AUTHOR: Ken Verrett: The author is the owner of Acorn Appraisal Associates, a 24 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities.
I'm sure we all read the Coester Survey link in Appraisal Scoop March 8th with interest. I certainly did. It was a broad survey; 1,569 appraisers all 50 states. That's gotta be pretty representative. Large sample sizes almost always are, assuming the sample is not biased in some way. Often times biases are unintentional. What really caught my eye is the following was the following quote in the introductory paragraph.
"After further analysis of the data from the Annual Coester Appraisal Group Vendor Survey, it seems like many of the implications made regarding the state of the mortgage industry as a whole have been debunked."
What a teaser! Since my company does a lot of business with AMCs I was quite anxious to compare their findings with our experience. Seems fair. Acorn is a mid sized appraisal firm that does business with many national lenders, many of which now order appraisals through AMCs. We are located in a major SMSA, Houston, TX, which is very competitive, thousands of appraisers doing quality work.
The Coester Survey was for 2009, so I selected the same period for comparison. In 2009 Acorn was privileged to serve 130 clients, the vast majority repeat clients with years of history with Acorn. We completed around 4,000 appraisals in that period. There were 18 AMCs in that book of business. That's a fairly good sample size to compare with Coester.
Let's look at each of the categories Coester reported on....
Distance - Coester found 65% traveled between 10-20 miles per assignment. Acorn averaged between 20-22 miles per assignment round trip, including all field work.
Response Time - Coester reported 2-3 day turn time for the typical Conventional 1004. Acorn averaged 3 business days for AMC assignments. Acorn averaged an additional 1-2 business days for non AMC assignments.
Fees - Here it gets interesting. Coester reports that 64.65% of the appraisers in their survey charge the same fee for AMC assignments as for non AMCs. Acorn's experience is quite different. The typical, vanilla 1004 in Acorn is $325-$350 for non AMC clients, which matches the most recent alamode National Survey through their Mercury network, of which Acorn is a part. Of the 18 AMC clients Acorn serves one accepts fees equal to Acorn's non AMC client charges. One provides accepts fees equal to 90 percent of our non AMC clients. The remaining AMC clients average fees equal to 68 percent of our non AMC clients. To Summarize: Sixty five percent of Coester's survey charges equal fees. The vast majority of Acorn's AMC clients accept fees equal to 68 percent of our non AMC clients.
Rating of the AMC Experience - The Coester survey indicated an average experience, with quick turn times, lower fees, and abundant 'report stips' cited as the reason for average. Acorn's experience would be generally rated above average, with steady volume, generally efficient communications systems, reliable borrowers, few 'report stips', no value pressure, and reliable payment experience as the reasons for the above average rating.
Payment - Coester reports a considerable number of comments regarding slow pay among AMCs. Acorn's experience is little need for follow up with AMC clients, more follow up with certain non AMC clients...mainly in the mortgage broker category. I haven't run actual numbers, but my guess is AMCs generally have about a 45 day receivable cycle.
General Feedback - Coester reports concerns with turn time expectations and pressure (evidently not value pressure, but delivery pressure), too much follow up required, better communication needed (concerns that their questions are not answered quickly enough), uneducated personnel, broadcasting of assignments.
Acorn's experience would not match these concerns. Turn times are part of the Scope of Work and delivery dates we accept when accepting the assignment. Follow up and feedback systems are generally internet web based and very efficient, with quick response from the AMC and Acorn. We find the personnel of the typical AMC to be educated and informed, and open to our instructing them on the issues in a non vanilla assignments and unique characteristics of our market.
Conclusions - As I read Coester's report I found that their survey matched our 2009 experience in several ways; distance, response time, receivable turn times. What didn't match is the experince in fees. Acorn doesn't do business with Coester so we have no idea what their general range of fees to the appraiser are. One of our AMC clients would rate similar to what Coester reports....but only one. The overwhelming majority accept fees significantly lower than our non AMC clients. We also differ in the AMC experience. I would rate it above average overall from a total business relationship. Coester's experience is just average.
Why the difference?
Readers of Appraisal Scoop may remember Acorn's history which we've described here over the years. Acorn made a conscious decision nearly ten years ago to build a business model that met the needs of the AMC market, reasoning that was likely to be a major funnel for appraisal demand in the future. It certainly has turned out to be so.
We organized and continue to develop our business model to give maximum administrative support to the appraiser. We take advantage of working in a market that provides an above average source of data from our various counties, and from our outstanding MLS.
A full time Administrative Manager provides the interface between our clients and the field appraisers. All non appraisal related questions and messages flow through that Manager, mostly through the various client web sites, but also all phone calls. We are organized to schedule all necessary appointments each afternoon, with those appointment being set for the next morning.
All feedback on schedules are immediately sent back to the client as each step is completed. Our objective is to minimize the times a client has to call us for information. If the phone rings, it's either because the client didn't check their website, or we failed to follow our procedures.
We monitor the 'stips' returned by each appraiser, and focus on getting those down to a minimal number. Each time an appraiser must open a completed file due to a 'stip' we eat into our profit.
Our non AMC clients benefit from our business model. We treat orders from either group exactly the same, same research, same scheduling (although we allow a little more leeway for borrows of non AMC clients), adherence to the standard SOW for that client. Turn times are generally set at the shortest, communications are set at the highest, research and analysis are treated the same....to do otherwise would be inefficient.
However, it took Acorn years to achieve the business model we operate in today. If other appraisal businesses focus on different niches, such as local lenders or mortgage brokers, expert witness, various forensic niches, then their business model and support operations are not likely geared to serve the demands of first and second mortgage AMC niches. I can certainly envision where occasional orders from the AMC sector could cause major disruptions on such businesses.
The only thing that Acorn's experience doesn't support or I can't explain by our different business model is the claim that the fee issue is debunked by their survey. In our experience there is generally a 30% haircut in appraisal fees in the vast majority of the AMCs in 2009 in our market.
Hopefully readers of the Coester Survey will look to other sources such as Appraisal Scoop to get....'the rest of the story....'
AUTHOR: Ken Verrett: The author is the owner of Acorn Appraisal Associates, a 24 year old firm
offering a wide range of quality appraisal services to the Financial and