AUTHOR: Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. Click on Outside The Boxes for a collection of Patrick's articles on Appraisal Scoop!
To me, the word "tariff" conjures up thoughts of Sherwood Forest, the Sheriff of Nottingham and Robin Hood. After all, tariff means "tax" or "levy" and the sheriff imposed and collected both. On the other hand, there was Robin Hood, well known for relieving the good sheriff of his "collected fees" and returning same to the rightful owners.
While I am not suggesting we form a "band of merry men", over the past decade, the cost of doing business has risen considerably and fees have remained flat. When you consider the "tariffs" charged by the AMCs (Appraisal Management Companies), along with the "required turn times", for many it is difficult to survive, let alone have the time to take the steps necessary to verify the data and develop a reliable opinion.
I read somewhere, that if you take the "pre-FIRREA" average appraisal fee and index it (adjusting for inflation and reporting requirements), today's average would be $700-$900 for a standard URAR, far from what is being paid by typical AMC's and well below that paid by most clients.
Since borrowers "pay the fee" for "our objectivity", it would seem to be in the lender's interest to work closely with us, exchanging information on the market, keeping their staff up to date with issues and seeing we are paid well to "protect them". This should not be an adversarial relationship (yet often it seems to be). Clients should recognize and protect our role of "protecting them".
Then and Now
Pre-FIRREA, home loans were made by the S&Ls', most with staffs to supervise "fee appraisers", providing "checks and balances" in the system. Fees were "scheduled" and almost standard, tied to the value of the property appraised and "turn times" averaged a week or so.
Post-FIRREA, the S&Ls' transitioned to FSB's and or, were absorbed by banks, mortgage lending shifted to "subsidiary or private mortgage companies" and appraisal staffs faded away, along with the oversight they provided. "Fee schedules" based on the value of the property, became taboo under USPAP, causing problems for lenders and appraisers alike.
Lending is competitive and mortgage companies need to provide "instant quotes and near guarantees" to secure the deal. When salaries gave way to "commissions and bonuses", making the deal and controlling the outcome became far more important. Competition for the deal created "turn time demand" that does not permit adequate verification or research. "Pressure has become the norm for many, if not all in the mortgage industry.
Enter the AMC
With the lenders employing the services of the AMC, problems abate to some extent, as the AMC "shops the deal" until they find an appraiser to do the work for the price offered. While eyebrows would rise if appraisers collaborated on fees, no one seems to have problems with AMCs setting a "standard fee" for our services.
Many appraisers have cried foul, claiming the fee charged by the lender (to the borrower for our services), is far from that offered by the AMC and that we are in effect, paying a "tariff" to the "sheriff". The point is simple. Pay appraisers a fee commensurate with the time and cost involved with developing and reporting a value opinion that is verifiable and reliable.
I am not against the AMC managing the process and being paid to do so, that is the cost of doing business. Simply determine what a fair fee is (independently and not via the AMC) for the scope of work involved, remove the pressure and pay the appraiser appropriately (passing the cost on to the borrower). I am not suggesting the $700-$900 cited above, but I would expect the fee to be reflective of the work and time involved with doing the job correctly.
If appraiser were protected from pressure; given adequate time to verify the data and measure the market; and allowed to do that which is necessary (to provide the client with an objective value opinion), without threat and compensated reasonably for the time involved, would many of the housing market problems we have today have occurred?
Over the past several years, the secondary market, lenders and the national economy have lost billions of dollars because of the housing crisis. REO's and "short sales" are selling for tens of thousands of dollars less than their "loan amounts", reflective of a market correction that never should have happened.
How many lenders and investors wish that we could have a "do over" and would willingly pay the "full fee" and remove the pressure to get the answers they should have or would have if the system was different? There is an old and wise saying, "you reap what you sow".
Mercury Rising
At their Appraiser Conference in Chicago, Dave Biggers, Chairman of a la mode, inc., stated that an AMC could be developed using the Mercury Network 3.0 (and one that would eliminate the "excessive tariffs"), providing the appraiser with better fees and granting clients access to a national network of appraisers.
The problem for the client is not the fee amount paid to the appraiser (since the borrower pays the cost). The problem is management of appraisal services, an issue the client does not want to deal with. The solution is a la mode, the Mercury Network and competent appraisal services.
I would suggest we support a la mode with these efforts on our behalf and I hope all of us will write to thank and encourage them. If you join the Mercury Network, provide the highest level of service, work with the fee schedule and make it the most effective AMC available, for clients and appraisers.
"The Right Start" is not about "Appraisers vs. Lenders or AMCs, it is about change, adapting to it and shifting from where we are to where we should be. It is a good business model for them and us.
- The "Right Start Step One - Standards
- The "Right Start Step Two - Tariffs
- The "Right Start" Step Three - "Association"
AUTHOR: Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at [email protected] Look for the new Outside The Boxes category for a collection of Patrick's articles on Appraisal Scoop!
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