AUTHOR: Ken Verrett is the owner of Acorn Appraisal Associates, a 22 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities in the greater Houston SMSA. Read all Runt Rants on Appraisal Scoop.
I had an interesting discussion with an appraiser in last week regarding AMCs. I thought we'd all benefit from his situation his view of the market, and his business decisions. Robert D. Mims IV owns 30-A Appraisal group, Inc. in Florida. He sent me the following email.
I've read your articles and actually submitted to you an email last year from a broker that was pretty nasty. I subsequently passed it along to New York District Attorney. I was mentored by an MAI, I do commercial with an MAI, and take my SRA designation class in September.
What alarms me is not that XXX is willing to pay additional $$$ for the additional scope of work, but that she said SSS will pretty much request additional consideration of sales whenever the purchase price is not met. So regardless of the quality, the number of comparables, Certification #7, etc. there will be an automatic request to consider additional sales to try and meet the purchase price?
Before I respond to XXX, I want your take. Am I overreacting here by interpreting this email as pressure to influence value? And a subtle threat that if I don't they'll will simply assign the work to other appraisers?
Here's XXX's response to the fee increase request I sent. What say you?
Client XXX's Response to the appraiser:
I appreciate you sending this report before the fee issue was resolved in order to provide the client with exceptional customer service. That, of course, is XXX’s goal.
Unfortunately, I fear you are going to be very disappointed with me, as I cannot approve a $50 fee to review the comps that were sent to you.
XXX and our appraisers provide this service to SSS at no fee. A majority of the SSS work we receive is for purchases, and it is very common (actually pretty much expected) for the client to send comps for review if the value did not meet the sales price. XXX has asked the client to provide comps in lieu of coming back to us to ask the appraiser to just re review the report/comps to see if the value can be changed. We try to limit the client to 3 comps for any value dispute.
Our appraisers are not required to grid or take photos of the comps sent if they are not as comparable as the comps the appraiser already used on the report. We only ask for the appraiser to state he/she received the comps for review and chose not to use them for whatever reason applies (sq ftg, distance, dated comps, etc). The appraiser has normally already seen the comps sent for review and chose not to use when he/she did the original research, so it usually does not take up very much of the appraisers time to type up a response.
If you feel addressing the market value disputes for SSS going forward will be an issue for you or your office, please let me know. I can ask for the SSS work to be distributed to other appraisers in your area who are able to work with the value dispute process.
Please let me know if you have any questions or concerns!
YYY on behalf of XXX
Wow. What an interesting question from an educated, experienced and knowledgeable appraiser.
We work with XXX and find them to be one of the more demanding and less cooperative AMCs among our client base. We work with SSS through KKK also.
My impression on reading what you have presented, and putting myself in the loop as if it were Acorn's situation and our report, is that the request is reasonable, especially considering that the AMC does not require the gridding to be done to prove consideration has been done.
Further, I do not see the note from XXX as being value pressure. I actually am surprised at the tone of the comments...you seem to have good rapport with the writer, a difficult thing to achieve with the XXX staff who, because of the volume they handle, have little time to cultivate relationships with appraisers.
Your evident sending of the report with the resolution requested before the fee issue is settled is probably why you have that rapport and respect...you emphasize quality AND service. We are of the same mind and would have handled it the same way.
I can understand the SSS policy of requesting one last consideration before the deal is killed. They've invested time and effort in the transaction, and they have a customer or prospective customer that they are trying to serve. Likely the market value conclusion you reached is just under what is required to complete the transaction...otherwise one or two additional comps wouldn't close the gap. The customer passed the other underwriting procedures and this is all that prevents a deal. That is especially relevant in 2008 when underwriting standards have been significantly tightened.
I'm actually pleasantly surprised at the XXX comments that they attempt to control the effort placed on the appraiser by requesting no more than three additional comps be submitted, in lieu of asking for the entire report to be reviewed and reconsidered by the appraiser. I hope they are doing that in our market!
On the other hand, I appreciate the frustration you experience with having to do this extra step without compensation. We are feel that same frustration when we receive such requests. Our first reaction is that they don't trust us, that they are questioning our quality, and we'd like to tell them to take a hike.
I counsel a broader view. The request is not personal, not an attack on the appraiser, it's an attempt to meet a customer request (the borrower) who has met every other condition for approval except for this.
Judging from what I have read (much of it taken with a grain of salt) there are a significant minority of appraisers in the market who are much less educated, much less well trained, much less experienced than yourself. The appraisals produced by those individuals are less certain, less supported than those produced by the better educated, qualified, and experienced majority.
SSS and XXX do not have the personal relationships to distinguish the majority from the minority when considering the one appraisal before them, therefore a standard policy is activated.
I consider such requests, even when less cordially worded, to be part of the cost of doing business in the current market we must live with. I'd comply and move on.
But that's just my opinion. If you conclude otherwise, it's likely because you have more information, more history, more knowledge of the relationship than I do. I'm adamant in saying that I can't be the deciding opinion in matters relating to someone else's business. I don't know enough about the specifics. Only you know that, and therefore you are your best advisor.
Thank you for sharing the situation with me. I'd like to publish this, including your final decision in a Runt Rant column, redacting all specific client names and yours it you prefer. This is exactly the kind of situation the good majority of appraisers face every day, and they would benefit from your example and final conclusion.
I've made my goal for 2008 to focus on the AMC/appraiser relationship, for many appraisers will now be working with AMCs due to the Cuomo Agreements for the first time and issues such as this will pop up frequently. At the same time, there are many requirements imposed upon appraisers by the AMC model which impede efficiency and threaten quality and service of the appraiser. I'm going to try to influence change this year to change some of those pressures for the better.
Let me know what you decide!
Thanks for taking the time to write such a precise and detailed response. I really appreciate that. Most all the appraisers I know are commercial and really aren't up on what's happening in the residential world so the counsel I get from them is not all that meaningful.
Yes, you can use this case if you feel it will benefit others and our industry. I would prefer if you don't use the names of the AMCs that I do work for. I feel like I was way ahead when it came to working with AMCs. I started several years ago. I wish I could say that it was my outstanding foresight and wisdom but it was more due to items listed below:
What I like about AMCs
1. AMC Fees were pretty competitive at that time here in Florida.
2. I like the review process. I don't mind another set of eyes looking at my report. I know some appraisers wig out about this but I don't at all. I'm thankful as I'm not perfect.
3. No pressure.
5. When I ask, I usually get fee increases for increased scope of work
6. I like having deadlines. I need some "motivation" or I'd be at the poker tables 24 hours a day. I have two offices. One on prestigious Hwy 30-A in Santa Rosa Beach, and the other in my home in Freeport. I work mostly from my home. So having deadlines, calls, emails, faxes, etc. maintains discipline in an undisciplined environment. We have four "children", our beloved Chihuahuas; a Mexican, an African American, an Indian, and a Caucasian. I tell folks that we can never be accused of bigotry as we are an interracial family. So when the kids begging for lap time and I feel myself going from "Mover" mode to "Responder" mode while I'm working, an AMC pressure filled deadline is a good thing.
7. No worries about getting paid.
What I don't like about AMCs:
1. The lower fees.
2. That my wife, a trainee, can't inspect some properties without me for many of the clients. (Flight to quality is a factor as well)
3. Lenders are placing more pressure on AMCs to include more "stuff" in the engagement letter. Some of these things are 4-6 pages long. My view is that this is unfair. Everything from Cost to cure to Stop and call....Scope of work evolves. It changes. And as it does, a fee increase is sometimes warranted.
I think it's important to note that fees in my area at the time I was taking on significant AMC work were very good. I specialize in complex residential beach resort properties and regularly commanded $500 to $1200 for a detached single family residence, depending upon the scope of work involved. The volume and work was very good as well. Sure, there were several times that I became frustrated when I would get requests from a newbie AMC rep who didn't read my report entirely or asked for unreasonable changes. However, I just seemed to sense that despite the lowering of fees, despite I was overworked, and despite occasionally being frustrated, I knew to stick with the AMCs.
As to the AMC situation, I decided your counsel was reasonable so I complied and moved on. It simply is what it is right now.
Robert D. Mims IV
I think Robert makes excellent points, ones we at Acorn share. The Lender/AMC/Appraiser relationship will need to be examined by all sides this year in light of the increasing share of the market that will be served in this industry model. I believe it is necessary that the relationship be a properly balanced and symbiotic one for it to achieve the goals each of the parties are seeking.
In a future series Runt Rants will attempt to discuss those roles, the current imbalances in the roles as we see them, and offer suggestions that may help achieve the symbiotic relationship needed for this model to be successful for all parties involved.
I have the right to remain silent. Anything I say will be misquoted and used against me