There is so much conversation about the appraised value coming in too low, but let’s turn the tables to talk about appraisal fees being too low. I know, who cares, right? But if you are a home owner or work in real estate, it’s good to know what’s going on. Is this happening during your escrows? Is it fair to pay so much for an appraisal when a huge chunk of the fee gets skimmed off the top by a management company?
Why This Matters: 1) Low fees for purchase and refinance appraisals are crippling to the longevity of the appraisal industry. If fees are too low, appraisers simply cannot stay in business. Also, if you think it’s taking too long to get an appraisal back to you right now, just wait until the industry shrinks more as appraisers leave because they can make better money elsewhere; 2) Consumers are likely not keen to pay good money for an appraisal only to have Appraisal Management Companies (AMCs) scrape a substantial amount of the fee off the top.
Here are three real life examples of low fees offered to appraisers:
EXAMPLE 1: Low fees with the promise of bulk business
Comment: It’s shocking to see marketing emails like this because fees haven’t been this low for decades. Of course the consumer is probably paying at least $450 to $500 for the appraisal. The ironic thing too is the word “reasonable” in the last line. This word is used strategically because AMCs are mandated under Frank Dodd to pay customary and “reasonable” fees.
EXAMPLE 2: Cheap fees with a quick turn-time:
Comment: Most local lenders easily pay the appraiser $400-500+ for an FHA appraisal, so $250 is definitely low. The kicker is the appraisal was ordered on a Thursday and due by Monday morning at 10am. When is the appraiser going to have time to do the report?
EXAMPLE 3: A blast order sent to MANY appraisers
Comment: This was a blast order to who knows how many appraisers. A massive blast email is one way for an Appraisal Management Company to get the quickest and cheapest appraisal fees because someone is going to accept it (which is a different issue). Some AMCs use a blast email system like this with a link. Whoever clicks “accept” first gets the order. This lender is wanting to do “quality” control, yet they are reaching out to pay an appraiser only $200 for a field review of a complex property. Do you think they can get quality for such a low fee?
- Agents Find Out: Real estate agents, be aware what your recommended lenders are paying appraisers and how they order appraisals. I’m not talking about what your buyers are paying, but what are appraisers actually getting? If you are concerned about appraisal quality as well as reasonable turn times, choose lenders who build a relationship with appraisers and pay them well. There are many local mortgage companies (and some national companies) with in-house appraisal departments who hand-pick a group of local appraisers and pay them a reasonable fee. I tend to like this system the best, though there are also some larger AMCs that I hear are okay overall. Remember, what happens to one group in the real estate community can end up impacting everyone else.
- Appraisers: Work for Reasonable Fees: Appraisers, are you working for clients like the examples above? Or maybe you are approved with several AMCs that seem okay overall, but their fees are still too low. Hey, we all need to feed our families, and there is no fault in getting paid. But why not start looking for better clients and then begin dropping the bad ones? Heck, start an appraisal blog to share your voice and expertise. It may take many months or even years to diversify your clientele, but go for it. Who do you want to work for? What type of work do you want to do? What does it look like to be intentional about finding great clients over these next 1-2 years?
I hope this was helpful. I’d love to hear your take in the comments.
Questions: What do you think of the examples above? Does it surprise you to see these real life examples? Any stories or insight to share?
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