GUEST AUTHOR: Joseph Foster is a Certified Appraiser in Washington State. Joe spent eighteen years in heavy construction and cost estimating, on some of the world’s largest construction projects. A Journeyman member of the Carpenters and Joiners of America, Joseph was a delegate to the AFL-CIO National Conventions, and organizer within the Northwest District Council. His experience in the construction field, pointed the way to a private consulting practice, within six Northwest counties. Contact: email@example.com . Blind Order PADS website
I started appraising in the early nineties. At that point I was told the local appraisal market hadn’t seen a fee increase in twenty years. The appraisal fee of $400 appeared to be stagnant, smothered with statements proclaiming, we need to keep the fees down, for the consumer.
The banking industry placed appraisal fees into a hard-cost category, in continued attempt to control the industry. The initial action of defining a hard-cost may not have been the original intent – however the
industry manipulated the point, resulting in “fee malaise.”
Through the decades I found it interesting that a loan officer can’t wait to lower an appraisal fee, however at the same time is making a point and a quarter, along with a rebate through the back-end of a
loan. Why isn’t the consumer crying? Because the thousands of dollars paid to the loan officer, is financed into the loan. The consumer never really feels the pain.
Oh yes, thousands of dollars are paid to loan officers, and real estate agents, while the lowly appraiser is tossed $400, and is expected to carry the full weight of liability.
I’ve practiced about twenty years in this configuration of generosity, and the appraiser that originally gave me an opportunity stated, “It’s been that way twenty years before you showed up.” I think the math equates to about forty years of flat appraisal fees.
If the real estate agent is paid 7%, and the price of real estate moves higher through the years, it’s not hard to realize monetary gain. All the creative loan products, and complex rebate opportunity, have greatly increased the wealth and riches of loan officers. The appraisal fee remained at $400 through all of this.
Stagnant appraisal fees can be directly linked to banks, and their ability to control the industry.
Dynamic growth in the 90’s, and increased volume from 2002-2008 – allowed the two largest title companies in the U.S. to amass large piles of cash. With economic riches, the title companies developed a plan to have their hands in every real estate transaction in America.
They link to the real estate agents, complete the title documents, work with the lender and control the appraisal. It’s a monopoly.
The title companies couldn’t be happy selling title insurance, and they spotted an opportunity to move in on appraisal fees. Their plan started slow, and today, they manage to monopolize the industry. In my
area, you don’t work, if you don’t work for an AMC.
Millions of dollars were sprinkled in Washington DC, changing and creating rules that work against any notion of an appraiser having a chance to expand his or her appraisal practice.
An appraisal isn’t a commodity, to be bargained for with discounted dollars. If it were a commodity, my business would be allowed to compete in an open market, where commodity abounds.
Appraisers were taken advantage of, plain and simple. Title companies, through there heavily layered partnerships with AMC’s generated billions of dollars, on the backs of appraisers.
An AMC creates no value, and devours half the fee of an appraiser. Does an attorney have an AMC taking half? Does an accountant have an AMC taking half? Your signature feeds the families of an AMC. They have insurance, vacation, and receive bonus checks for dogging you.
My state has 156 registered appraisal management companies. At no point does one appraisal management company have full coverage. They scramble trying to get anyone to complete an appraisal. I’ve had calls to do appraisals 300 miles away from my location.
The latest trend is the AMC going broke, writing bad checks, playing games with appraisers, and generally acting like collection agencies Are You Done Yet – Are You Done Yet. Do you have an ETA? They go as far as to ask you -- ”when can we expect the appraisal” before you receive the assignment. These are people that don’t have a clue about what it takes to operate within this profession.
Appraisers face heavy pressure. Yes, pressure can come in many forms. If you can’t turn the appraisal out in record time, you don’t get the work. And oh-by-the-way, the before mentioned fee of $400 is now $200. They stripped the profit portion of a fee, that hadn’t seen an increase in forty years, that’s the dirty little secret. There was never room in the fee structure for their business model, but that never stopped the two largest title companies from exploiting appraisers.
The AMC model has failed and it’s time for change. It failed the consumer, and failed the real estate appraiser. They knew it would fail the appraiser, and they didn’t give a damn. The AMC business model projects maximum profit, while oppressing the real estate appraiser. That’s the only way it can function. They must keep the appraiser isolated, in order to control the deal.
Title companies have no business in the valuation business.
I’ve started a grass-roots effort to change this dysfunctional relationship, and I’m introducing the National Blind Order System. The Professional Appraisal Delivery System (PADS) will move the appraisal industry forward, from the dark ages – into an area where the brotherhood of appraisers is paramount.
It’s not a union, and it’s not an AMC. It’s something much better than either of those models could possibly hope to achieve . If appraisers don’t act now, the AMC’s will move into the area of regulation, and from that point their business model will create value.
Its 9:00AM, and across your portal screen comes the appraisal assignments available in your zone. Other appraisers in the same zone see a similar and filtered screen, and from within the system, you pick the appraisal, or appraisals you want to complete.
There is no need to undercut other appraisers, because the fee is generated from a master list of appraisal fees for that assignment, and for your appraisal zone.
Your portal remains open all day, and you can communicate with regional, and national system operators, who by-the-way are appraisers working directly for the PADS. Market statistics will be passed on to you, and you the appraiser will not be in the dark. You’re going to know the foreclosure rate, along with a host of generated statistical patterns for a specific zone.
The ordering system links directly with the Appraisal Foundation and ASC. The ordering system completes a circle between the Appraisal Foundation and ASC. The Foundation already has approval from Congress, and the ordering system will be funded, through the Foundation, from a vehicle currently in place.
Oh Yes, the budget will be moving up, from what is currently in place at the Foundation
If the Appraisal Foundation would consider this plan of action, they would find the missing link between the varied entities, is the ordering system. The PADS fully completes the chain. We take the regulatory, and put it to use within the ordering system. That is something an AMC can’t do, and it drives them crazy.
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Upon development, Fannie Mae will surrender all AVM’s and data associated with real estate appraisals. The system will operate all legal U.S. Automated Valuation Models. If an AVM is generated in a given appraisal zone, the appraiser, or appraisers will be given a credit. The credits can be saved, or cashed, similar to a vacation check.
PADS will operate all U.S. automated valuation models, and web-bots will be developed to aid in gauging the industry.
Fannie Mae is nearing the point of dissolution, and now is the time to gather all appraisers into the PADS. Appraisers will create appraisal forms, and appraisal programs. Through the circular connection with the Appraisal Foundation, and ASC – appraisers have the ability to operate and manage this industry.
Upon development of the PADS, the Appraisal Foundation will expel all sponsors. The sponsorship model will be considered outdated upon creation of the PADS.
When implemented, there will be an immediate moratorium on appraisal licensing, until such time the ordering system can gauge specific need. This moratorium will bring immediate value to your license. I count about 100,000 appraisers, and estimate about 70,000 active appraisers.
The appraisal Institute and National Association of Independent Fee Appraisers will be issued a cease and desist order, halting any further classification of appraisers. The national system will recognize all appraisers, and work to develop classification.
An appraiser will not be tied to a single zone, and if you can demonstrate ability in additional zones, your portal will link to those markets. For example, I cover five counties.
There will be no need to work against other appraisers. I envision office sharing, you’re not competing against anyone – that’s the beauty of the PADS. If an appraiser wants to move to other zones, that isn’t a problem. Move to Florida, hey it’s OK – the system follows you.
This is the best chance for appraisers to rebuild the industry. We can’t continue down this one-way path of oppression by people only wishing to manipulate your appraisal fee.
- All appraisals will be ordered from the PADS.
- One location for all appraisal ordering.
- The portal will be a powerful tool for you to communicate with the system.
- Technology will be paramount, and highly expanded.
- You will receive the compensation, for AVM’s in your zone.
- The PADS is key to completing the circle between the Appraisal Foundation and ASC.
- Appraisers will operate the system, and you will be a vital part of that operation
- The moratorium brings immediate value to your license.
- The PADS will help to rebuild 70,000 small businesses in America. (mainly yours)
- Appraiser office sharing will be typical, because we will not be competing.
- All appraisers will be in the system. Residential, Commercial, Right-of-Way, All.
- Appraisers will develop a BPO type report format to be used, and fully recognized
- Appraisers will report to congress on the state of the industry.
- Appraisal fees will no longer be a hard cost, and finance into a given loan product.
- The national system will locate in General Services Administration (GSA) buildings.
- Partnerships will be developed with all system users (Banks, etc)
- Appraisers will police appraisers, and all bank black lists will be deemed void.
The only way this works is to have all appraisers in the system. There can be no loop-hole in the model, allowing for another fox to enter the henhouse. We’ve learned lessons from leaving the door open, and that ends here.
We’ve covered the basics and I need your help. I need you to sign the petition at Whitehouse.gov. There’s a “We the People” petition that I need you to sign. I need you to talk about this with other appraisers, and generate interest, in this plan.
AUTHOR: Joseph Foster is a Certified Appraiser in Washington State. Joe spent eighteen years in heavy construction and cost estimating, on some of the world’s largest construction projects. A Journeyman member of the Carpenters and Joiners of America, Joseph was a delegate to the AFL-CIO National Conventions, and organizer within the Northwest District Council. His experience in the construction field, pointed the way to a private consulting practice, within six Northwest counties.