Editor’s Note: Francois (Frank) K. Gregoire IFA RAA, long active in Florida politics, is in favor of AMC regulation in his state. Here’s why.
Call for AMC Regulation
by Francois (Frank) K. Gregoire IFA RAA
The Florida Legislature passed a record low number of bills this past session. Like many states, their time was consumed with trying to balance a budget in tough economic times. The bill to regulate appraisal management companies (AMCs) was not considered. However, the team of appraisers, professional associations and the Florida Real Estate Appraisal Board is lining up support and legislators for the 2010 Legislative session.
Unlike some of my appraisal brethren, I believe AMCs provide a service and are legitimate businesses. AMCs existed long before the federally-mandated licensing, certification and regulation of real estate appraisers. Quite a few lenders opted to utilize the services of AMCs and a couple of AMCs offered quite a bit of assistance to get appraisers and appraisal firms up to speed with appraisal software and office management.
My own firm, Gregoire & Gregoire, Inc., received complimentary appraisal forms software from one of the early AMCs. Although my firm was already using computers for appraisal reporting and some analysis, the software enabled us to move from a mini-computer to personal computers and enabled us to update to revised forms more quickly. Gregoire & Gregoire, Inc. enjoyed a mutually beneficial relationship with that AMC for over a decade.
Souring Relationship
Unfortunately, that relationship started to sour with fee pressure, turnaround pressure and what appeared to be the AMC’s accounts payable department taking advantage of the “float” in their payment procedures, policies and responsiveness. We arrived at the realization that it cost the firm just one dollar ($1) less to send an appraisal report out the door than the fee received from the AMC. The seven appraisers, including the principals, were extremely busy but there was no profit. Instead, we had a flurry of activity and paper and constant phone calls for status and appointments. Our requests for modest fee adjustments were refused. Gregoire & Gregoire, Inc. decided to reduce our volume, enhance our quality and concentrate on the segment of the market more interested in quality than cost and speed.
Recently, a national AMC made a request for my expert services. Apparently, the company had an assignment in my market area that required appraisal review services and testimony from an expert witness. Although the company has dozens of appraisers on their panel active in my service area (Pinellas County, Fla.) they sought me out first. In telephone conversations, I was assured that I would set my fees, determine the time required for each phase of the assignment and would not have to endure constant requests for status and updates. All they asked was for me to review the engagement contract, sign and return it to them.
When the “package” arrived, it was the standard AMC agreement, compelling me to agree to 48 hour turn time, status updates, a fee schedule and other assorted items contrary to their verbal assurances. When their attention was directed to the conflict between their written terms and their verbal assertions, I was instructed to modify the agreement to my liking and return it. Although the assignment had the potential to be worth my time, I decided to let it pass. If the AMC’s right hand does not know what the left hand is doing up front, the potential for conflict in the future outweighed any perceived benefit to me and my firm.
The Florida Real Estate Appraisal Board was interested in the regulation of AMCs long before there was a Home Valuation Code of Conduct. After reviewing hundreds of workfiles and reading the written and email requests from AMCs to appraisers, the problems were clear. Many, not all, AMCs were making representations to their clients that could not be met and appraisers were pressured to make miracles happen; often to the detriment of the public and appraisers’ professional license and certification.
Fairness and equity was and is needed. What is proposed for Florida is a fairly simple act that will require registration of AMCs along with their officers and directors. It is only fair that AMCs meet the same character qualifications as appraisers. We also propose that AMCs and their officers and directors comply with the same laws, rules and regulations applicable to Florida appraisers, including the Uniform Standards of Professional Appraisal Practice, nothing more, nothing less.
About the Author
Frank Gregoire, IFA RAA is a State-Certified Residential Appraiser, #142, active in a wide variety of valuation, consultation and expert witness assignments in Pinellas County, Florida. He operates the blog: Appraiseractive.blogspot.com.
7 responses so far ↓
1 Frank Gregoire // May 27, 2009 at 12:57 pm
Thanks for publishing the article, David. The one clarification necessary is when Gregoire & Gregoire, Inc. decided to cease our relationships with the AMCs. That was well over 10 years ago, it may even be 15 (time passes quickly when you are having fun!).
At that time, Gregoire & Gregoire was getting $175.00 for a single family residential appraisal reported on a Fannie Mae 1004. It cost us $174.00 to produce that report. Admittedly, some costs have come down since then; photo finishing, for instance. I find it amazing that many management companies are offering fees similar to those my firm found insufficient so many years ago.
Frank
2 Jonathan Miller // May 27, 2009 at 2:29 pm
Well articulated Frank!
This is consistent with our experience 20 years ago. There are a slew of AMCs coming out of the wordwork, unchecked and unregulated.
3 wade gibson // May 29, 2009 at 7:41 pm
It appears that Mr. Gregoire has the insite to turn down non profitable business. In my 36 years of doing appraisals, I have had business relationships with numerous AMC’s, some good, some bad. Still get regular assignments from 4 AMC’s that agree to pay me my fee & agree to my turn time. So there are “good AMC’s” out there. It’s up to us (appraisers) to not do business with the low bid/24 hr turn time AMC’s. In other words, don’t wait for additional government regulation to solve your problem, lets do it ourselves.
The “profitabilty issue” is something that every appraiser needs to address. If you are doing a decent job of protecting the “end lender’s” interests, it takes a certain amount of hours to complete a competant/defensable/reliable report. If the AMC your dealing with is not willing to compensate you for the time required to meet these “mandatory requirements”, fire them. It’s really that simple. If enough appraiser’s aquire the back bone to say no, then these AMC’s will be out of business, as they should be, there will not be any requests for expert witness testamony as Mr. Gregoire received & the individuals performing these appraisals will not be future guests of the state/federal goverment( I had one appraiser request my assistance in preparing a defense against our State Regultory Board, after reviewing the report & work file, I determined it was not defensible & told him so. His reply was that he would let them revoke his license & retire. This is not a good strategy, as Bank Fraud charges do not care whether you still have a State Certificate or not.
In conclusion, Guys, don’t be waiting for any governmental action to solve our “problems” lets do it ourselves.
Wade Gibson
4 Chuck Miller // May 29, 2009 at 8:35 pm
Today it was requested of me to by Lincoln to provide newer comparables or have my report get sent for a technical revue unless I could produce them. This is in light of the fact that in the 12 months prior the effective date there were 10 sales , 6 of which are 9 - 12 months old and 8 are more than 3 miles away. I used the three that were under 3 miles albiet 9 monthsd old with market adjustments and with as it turned out under 5% gross adjustment. They just could not understand there weren’t any newer sales and why I could not meet their demand to find newer sales, Finally, I left them with this remark, The sales comparable fairies had not gotten around to making more comparables as of yet… send it to review. this ought to be interesting
5 Edd Gillespie // Jun 1, 2009 at 1:55 pm
Frank,
I heartily endorse your decision to maintain appraisal quality as a first priority. I can not do that and also provide a sustained my service fast and cheap.
I once didn’t care if the client wanted good or bad appraisals and ethics were up to me, but then I became aware that I had become somewhat financially dependent on clients that could care less about quality. Now I am convinced that it is important to my career to cultivate clients that have high standards of ethics and quality.
I suggest that the profession require the fee paid and the turn time required in the scope of work and highly scrutinize those appraisals that are done with emphasis on cheap and fast. Those appraisals are anathema to our profession.
6 Frank Gregoire // Jun 2, 2009 at 5:41 am
Nice to hear from you Edd! Appraisers do not produce a good or commodity, we provide professional services. Unlike a manufactured widget, there is no savings by larger production runs.
Some folks would be amazed to see cases considered by the Florida Real Estate Appraisal Board resulting from appraisers trying to set up a production run of appraisal reports for new home subdivisions, condominium developments and condominium conversion projects. Interestingly, “manufacturing defects” seem to creep into either development and/or reporting and the error is magnified by 100’s of appraisal reports, some done for as little as $75.00.
The appraiser was able to “make it up with volume”, but ended up losing their certification anyway.
7 Nick Dangerfield // Apr 30, 2010 at 6:31 am
Appraisal Management is here. To say we can depend on independent individual behavior within our profession to solve all related issues is short sighted.
State regulation is very necessary. Some AMC’s have become very involved in the appraisal process. They sometimes act in the capacity of a Senior appraiser review/manager. Others are just ordering the job.
The more intense involvment may rationalize a higher % of the overall fee but that should not come without the same liabilities, regulations, licensure, disciplines, and responsibilities the appraiser assumes.
A full disclosure of their participation and qualifications should be attached to every report along with an approximate time needed to manage.
And let’s not forget there is currently no measuring stick for the % fee allowed an AMC and this won’t be accomplished through the Feds.
One suggestion might be a sort of “dollars in/dollars out” (a formular often used for partnerships). In other words the partner with greater investment profits according to the % put in. In the appraisers case it would be, “Time in/Time Paid Out”. Obviously if an appraiser is spending 10 man hours on a report and the AMC is spending 30 minutes, the fee should be divided up 5% to the AMC and 95% to the appraiser.
So let’s start discussing how state laws can assure us some recourse if we are treated unfairly and how the liability will be spread around for AMC’s which want to become more involved in the process. Because if an AMC is taking half the fee in management how can they say they are not influencing the value if in fact their share of the work warrants the fee?
Working toward State laws can be a rallying point for the appraisers to assemble. We are talking about a means for united action through government.
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