Monday, April 26, 2010

AMC vs Appraisers, Lenders & Homeowners

The idea of an appraisal management company (AMC) is great. Bottom line, they provide a service and fill a void left by the HVCC regulations. Sales, or anyone tied to the sales process can no longer contact appraisers so AMCs appear to be the logical answer. They act as the layer, or buffer between sales personnel and appraisers.

We all know that direct contact between sales and appraisers can be dangerous. I know many appraisers who didn't exactly love hearing from loan officers all day, but I doubt this is the answer we all sought. The idea behind the business is great; unfortunately the business model often pits the AMC against the appraiser, lender, sales and homeowner.

Is this the best we can do? Here's an example:
Standard appraisals range from $300-375, collected by appraisal firm
Direct contact between sales/loan officers and appraisers

Standard appraisals range from $400-450, collected by AMC
Appraisal firms collect $225 from AMC
All contact with appraiser/appraisal firm is filtered through AMC

Here's the flaw...
1. Homeowners/loan applicants are now charged a higher appraisal fee, approx 15-25%
2. Appraisers are paid a reduced fee from the AMC, approx 40-45%

Here's the result...
I'm seeing most accomplished, reputable appraisers livid - seemingly forced to accept these reduced fees. Their unfortunate response has been speed; churn out reports to make it up in volume. This leads to reports with errors and the quickest comps one can find, not the best. Common errors these days? A minus (-) adjustment instead of a plus (+), failing to note a garage adjustment although a two car garage is clearly evident in all photos, etc. You get the idea. These aren't malicious errors, just simply careless mistakes when trying to move too quickly.

Clients are charged an increased fee for inferior product. This is a bad model. When, or I should say if the errors/omissions are noticed, the lender must advise the AMC, who then advises the disgruntled appraiser of the error. Needless to say this isn't atop anyone's priority list. Turntimes stall, rates move, locks expire, all become frustrated.

Is this really the best we can do? Great idea, poor execution. There must be a better way.