Appraiser Talkback Blog

Editor’s Note: Data from the HVCC Appraiser Talkback Survey may point to a new survival technique: AMC shopping. Find out what recent survey data says about this trend and read some not so happy feedback to our story Diary of a Happy Appraiser, including a few reader-suggested survey questions (complete with answers). Also, release of the long-awaited Home Valuation Code of Conduct Complaint Form and comments from several former FHA appraisers.

AMC Shopping/Not so “Happy” Appraisers Talkback
by David Brauner, Editor

Everyone knows you can’t get appraisers to agree on much. But when it comes to working with AMCs, opinion is polarized even more than usual. New survey data shows that the reason may be simple.

Response to the recent WRE story, Diary of a Happy AMC Appraiser, was overwhelming, about 30 to one against, with most appraisers continuing to revile appraiser management companies (AMCs). The majority we hear from continue to report unrealistic fee demands and turn times and AMC staff who show little interest in quality and even less knowledge of appraising- among many other complaints. Most say HVCC is causing a decline in appraisal quality as “good” appraisers leave the profession in search of a living wage. Some appraisers even predict a “double dip” recession as a result of the damage HVCC is doing to the real estate market.

According to our survey, however, which now measures the collective response of over 3,500 appraisers nationally, the experience is mixed for the many appraisers who work with AMCs. Our Working RE/OREP HVCC Appraisers Talkback Survey supports the notion that appraisers are picking and choosing which AMCs to work with. This may be a hopeful sign.

Consider these results: to the survey question: “Do you work with appraisal management companies (AMCs)?”; always 9%, often 33%, sometimes 46%, never 12%.

To the question: “Overall, are you satisfied with the AMCs you do work with?”; always 3%; often 19%; sometimes 50%; never 28%.

One way to interpret the results is that 88 percent of those surveyed work with AMCs at least some of the time (12 percent say never) and that 72 percent of those who work with AMCs are satisfied at least some of the time (28 percent say never satisfied). Some suggest that appraisers are “AMC shopping.” Some predict that eventually AMCs will be compelled to improve their practices to attract the best appraisers.

The polarized reaction to AMCs among appraisers, characterized by the comments below, may be a result of something quite simple: the appraisers who are somewhat content or even happy are hooked up with AMCs that treat them okay- limited pressure for value and turn time, fair fees, etc. The others, perhaps, haven’t found the AMCs worth working for or if they have, they can’t get any work.

And of course, some of the vitriol directed at AMCs comes from appraisers who can’t get past the fact that HVCC, a private agreement and not the product of a legislative process, has been allowed to turn their businesses, their lives and free enterprise on its head.

Seeing the Light
There are some rays of hope since HVCC took affect May 1. Regulators, lenders and the public are finally getting the message that all is not well. Consider FHA’s recent mandate that appraiser fees be customary and reasonable and that there be a clear separation of appraiser and AMC fees. These requirements speak directly to appraisers’ complaints.

Legislation to regulate AMCs, with provisions to fix many problems articulated by appraisers, has passed or is being considered in many states. On the federal level, H.R. 1728 (Mortgage Reform and Anti-Predatory Lending Act), which passed the House of Representatives in May 2009, also requires the registration of AMCs as well as a clear separation of appraiser and ACM fees. H.R. 3044, still in Committee, proposes an 18-month moratorium on HVCC.

This is progress. Just last May, the Federal Housing Financing Agency (FHFA), the agency that oversees HVCC, issued the following statement in response to appraiser complaints: “The Code (HVCC) does not alter the fundamental business models that exist in the appraisal industry, nor does it alter the fees or charges of any participants in the valuation system.” (WorkingRE.com, Sidebar: FHFA Letter Regarding HVCC.) Apparently, FHA, numerous states and the U.S. Congress disagree and seem to understand that HVCC has changed the playing field and not all for the better.

Lender Pressure
There is anecdotal evidence that HVCC has ameliorated the problem of lender pressure but according to our survey, it hasn’t fixed it. Our survey reports that only 46 percent of appraisers answer “never” to the question: With the AMCs you work with, do you experience pressure for value? This seems to indicate that over half (54 percent) of appraisers report still feeling pressure for value from AMCs at least some of the time.

Most appraisers agree that HVCC is well intentioned and that something needed to be done about lender pressure but most feel the cure is worse than the disease. As one appraiser put it, in response to Diary of a Happy Appraiser, “I disagree with the anonymous (Happy AMC) appraiser. For most of us who enjoy having our own company with an income earned from our own skill sets and the sweat from our own brow, this is not good! Most of us did not devote several years of our lives to this business to let someone else control our destiny. I had (an AMC) contact me the other day in hopes of paying me $75 for a full blown appraisal. $75! When explain to clients that I do not do ‘comp checks’ and explain why, they understand. And they still send the appraisal order to me. Like many other appraisers, I feel there are better solutions out there to safeguard appraisers from lenders then what we got. I think everyone could have been happy.”

The Home Valuation Code of Conduct Interim Complaint Form is finally released. You can find it at WorkingRE.com, Sidebar: HVCC Interim Complaint Form.

Editor’s Postscript: Find comments below from both sides of the great AMC divide as well as reaction from former FHA appraisers who are not so happy at being kicked off the roster by legislative edict.

Not So Happy Appraisers
“Given the investment in education and experience it takes just to become and remain Certified, I think I need at least $60 per hour just to break even. And I learned long ago that most appraisals (even simple SFRs) take a lot longer than eight hours of work to complete thoroughly. The verification of comparable sales alone can easily require twice that. I’m glad ‘anonymous’ has a positive attitude since negativism runs rampant among us right now but if he thinks he isn’t part of the problem in the appraisal industry he is in denial. Appraising does not pay well enough right now and it is bad time for AMCs to be offering lower fees. Unless of course the objective is to weed out appraisers who think they should be paid a professional fee ($60 per hour is about what a plumber makes here) for their difficult and diligent work and expert advice. It is unfortunate but not surprising that HVCC came along at the same time the profession is working to improve quality. Appraisers must never forget that in many if not most mortgage transactions their opinion is viewed as a necessary inconvenience and certainly not something the other actors consider valuable. You are simply headed in the wrong direction, ‘anonymous,’ the entirely wrong direction. What you are saying and doing is bad for the profession and is not sustainable, and it is not good for you in the long haul.”

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”We watched revenue drop from $12,000 per month to around $300 per month between May 1 (when HVCC was implemented) and August. We lost every bank client and mortgage company except for one. We’ve been in the business for nearly 20 years but closed the appraisal department after giving HVCC a test run. Past experiences told us that even if you receive a great deal of work today by cutting fees you will be quickly dropped from their roster if someone newer and cheaper comes along.”

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”I have been a Certified Residential appraiser for 18 years. During all those years I have been able to earn (and I mean earn) a decent living. I enjoyed my work. I have not been an activist or really very much aware of the new legislation as I just plodded along doing my work everyday (including weekends). Now I find I have no work! Or so little it is laughable. I have done some work for AMCs over the years but only for the ones that paid close to my normal fee and who had turn times reasonable enough to complete an assignment adequately. Now, most of those companies have reduced the fees they will pay and require turn times which do not allow enough time to do an adequate (not to mention good) appraisal. I spent years cultivating good clients who appreciated honest appraisals and paid a fair fee. They are now forced to utilize an appraisal ordered through an AMC without regard to the credentials or ethics of the assigned appraiser. I am in a state of disbelief. Clearly, many appraisers knew this was on the horizon. I am caught with my head in the sand. I certainly have to take responsibility for that.”

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“HVCC and appraisal management companies are ruining our profession. I can not make a decent living spending the time necessary to complete a quality appraisal with the cheap fees AMCs want to pay. The people I talk with at AMCs do not know anything about appraising. They know nothing of our particular area and it is a totally bad idea to have them involved. I have been appraising over 30 years and there has always been lender pressure, however, the appraisers I know in our area learned how to deal with these pressures and did not fold to the influence. States should be in charge of cleaning out those appraisers who cave into the pressure, not a federal mandate that ruins our profession and results in poor product to consumers. Appraisals are worse now than they have ever been because the management companies are hiring the less experienced and poorest appraisers at the lowest price they can get them at. The whole thing is ridiculous!”

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“My plan is to get out of the business. I have been appraising for 12 years. I had built up a large client base. All gone. Twelve years of work obliterated by a rule without any legislative process. AMCs are squeezing the fees, demanding ridiculous turn times, and expect me to work seven days a week. Since I have another profession I can go into, that’s what I’m going to do. The bottom line is that good people will quit the business because of pay. You get what you pay for. The only people left will be those who can’t add and subtract or measure a dog house. What bothers me is that there are appraisers who work for these fees. Eventually they will realize the error of their ways. But it won’t be until the economy turns around. Right now any employment is good. So people will work for fast food wages. But when the economy turns around there is going to be a major bailing out of this business.”

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“I have been appraising for 22 years and have been very successful with numerous clients. I have never worked with AMCs because I did not have to. Now, after 22 years, I have no work. All the AMCs I applied with have not given me a single job as of yet.”

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“Experienced appraisers are fleeing the business by the thousands. Colorado lost 20 percent of its licensed appraisers this year (prior to HVCC I believe). I don’t think you will see the truly staggering numbers of non renewals rolling in until 2010. The Working RE Survey states that 43 percent intend to leave the business within five years. I am quite confident that we will surpass that number just by adding the 2009 and 2010 losses together. It’s unfortunate but the demand for quality appraisers is now comparable to the demand for buggy whip makers. I believe that HVCC will be the major catalyst leading us into a secondary housing crisis and the second phase of a double dip recession.”
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Happy AMC Appraisers
“The overwhelming collective squeal coming from appraisers regarding HVCC makes me think that maybe most of these folks really ought to find something else to do. How can those mandated to be unbiased actually cry foul for removing the corrupt process of having commissioned sales people in charge of the appraisal process- shame on them. Like the author (in ‘Happy Appraiser’) I realized years ago I had a choice- work for full fee, collect my bribe, and hit the value or work for a reduced fee via AMC and maintain objectivity and an honest process. Not one AMC order in four years from multiple AMCs has included any value pressure, predetermined value or comp check requirement.”

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Suggested Happy Appraiser Survey Questions (complete with answers)
1. Have your AMC clients resulted in higher profits than some direct order clients? (Yes)
2. Are the personnel at your AMC clients generally more-professional and more-knowledgeable of appraisal issues than the personnel at direct order clients? (Yes)
3. Could the HVCC be improved by implementation of the IVPI? (Yes)
4. Have some of your AMC clients resulted in greater efficiencies due to smaller coverage areas or in the manner in which the order is received? (Yes)
5. Do any of your AMC clients pay MORE than you would normally charge a high-volume client for some types of work (e.g., FHA, Income Properties, High-Value subjects, etc)? (Yes)
6. Overall, are you satisfied with your relationship with your AMC clients? (Yes)
7. Do you think a lot of appraisers are whining about the HVCC and AMCs because they can’t make a living anymore by bending the truth (i.e., stretching the value to fit the client’s needs)? (HELL Yes)
8. Do you wish that the appraisal profession, unlike every other profession on the planet, would be insulated from change forever? (No)
9. Do you believe that the appraisal profession as a whole was damaged by the all-too cozy relationship between loan officers and appraisers? (YES!!!)
10. Do you believe that appraisers who whine about the ultra-low fees offered by some AMCs need remedial lessons on the use of the word “NO”? (Yes - one can only imagine how pliant such appraisers must have been to the needs/wishes of their full-fee clients if they can’t even manage a simple “no thanks” to low-fee orders.)

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Licensed Appraisers and FHA
“So 81 percent of appraisers are in agreement with licensed-level appraisers not being allowed to do FHA appraisals? It does not take a rocket scientist to understand why. It’s more work for them. I have been a licensed appraiser for six years. I do not have a two-year degree and cannot put my life on hold for two years to go back and get one. I would put my work up against any Certified Appraiser in my area. Tell me how this law makes sense? A new guy fresh out of appraiser school tomorrow can now do FHA appraisal but my six years of experience makes my work of ‘less quality’ than theirs?

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“There are many of us who didn’t pursue the Certified level for many reasons. Our reason is we went into semi-retirement this year and didn’t see the need or expense to take all the classes and testing required. So now only the ‘newly’ Certified appraisers in our area can do FHA work. These newly certified appraisers have less than half the experience we have and if the reviews we have completed on their reports are any indication of their competence, they should only be licensed as limited appraisers. Three of the most experienced appraisers in our very rural area didn’t upgrade due to nearing retirement age and now the FHA work will go to these newly certified appraisers with low levels of competence. Also, some have been removed from one of the larger hometown bank’s approved appraiser’s list, BUT they are able to do FHA work and we aren’t. Some of these are the number hitters who got a lot of action during the boom times and have upgraded their level of incompetence to Certified. FHA would be better served if they changed their requirements to allow experience and quality of work to be their guidelines and not the fact that someone just took classes and passed a test without having a solid background in appraising. We have not completed a lot of FHA work in the past as we are in a very rural area but the quality of appraisals for FHA work will now suffer due to the new Oct. 1 requirement. I’m sure this is true for many other areas of the country.”

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“Any appraiser who knows this business understands that Licensed Residential Appraisers got the shaft. I have been a Licensed Residential appraiser for 18 years and doing FHA work for 12 years. Not only have I never had an infraction on my license, I have a very solid reputation for being ethical and accurate. Seventy-five percent of my work is FHA and this legislation has destroyed my livelihood. I am now 58 years old and out of a job. I guess this is our government’s way of saying ‘thanks for a job well done’.”

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“Eighteen years ago I attended and paid for a class offered by the Appraisal Institute, called Appraisal 101. I then, paid, attended and completed another course offered by the Appraisal Institute called Appraisal 102. I studied very hard, and shortly thereafter, I paid for and took a state and federal exam to become an “Appraisal Trainee.” I passed the exams, and started working under a general certified appraiser. I fulfilled my two year apprenticeship in 1992. I then again paid for and took an additional 24 hours of continuing education, and a course entitled “The Income Capitalization Approach.” I passed the course, and applied for and paid the fees to sit and take the state and federal exam to become a “licensed” Real Estate Appraiser. This would entitle me to venture out on my own and appraise residential property of 1-4 units, land and condominiums with a value less than $1,000,000.I passed these exams, paid the fees and opened my own Fee Appraisal Shop. In a matter of a few months, I again paid for and took some additional courses so I could take a state and federal exam to become an FHA approved appraiser. I took courses, sat and passed the exam and in 1994 was added to the FHA appraisal Roster. I then took a few more classes, paid for them and took a state and federal exam on performing FHA 203K appraisals. I studied very hard, and like the other times before, I passed the exams and was now approved to perform FHA and 203K appraisals. Since that time I have renewed my Appraisers License eight or nine times, taking 30 hours of continuing education every two year period for a total of an additional 240-270 hours. Not inclusive of this was the education I had to take every two years for my Real Estate Brokers license, 12 hours every two years or 120 additional hours. The years went by, my family and I flourished. Life was good. Maybe Too GOOD? Because the other day I was told by the FHA, and other state and federal regulatory agencies along with appraisal management companies that they could no longer accept my work because under the new guidelines, I AM NOT QUALIFIED. Is this for real? Is this fair? Does it make sense? How did this happen? And finally, where do I go from here? My family and I are hanging on by a proverbial thread, as I am now 52 years old with 19 years real estate appraisal experience, and guess what? I am no longer “qualified” to perform residential Real Estate Appraisals. Please say it ain’t so.”