Have you heard horror stories about out-of-area appraisers driving 200 miles to appraise properties in places they know nothing about? There is a new bill (AB 1796) to pay attention to as it relates to real estate appraisals and this very issue. You can read this very short one-page bill HERE. In essence, AB 1796 looks to require the Director of the Office of Real Estate Appraisers (OREA) to adopt regulations for Appraisal Management Companies (AMCs).

I understand the reasons behind this bill, but the part of the bill that actually really concerns me is the following:

The director shall adopt regulations governing appraisal management company activities, including, but not limited to, the following:   (a) Use of out-of-area appraisers.

I understand the need to limit those pesky out-of-town appraisers who are “killing deals” because they are appraising in locations they know nothing about. I get that, but there are several good reasons why “regulation” language concerns me as it pertains to this point: 

1) There are certain properties in my own county and city that I wouldn’t even think of appraising. Not all appraisers are qualified for all types of properties – even in the city they live in. I don’t know of an appraiser who would say it differently. So the issue is not about distance from the property per se, but does the appraiser have the experience to get the job done (or can he gain the experience)?

2) I’d hate to see the government impose some sort of a “two county” rule where AMCs could only send appraisers to properties within two counties or 50 miles of their location. Again, some appraisers have vast experience in multiple counties. This would probably hurt appraisers located in more rural areas too.

3) I’m not a big fan of the government imposing more rules and regulations on the appraisal industry. Appraisers are required already to be “geographically competent” by USPAP (our uniform standards) and if an appraiser is not, then the hammer needs to come down from the appropriate authorities already (OREA) instead of inventing new rules. This is a bit like parenthood. If you have rules in place, you need to enforce them. Don’t just go make new rules if you are not enforcing the old ones.

Isadore Hall of Compton, CA authored this bill.  

Isadore Hall
Box 942849
Room 6025
Sacramento, CA 94249-0052
Phone: (916) 319-2052

I know I sound a bit ranty, but trust me, I’m concerned – not hostile. How this bill is ultimately handled can have big implications for the real estate industry. I am optimistic that OREA will not make some hard and fast “2 county” rule as I mentioned above, but my internal sensors are dinging and I’m aware of the importance for our legislators to understand how the appraisal industry works as it pertains to appraising in multiple counties. 

I’d like to hear what you think. What is the solution to the problem? What implications do you see for the appraisal or real estate industry if this was handled poorly? Feel free to comment below.

If you were buying a house, how would you feel if the appraisal was ordered as below? Or if you are a real estate agent or loan officer, and your deals are hinging on quality appraisals, how does this strike you? 

I received an email with the text below just a few days ago. I don’t personally do business with these types of companies, but I guarantee someone did accept this assignment.

My name is XXXXXXX with XXXXXXXXXXX. I have a 1004 Conventional order in Auburn, CA. It has a fee of $200. Please let me know if you are interested.

What’s wrong with this message? Several things: 1) The fee is too low and not customary to typical market rates for a real estate appraisal, especially in Auburn; 2) This email was likely blasted to a high volume of appraisers, and orders like this typically go to whoever responds the fastest. Is that really a good methodology? Instead of picking the most qualified appraiser for the job, it selects whoever happens to be available to work for cheap; and 3) The management company ordering the appraisal likely charged the bank easily $400+ for the appraisal. That doesn’t seem very fair to the borrower or the appraiser.

Thankfully not all appraisal management companies (AMCs) operate like this, but unfortunately there are many that do. When I do appraisals for loans, I only work for good AMCs that respect my time, work and pay me decently. If you are in a position to order appraisals or you use an AMC, what is the process like for engaging appraisers for business? Is it like what I explained above? Different?

Please know that I’m not ranting or asking for pity for the real estate industry (like anyone would give some anyway). That’s not it at all. I just want to provide some insight and context into the happenings of the appraisal ordering process because over the long haul this is not going to be helpful to consumers or the real estate industry. 

What do you think?

I heard of AppraiserSupport today, and this website is worth a look to see one of the core complaints about the Home Valuation Code of Conduct (HVCC). Certain AMCs (Appraisal Management Companies) are charging Borrowers big money for appraisals, but then turning around and giving appraisers less than 50% of the amount charged, while pocketing the rest of the fee. Ouch!!

The AppraiserSupport website lists a handful of these AMCs - what they charge and what they pay appraisers. Don’t get me wrong though. Despite the “AMC” topic being a sore subject around many appraisers, there are definitely some upstanding AMCs out there who respect appraisers and pay them reasonable fees too (I do business with a handful of the “good guys”). It’s just unfortunate to see what some AMCs are doing because it hurts the consumer, the appraiser trying to stay afloat in this economy, and definitely the overall quality of real estate appraisals (HVCC only applies to certain types of loan appraisals). 

Have a look at www.AppraiserSupport.com and let me know what you think. And just so you know, I did not build this website.

For more on HVCC, have a look at my “Talking to Appraisers in an HVCC World: Tips for Real Estate Agents” and “Can Realtors Still Talk to Appraisers After May 2009? (HVCC went into effect on 05/01/09)“.