the house. The guy we let in is nowhere to be found at the state appraiser licensing place.
Turns out the appraiser ordering companies are owned by the lenders. Just another way to squeeze revenue from the loan applicant. Heck, they could just decline the loans and pay for their skyscrapers and TARP bribes with appraisal er, loan application fees.
Kris, et al, just wanted to tell you that there are AMCs out there – I use one – that pay appraisers full fees and that have discovered that when they do, they get faster appraisals and better valuations. So while I agree that most of the problems caused by the HVCC are attributable to AMCs, it’s also true that those problems can be solved fairly easily.
As long as no lender can mandate the use of a particular AMC. Since that was what started this, you’d think that would have been part of the HVCC in the first place.
Alas.
Anyhow, just wanted you to know that there are good AMCs out there. Well, at least one. Their customer service is outstanding, they pay their appraisers like professionals, and they care about the quality of work they get. Sort of like, I don’t know, a professional company.
As an appraiser for many years in the San Jose, Ca area I have seen many changes. Before the new HVCC and subprime melt down I used to tell people to “follow the money”. Trust me; this is now more true than ever. Follow the money to the bank owned AMCs.
Like most of you I have heard the stories about Cuomo’s conflict of interest. I can only hope the real story and the money trail comes out in the near future. In the short time the HVCC has been the “agreed” solution (not a law), I have heard many stories from associates, clients and friends.
Just last week I learned that a large AMC starting with the letter Q blacklisted our firm because we would not do the cheap remote appraisals in 24 hours. Sorry, if all we are taking about is my price, not if I will, than we have a problem when I only get $150 on a $500 appraisal that takes me a full day just to drive the comps and inspect the subject in the Santa Cruz Mountains.
Follow the money…it sure does not lead to this appraiser.
P.S. I just measured the square footage of a SFR in Los Altos for a real estate agent as an appraisal done recently by another appraiser from Sacramento (130 miles away) came in a bit off including the square footage. I don’t know if the home owner is going to file a complaint or not, but one thing is clear – you get what you pay for. In this case the home owner paid a fair market price of $500 for the appraisal, but I am sure the appraiser got less than $200 to make the drive because this is what AMCs are doing, they are setting up the poor appraiser that needs the work to take the fall for bad appraisal work, that the AMCs themselves are NOT held responsible for.
Someone needs to force AMCs to use local appraisers and pay the local fees. AMCs should not be allowed to use out of area appraisers like whores, paying them pennies on the dollar.
Again I say – Follow the money.
Chris – I am sure there are good ones. I also suspect that this is an exception.
Mike – Thank you for the comment. Interesting and frightening. I am still clinging to the notion that enough people are up in arms over this issue that we will eventually see some change. Alas, change is a slow process when bureaucracy is in the batter.
Probably my AMC is the exception. But in the presence of competition, it wouldn’t be. People pretty quickly gravitate to those companies that can do the job well, and in the presence of unfettered ability to move from one AMC to another, that gravitation would weed out the bad AMCs and improve the performance of all the others.
Alas. We don’t have it.
I hear alot of Realtors complaining about appraisers that are coming in from 100+ miles away. FNMA has even started complaining about this. Before you complain about it, ask yourself why it’s happening.
The answer it really quite simple.
On 5/1/2009 appraisers were forced to surrender their client base, sit by the phone and wait for 1/2 priced orders to arrive from AMCs. Many appraisers spent 40 years building their businesses. In order to pay their bills most appraisers are taking whatever orders they receive. We lost 97% of our clients on May 1st (banks & mortgage companies). Marketing does no good because lenders can no longer choose their appraisers. The few orders that we do receive pay 50% less than they did 3 months ago.
I dare anyone to take a cheap shot at appraisers for taking long distance appraisal orders. If you feel the need to complain about appraisers doing this take the following actions first:
1) Take a 50% pay cut per transaction.
2) Live by the same rules that we do. No more marketing or talking to your clients..just sit by the phone and wait for it to ring.
If you still feel the need to complain after you’ve live by these new rules…go for it. At least you’ll understand what we are going through.
David,
We are actually defending the appraisers you describe! From may same Inman article:
Since I posted above, I’ve done some serious research on this AMC/HVCC thing, more than just working with my AMC – with which, let me say one more time, I have NONE of the issues described above. I’ve come to a couple of conclusions:
1. The AMC I use is not just the exception, there are hardly any out there at all like it. They pay full appraiser fees, assign jobs based on locality as the primary selection criterion, and function as a protection for, not a hassle to, the appraisers that are part of their panel. The Appraisal Institute has been talking to these guys about partnering, in fact, because they are so different.
2. If 1st Choice AMS was the rule, rather than the exception, HVCC would be ignored. It would be almost irrelevant. People would still be complaining about appraisals coming in low, but that’s at least as much a market condition as it is a regulatory effect. Appraisers would be happier. I know this firsthand.
I’m just a loan officer, but I’m a happy one. And my appraiser friends are just as happy. It’s not the HVCC, folks. It’s the AMCs, and the fact that most AMCs are owned by the banks, which then require their AMCs to be used for their loans. That once was illegal. It should be still.
Chris Jones – I am an appraiser in Southern California and would love to know the name of the AMC you use.
Herb, it’s 1st Choice AMS. You can contact them at http://www.1stchoiceams.com, and they’ll be very happy to talk with you.
Good luck.
One more thing to add to this discussion: Many don’t realize that appraisal fees
have not increased in the last ten years. Now take half of that away…The standard of living for an appraiser has steadily decreased as inflation has continued to eat away at our stagnant fees. The HVCC has just destroyed what was left. As an ex-corporate employee who worked for a fortune 100 company for years and then decided to become an appraiser to experience the rewards of self-employment, I am sickened by what has happened to me and my family.
Ted:
Yes, its a rather brutal scenario that has been foisted onto residential appraisers. One of the problems is that we are by nature an easy prey because most of us work independently and so we have no collective power.
One might think (or hope) that the Appraisal Institute might wield some resistance to the abuses of AMC’s. However, having gone to a recent seminar by the Appraisal Institute regarding HVCC and its effects, there doesn’t seem to be much recognition of just how bad all this is. In fact, the guy presenting the seminar was all excited that the latest Fannie Mae/Freddie Mac guidelines state that professional designations for appraisers should be considered as a reflection of expertise. However, when it was pointed out to him that AMCs could care less if an appraiser is an SRA or anything, he was non-plussed. The thing is, since the Appraisal Insitute is more commercial appraiser oriented, until this kind of stuff hits commercial appraisers they probably are not going to do much about it.
The sad fact is that in trying so hard to prevent appraisers from being coerced on values by mortgage lenders, they have opened the doors wide open to appraisers being totally abused on fees and time. Guess who owns these AMC’s? The banks and it is totally legal. So now they can say that they employ independent appraisers who are licensed and/or certified.
There are a few of us that still attempt to actually do a fair valuation ( you sound like one them), but look at what most AMC’s are promoting. Since they take a huge chunk of the fees and they are insisting on such quick turnarounds, they are “encouraging” appraisers to be doing 5 or more appraisals per day. Now any appraiser that was decently trained knows that such a volume is guaranteed to result in sheer crapola.
If any of the agents out there wonder why they are gettting such lousy appraisals these days (besides the out of area factor), they need to understand that a lot of the work is being performed by appraisers who are under enormous pressure to crank out “forms,” because that is all that appraisals are to the banks and the AMC’s. It doesn’t matter to them that the appraiser can be sued or that the appraiser is certifying that the work was performed to USPAP standards and guidelines. No, what is being done now is high pressure jobs to meet ridiculous turn around times for low fees, but hey, the appraiser is not getting beat up to meet a value, so we’ve made a lot of progress, right?
Hopefully, it is not violating this blog to show a link to another site….. check out this interview by the chief appraiser (who incidentally is a SRA) at LSI, ……….. this interview pretty much sums up where these guys are coming from.
http://www.tavma.org/index.php?option=com_content&task=view&id=77&Itemid=32
I did a refinance job the other day for a guy who had some inkling of this situation. He told me that he was being charged $500 for the appraisal, and when he asked the lender for a breakdown of where that money was going, he was told it was unavailable. I couldn’t tell him that I was getting $180 for doing the assignment…. I had already been feeling totally screwed by the AMC scenario, and this just totally drove it home…..
From what I understand, in October of this year, the FHA will no longer accept appraisals from non-certified appraisers. And apparently the OREA has recognized that the majority of complaints it gets involve appraisers who are licensed, but not certified, and is considering doing away with the License designation. So it is possible that some of these people out there are going to go away……… Of course, considering the power and influence the banks and AMCs now wield, they will probably fight to keep their large labor force intact….
Anyway, agents need to know that chances are the appraiser they are dealing with is drinking a lot of Starbucks and Red Bulls trying to do a lot more appraisals to make ends meet. And this has nothing to do with the downturn of the economy, but the sheer greed of the banks who own most of these AMCs.
I am a Real Estate Appraiser as well suffering. I am really upset that Taylor Bean Whittaker has gone out of business and so has their AMC. See the lenders do own the AMC’s. They are suppose to be a separate company, but they are not. I have not been paid for 5 apraisals that I did 2 months ago for Valuation one sevices (owned by TBW) . So how is that? AMC were designed to make sure the appraiser was paid. HA! They aren’t and I have not been paid. They don’t answer the phone at all. I am screwed is all I can say.
Appraiser Anonymous summed up HVCC and it’s affect on the appraisal profession very well.
We established our appraisal firm 17 years ago. We refuse to accept appraisal orders until HVCC has been declared unconstitutional. We currently use our former appraisal webpage: http://www.investsmart.com as an advertisement against HVCC. We invite everyone connected with the real estate (except banks) to sign the online HVCC petition. We also invite any appraiser with guts to join in organizing a national appraiser’s strike. AMCs could easily be forced out of business by appraisers who have the conviction to show a little backbone.
I have been appraising since 1995 and what bothers me the most about the current situation is the complete lack of loyalty and respect of the rules and laws by loan officers. Most loan officers dont care what laws they break, they dont care how many appraisers they burn to find a value, they dont care if the home owner get dragged through the mud for 3 or 4 months, they only care about making money… This makes an appraiser want to work with AMCs just so we dont have to deal with loan officers. The problem is that I cant support the HVCC and so I have never nor will I ever work for an AMC. So where does an appraiser with some ethics and good old fashion values fit in. We dont… If only this business were made up of people with ethics and morals we would never be here. Welcome to the new Human Condition….survival at any cost.
I’m a borrower trying to refinance. My mortgage is owned by Freddie Mac. My broker told me that he is not allowed to order an independent appraisal and has to go with Freddie’s HVE (which valued my 350K house at 234K). Zillow and county tax valuations are between 306K and 318K. The HVE valuation will cost me 2 points. I have a strong feeling that the HVE valuation is flawed and I’m willing to pay $400 or whatever it costs to get a proper appraisal done. I’ve been scouring the web trying to find out how to complain or challenge that valuation but I haven’t found a thing. The only thing I found is reference to IVPI that is supposed to take such complaints… only problem is that it does not exist yet. Anyone has a clue what a borrower is supposed to do in a situation like this?
Massoud – You are experiencing what every agent, buyer and seller is now. The appraisal process is like a turkey shoot. We are seeing competing appraisals (original and then review) come in 20% different, and we are having little success appealing because of the “independent” nature of the process now. It is nothing short of a nightmare, and appraisers and lenders are establishing values now, not buyers. You could try appealing the appraisal if you feel it is flawed, but there are no guarantees that the appraiser will amend the value or the lender will accept it. It’s a bummer.