I had a bad experience with an AMC recently and I want to share it. This is not because I’m wanting to rant or be negative, but only to highlight some of the ugliness that happens behind closed doors when it comes to appraisal fees during loans. This is especially worth knowing about for any home owners and real estate agents for the sake of their clients. Any thoughts? I’d love to hear your take.
The Issue: I was asked to appraise something challenging, so I quoted a fee that was higher than a standard fee in Sacramento but still reasonable for the job because the house was funky. Anyway, I was comfortable with the fee and it was accepted by the AMC (Appraisal Management Company) that the lender hired to manage the appraisal ordering process. But then things got interesting because through the course of the transaction someone showed me an email from the loan officer where I learned the AMC was actually charging the buyer $345 higher than the fee I quoted. What the? That seemed excessive, but the real clincher for me was the email showed a chain of conversation with the AMC where they said I was the one who quoted the much higher fee. Not only was the AMC gouging the buyer in my opinion, but there was a blatant lie that I was the one dictating this fee that was 43% higher than the one I quoted.
Look, I’m not a complainer and I am a total optimist, but this is not okay on so many levels.
Why this matters:
1) Anger & The Real Fee: Let’s remember the appraisal fee charged to the buyer might be far different from what the appraiser actually gets. Thus before becoming angry at the appraiser for charging so much, try to find out what the appraiser is being paid (and what a market rate is for your area too). Is the appraiser actually getting that rush fee your buyer paid too? Keep in mind many AMCs tell appraisers not to discuss fees, so unfortunately it’s not likely you’re going to get an answer from the appraiser (maybe ask the loan officer to dig around). To complicate matters, it’s common for AMCs to tell appraisers NOT to attach an invoice to the appraisal report, so it’s not easy for anyone to find out how much the appraiser made from the fee the buyer paid unless there are disclosure rules from the state.
2) Appraisal Quality: In many cases AMCs are scraping so much off the top that the appraiser really isn’t making a reasonable market fee. It’s easy to gloss over this as insignificant, but it matters because over time if appraisers do not earn market rate fees it is going to weed out more experienced appraisers from doing loan work. Could this impact quality? I think so. By the way, if you didn’t know, an Appraisal Management Company is NOT used during a private valuation such as a divorce, pre-listing appraisal, estate planning, litigation, hard money loan, bankruptcy, etc… By the way, let me make it clear that not all AMCs are bad either.
3) Longer Turn-Times: At times it’s difficult for an AMC to find an appraiser because a property is so unique or it’s in a rural area. This can be frustrating for everyone else in the real estate transaction because it hands-down makes an escrow longer. Yet sometimes the problem isn’t the lack of an available appraiser, but rather the AMC broadcasting an absurdly low fee to countless appraisers for weeks. If the AMC would have simply started the process with a market rate fee and a realistic turn-time, maybe the order would actually be finished by now.
4) Lack of Transparency: California does not require disclosure on the HUD-1 of the fee paid to the appraiser vs the fee paid to the AMC. Since these fees are not separated, there isn’t any transparency as to what the appraiser and AMC are getting. I would think some buyers would be shocked to learn the appraiser didn’t get the full fee in the first place – not to mention a $345 AMC fee. Why would we not disclose these fees? Can’t we do better at being transparent?
I hope this was helpful or interesting. Any thoughts?
New Video: I made a video called “The market isn’t doing the same thing in every neighborhood.” It’s a quick look at three neighborhoods. Watch below (or here).
Questions: What stands out to you most about what I mentioned above? Anything else to add? Did I miss something? What is the best way to avoid working with bad AMCs?
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Thank you for sharing this Ryan. The problem is that this kind of thing goes on all the time and it is not just an isolated incident. I have people call me about weekly that just want to know what an appraisal should cost them because they think the lender and AMC are taking advantage of them in a situation where the homeowner pays but does not have a chance to shop around. I’m always explaining that not the entire fee they were quoted goes to the appraiser.
Thank you Gary. I appreciate it. I have those conversations all the time too. I often find myself explaining two tiers of fees. I discuss market rate and what an AMC might charge. Sometimes when I quote for a private job I’ll let the person know he/she might actually end up paying more for the lender’s appraisal because of the hundreds of dollars of extra fees padded on the top of what a good market rate fee might look like. At the same time, some AMCs collect a reasonable fee, but since they skim too much off the top the appraiser ends up not having a reasonable fee. We have to remember that low fee is not where the market is.
Ryan, for those of us that have followed you for a while we know you to be the utmost professional and definitely not a complainer. What happened here is immoral and unethical, and I would go as far as to say unlawful. The AMC blatantly lied for their own gain. This is PRECISELY why every single state in the Union MUST implement a full fee disclosure policy. I worked in California for 15 years, so I know what you’re dealing with. I now work in Utah where it’s a state law that we disclose what the (A) client charged to the borrower, (B) what the Appraiser is getting paid, and (C) what the AMC’s fee cut is. This is a no-brainer. Those in power, make this happen!!! Not for the good of the appraiser, but for the good of the public which USPAP attempts to protect… Full fee disclosure should be a USPAP requirement (and as a result it would be required in ALL states) if we really want to protect the public.
Thank you Jacob. This means a lot. I really felt it was unethical. This was a job I took because I was specifically asked to do this one. I have only done one appraisal for this AMC and it wasn’t a good experience because of this. I told them I saw the email and fee and felt it was unethical to communicate like that. They didn’t respond back (I was very professional in how I said this of course). It is a no-brainer to disclose. I hope that happens soon in California for the sake of my peers.
Well stated Ryan!!
Thanks so much Michael.
Excellent post, as always. I JUST had a situation where I quoted a fee nearly 2x what an AMC was offering for a 10-acre home. Over a week later it just landed on my desk for the fee quoted.
I would love to transition a portion of my business out of AMC work. Maybe you and I can have a discussion about the best way to do that. Any tips you can share with me would be greatly appreciated!
Thank you Abdur. The AMC model tends to often shop for the lowest fee instead of the best appraiser for the job and/or a reasonable fee. I had an AMC order come across my desk this week where a rush was requested without a rush fee. I was polite and told them they have a better chance of getting the order placed if they include a rush fee along with the order too.
I’m glad to have that conversation and I’m open to trading thoughts via email. Right now 90% of my work is private. A few tidbits for any onlookers to diversify your business: 1) Increase your skillset; 2) Learn to make graphs and tell the story of the market in a visual way; 3) Serve the real estate community; 4) Care about people; 5) Find ways to connect prospective clients with really helpful information because it makes you the go-to person (and you’re a nice person too because you’re already doing #3 and #4). 🙂 I’m sure I’m missing something. There is nothing complicated though here. I am actually doing a class at REAA about social media and I’ll touch on much of this then.
I definitely agree that the Appraisal fee should be broken down and disclosed to the Buyer on the Loan Estimate / Closing Disclosure as to how much is going to the Appraiser and how much to the AMC.
When it’s a fee that the consumer has to pay, then there should always be transparency.
Thanks Brian. Yep, it makes sense. California is said to be progressive in so many ways, but there is some catching up when it comes to this disclosure issue. Hopefully in coming time it will change.
Have you ever looked at what Wells Fargo charges the customer for the appraisal vs what the appraiser gets ?? At least with income properties it is pretty shocking. I don’t know if it is Wells or Rels/Corlogic who pocket’s the difference ….
I’m not sure what they charge. Any idea?
My thoughts??? My brain is filled with words such as “unethical”; “fraud”; “misrepresentation” “gouging the consumer” . . . well, I guess you get the picture! And, you are a pillar of professionalism and best business practices. I can’t believe we have this going on.
Thank you Cheryl. It is troubling for sure. Thank you for the kind words. By the way, I think I’m speaking in your office next week. 🙂
Sounds like it’s time for the dog to remind the tail which one is the “wagger” and which is the “waggee”!
Collectively, you have options: 1. Go on social media and call out this AMC. Nothing libel about sharing your personal experience; collectively, appraisers could boycott that AMC and put them out of business, 2. Form a legal, professional association which dictates terms. The NFL players formed the NFLPA which became their union. The PGA Tour is the association that professional golfers formed to remind the USGA who was putting on the show. Sounds like the time has come form appraisers to take back their profession.
Thanks Tom. Appraisers absolutely need better representation and to organize themselves better. Nail on head.
And you are just the man to do it!
Excellent post Ryan. And as others have noted, this happens all over the country every day. It’s not limited to any state or to any particular AMC. As an appraiser, it amazes me how well AMCs have hidden themselves from the borrowing public.
An Appraiser is the ONLY party in a real estate transaction that is neutral and unbiased and does not benefit from a loan closing. We are there to protect the public trust. AMCs have been robbing the appraiser by taking a large portion of their fee, and robbing the borrower by making sure AMCs fees are lumped in with the REAL appraisal fee, so no one is aware.
AMCs are certainly permitted to “charge” whatever they want, but explain to me why it’s taken from the appraiser’s fee in the first place? It’s the LENDER’S cost to do busiess if they choose to use an AMC for appraisal ordering. The appraiser NOR the borrower should be the one coming up short. It is NOT REQUIRED for lenders to use AMCs. *NOTE; Many Lender’s now OWN their own AMC company and are making serious money just from skimming from appraisers and overcharging borrowers. It was documented that 1 AMC made over $900,000 in profit in 1 year.
There are over 200 AMCs registered in my state alone.
As for disclosure on loan documents, there was a concerted effort on the part of appraisers to remedy the non-disclosure issue. During the process of implementing the new TRID requirements, there was an open comment period. Individual appraisers as well as professional appraiser organizations called, emailed and wrote letters to all involved pleading that it be made a requirement on the new documents to separate the “appraiser’s fee” from any “AMC’s fee”. However, the AMCs have hired lobbyists on the payroll and their pockets are very deep. They fought it tooth and nail. Our pleas were completely ignored.
It also amazes me that Realtors are mainly unaware of the existence of AMCs and how they operate. I take every oppurtunity to educate Realtors and encourage them to inquire with the lenders they recommend to their buyers to see if they utilize AMCs in their appraisal ordering process. Whenever I hear a Realtor complain about an appraiser that came from 200 miles away to appraise a home they sold, and did a bad job because they were not familiar with their local markt and it’s influences, I ask…”Did your lender use an AMC to order the appraisal? If so, it could have been an AMC broadcast email offer to dozens of appraisers in an attempt to find the cheapest, fastest appraiser instead of the most qualified.”
Great stuff. Thank you so much for the thoughtful comment.
The bottom line is always: You get what you pay for!
Yep. Thanks Gabe.
The issue of fees has only gotten worse with TRID regulations.
From 25 states away and with no local presence (no branch offices, or local offices with staff appraisers), lenders pre-determine appraisal fees for what is supposed to be an independent business transaction. This predetermined fee is a zero tolerance item (very unlikely to change), where their hired AMC’s then seek the lowest fee to maximize the split ($$$) in their favor. Even though the Dodd Frank law specifically states that complexity, scope of work, license requirements (and should say engagement letter length (15 pages anyone), none of this is considered as the appraiser and the local situation is unknown at the time the fee is established. Forget about the fact that the burden of proof as outlined in the law IS ON THE LENDER TO ESTABLISH WHAT IS C&R by way of 4 different methods (surveys, government fee schedules, etc.). The game is simple, predetermine the appraisal fee, ignore the 1st, 2nd, or 5th in a row appraiser that brings up complexity (higher fee / new disclosure docs / new 3 day waiting period), and say yes to the 1st appraiser who does not challenge the original zero tolerance fee. Lenders nor their hired puppet AMC’s do not have the borrowers best interest, but rather see the appraisal process as a profit center (BOA / Landsafe / Wells Fargo / RELS, etc.), or in general a speed bump in passing the financial liability onto the American consumer (We own Freddie & Fannie). Although in your example the higher fees were known upfront, again the consumer is not being protected when the lender or AMC upcharge their take, based on YOUR increased complexity.
When as an industry you had over 10,000 people sign a petition (HVCC days), when ten years ago we had 120,000 licensed appraisers (75,000 today), per individual tracking of appraisals (CU portal), nearly half of licensed appraisers choose not to participate in residential lending (NO SHORTAGE), and when lenders know borrowers on a local level pay $600 for VA (100% to the appraiser) versus say $300 via AMC split, the issues are known, BUT IGNORED.
Seek the truth.
Thank you Bill. I appreciate your attention to detail. Thank you for spending time writing out this comment.
I think you’re right about some appraisers opting out of lending work. Why bother if the fees are lower and there are endless stipulations to correct, explain, etc…? The AMCs that send out blast orders and/or send out hundreds of emails to ask appraisers to quote are not good clients. They are definitely searching for the lowest fee out there. VA actually raised their fees to $650 in my area, so some appraisers only do VA now.
In appraisal reports ordered by AMC’s I have been putting the following statement in my reports (usually page 3 of the URAR) for the last 6 years: “The appraiser is being paid a fee of $xxx by the lender, or its agent, for the completion of this appraisal report.” If the AMC is licensed in California by the BREA, the AMC cannot prohibit the contracted appraiser from disclosing the fee paid to the appraiser by the AMC in the body of the report. Read the last line on page 9 of http://www.orea.ca.gov/pdf/2010-1217-03C.pdf. Every fee appraiser in California working on an AMC assignment should be doing this. Borrowers and loan officers may not read the statement regarding the appraiser’s fee but it would be there for reference.
Fantastic comment. Thank you Sid. I appreciate the link too to show it’s not just hear-say so to speak. I like disclosure in the addendum as you mention, though I would much rather see a transparent process or AMCs telling appraisers to not include an invoice on the report.
Ryan
I took you for an eternal optimist as I’ve never seen one peep out of you since 2009 with regard to the hijacking of the appraisal industry with regard to fees.
Better late than never I suppose.
I’m still an optimist and hope to never be different (being an optimist is not the same as someone without conviction of course). I have talked about fees many times actually.
By the way, here are some articles I’ve written about fees. I did a quick search and I see ones as early as 2010. There may be others.
https://sacramentoappraisalblog.com/2016/07/19/fees-turn-times-eliminating-appraisers/
https://sacramentoappraisalblog.com/2010/02/17/fighting-for-200-to-do-an-appraisal/
https://sacramentoappraisalblog.com/2011/01/04/pointing-the-finger-at-appraisers-reviews-low-fees/
https://sacramentoappraisalblog.com/2015/04/14/the-big-problem-of-low-fees-in-the-appraisal-industry/
https://sacramentoappraisalblog.com/2016/09/20/5-things-to-consider-about-higher-appraisal-fees-and-longer-turn-times/
https://sacramentoappraisalblog.com/2015/07/27/behind-the-scenes-of-how-appraisals-are-ordered/
http://www.workingre.com/true-cost-of-low-fees/
Ryan, I think your experience in this situation goes hand in hand with what I recently wrote in regards to appraisers having their voice heard and others writing the narrative of what is going on in our profession. If you did not share your experience I can imagine the “story” coming from the AMC you did business with. They would say you were gouging the customer because you knew there was a shortage of appraisers and you could charge what you wanted to, and probably take as much time as you want to, therefore delaying the whole process. They would say this is why they need to have their own staff of appraisers, so to protect the public interest. We all know from your story that this is not what happen, so thank you for sharing. Every appraiser needs to set the record straight so the public knows exactly what is going on.
Thank you Tom. Whenever we hear one side of the story, we often need more details to really know if we are getting the truth. This is true in parenting too, right? In the real estate industry we often only hear one side of things, so we hear the complaints about fees and turn-times. Yet what is the appraiser really being paid? And what sort of fee was the AMC pitching to appraisers? How long did the AMC take to place the order before it was accepted? These are critical questions and we often don’t know the answer. For anyone interested in Tom’s post, here it is (Tom, if you mention your post, just provide the link. I know you and know you’re not a spammy guy). 🙂 http://birminghamappraisalblog.com/in-the-news/how-to-successfuly-have-your-appraiser-voice-heard/
I ran into this situation a few times where the fee was disclosed to me, I believe in error. But the best one was for a complex property where the fee was at the high range but, the AMC put $2,500 on top of it. No lie. I found out because the borrower canceled the appraisal due to fees and quoted the total fee in the note. And of course, I couldn’t defend myself because my hands are tied in discussing fees. I’m sure this swept through the industry on how the “appraiser” is price gouging.
Wow Lauren. That is a crazy story. It’s unreal to see AMCs pad fees like that. I had a local appraiser in my market get hired to do a complex job. He initially said yes to the appraisal and then the owner started complaining about the $2000 fee during the inspection. Let’s just say his fee was nowhere near that level. Padding fees is nothing new in any business, but let’s keep it transparent here. Thanks again for your take Lauren.
I am Realtor and also serve rural areas. Appraisals where taking 3-4 weeks for completion this past year and fees avg $700 plus. A manufactured home recently required $1,000.
Before the AMC existed avg fee was $400 bucks!
I hate too many regulations but either the AMC fees need to capped or exposed upfront!!
Who regulates the AMC’s ?
Time to make some political waves.
Thanks
Brunski
Hi Brunski. Thanks for the comment. You are correct that the AMC system has definitely helped increase appraisal fees. Last year of course there was a refinance boom and appraisers were REALLY backed up. Though now that has changed in many markets.
Who regulates AMCs? Well, technically the AMC has to hold a state license with the Office of Real Estate Appraisers. They sure don’t seem to be regulated much though to be honest as they seem to pretty much do what they want most of them time. There are scenarios where this is not the case thankfully, but it seems the basic stuff like customary and reasonable fees to appraisers has still remained a huge issue despite the promise of such from the beginning of Dodd-Frank. For starters it’s been an uphill battle to even get to disclose the appraisal fee vs the AMC fee in the HUD1. My understanding is most states still don’t require this after nearly 10 years, so there really isn’t transparency about the lopsided fee structure. The truth is those in power tend to win, and this is an example of that.
Well I am going to look into this issue. I am also involved in the lending arena, but not up to date on this part of the business.
This AMC issue came up in one of the mortgage brokers forum! And one of your blog post was mentioned… in a good way 🙂
ALOS… There is a major move going on with Mortgage brokers vs wholesale lenders who are battling for the rights to solicit the borrower in the future. Many wholesale lenders are now running scared.
Mortgage brokers are uniting under a very active group (BRAWL) and they are demanding certain policies or no more business.
They have also developed a new software platform for delivering and managing much of their loan production… coming out Jan 2019 .
Anthony Casa is the driving force and he has gotten 50 plus whole lenders to comply with their requests/demands. More are coming abroad or their business volume may suffer.
AMC fees would be a good topic cause they want to lower fees where ever it is reasonable!
The slow down in the market is making this group very powerful!
Mortgage brokers are uniting in a good way .. at least for now 🙂
Thank you very much. Please keep me posted as you do research and make discoveries. Markets are always changing, and it usually begins with decisions that are made behind closed doors. Speaking of change, the appraisal threshold is a really big deal right now. I wanted to mention it her for any onlookers. https://sacramentoappraisalblog.com/2018/11/26/get-rid-of-appraisers-while-nobodys-looking/
We just discovered this with a new home purchase. Lender retained AMC, which charged 55% profit above the actual appraisal fees. This was not disclosed to us, and it seems super shady. But, looking into it, we find that it’s a workaround since lenders can only charge the actual appraisal fee, by law. Too bad we didn’t read your blog (and Chicago Tribune article) before this happened. We would have tried to decline use of an AMC.
Thanks Teresa. I would feel similar. I’m not familiar with the article in question, but maybe it was a recent one on bias. I doubt you would’ve been able to go around the AMC model. That sort of margin at 55% is substantial though. I don’t think any of us expect to see that sort of mark-up when engaging with any third-party system.