Appraiser Talkback Blog

Editor’s Note: Happy New Year! The Winter 2010 edition of Working RE is in the mail to 80,000 of you right now. You can also read it digitally by clicking the cover image (at left). There, you will have the opportunity to opt out of print for future editions, joining thousands of others in choosing to save the resources required to manufacture and mail their copies of WRE. If you decide to opt out of print, we’ll let you know via email when each new issue is posted online.

Below you’ll find this issue’s cover story summarizing the effects of HVCC, according to the Working RE/OREP HVCC Talkback Survey. So far, over 4,300 appraisers have responded, making it the most comprehensive appraiser survey of its kind, including being quoted in an influential New York Times story, published last summer, which reported that over half of you still feel pressure from AMCs to make a deal work at least some of the time. (Find the NY Times story at WorkingRE.com, Sidebar: In Appraisal Shift, Lenders Gain Power and Critics.) The percentage reporting pressure has stayed steady in the months since, as you will read. If you haven’t participated yet, you can find the questions below and a link to the survey. The good news is that grassroots and feedback from the appraisal organizations and other interested parties are making a difference! We have no doubt that most appraisers will find their way in this new environment.

Looking Ahead/Looking Around
For eight years the mission of WRE has been to help readers grow as professionals and business people. True to our mission, you’ll find valuable stories in the new issue on how to find more work and how to be better appraisers. But we will not ignore what you are telling us, via the survey, about the effects of HVCC: the Code has turned the profession upside down while not solving the problems it was intended to fix- pressure on appraisers remains and, according to many, the quality of work is diminishing not improving. The most seasoned appraisers say they will not work under the present conditions and are leaving for greener pastures. This hurts everyone, including consumers and taxpayers.

Thousands of others say they want to continue appraising but may not be able to make a living on the new cut-rate fees or are unable to secure enough work from AMCs to stay afloat, now that they do not have access to their regular clients. The sad irony is that most of the protections in HVCC– which by all accounts are easing pressure and reducing complaints to some extent- existed before the Code was even a gleam in the eye of the New York State Attorney General.

Real Life
Just before Christmas, an OREP member shared that he is leaving the profession after over 20 years. His story is more representative than it is unique. He said he has had a great career, built a (once) successful business, mentored many quality appraisers along the way- never giving in to pressure, producing first-class work. He still loves appraising but after two decades of honing his skills, acquiring expertise, earning designations and certifications and building a strong reputation and loyal clients based on quality work, he said that appraising for half fees in half the time for people who mostly don’t know much about the practice, just doesn’t make him eager to jump out of bed in the morning to go to work. He said he has other options. He did everything right and has been run out of business by HVCC.

And there is this comment posted to the HVCC Talkback Blog in December. “I just got off the phone with a major AMC. I called them to complain that it doesn’t matter how fast I text them back for an assignment, it has already been accepted by another appraiser. I got five text messages in the last two days and didn’t get one assignment. I complained that every time they text message me it costs 15 cents and that I wouldn’t mind paying the money if I got an occasional appraisal. The woman said that the way they assign appraisals is that when an appraisal comes in they put the address in their computer and all the appraisers within a certain radius get a text message. First one to text back gets the assignment. I told the woman on the phone that I didn’t think it could be any worse than that. I was told that what I should do is get a P.O. box in a busy area and they could feed me work that way. They are already doing that with a few appraisers. She told me that she thinks that I am nasty and that is why I am not getting any work. She said they want to have a mutually friendly working situation and that being nasty was making it hard for them to assign me work. I said you want to talk about nasty, I did two appraisals for your company and I am waiting over 60 days to get paid a lousy $210 an appraisal. She hung up on me. Anyone who thinks that this AMC is a good thing is out of their minds. After 25 years in the business I think it’s time for me to find a new profession.”

And so it goes.

HVCC Survey Results: Appraisers Still Feel Pressure
By David Brauner, Editor

If you’re struggling to survive post HVCC; if you’re angry at having control of your business taken from you; if you’re having trouble getting orders from AMCs even though you’re trying; if you can’t make a living working for reduced fees; if your experience is that AMCs hire based on the lowest fee rather than quality work or if you continue to feel pressure to make deals work, then you’re not alone according to the OREP/Working RE HVCC Appraiser Talkback Survey and Blog.

With over 4,300 appraisers nationwide responding to the survey, the most significant results are that over half of the appraisers working with AMCs report that they continue to feel pressure to make deals work at least some of time.

Here are some quick stats. Find more complete results below:
* Ninety-two percent (92%) answer that they are “not in favor of HVCC as written.”
* Eighty-two percent (82%) say they “do not consider the AMC model to be a legitimate business model.”
* Fifty-one percent (51%) say appraiser selection (by AMCs) is always based on the lowest fee.
* Twenty-four percent (24%) say personnel at the AMCs they work with are never knowledgeable and competent.
* Eighty-six percent (86%) say working with AMCs is not worth the “trade offs” (for example, earning lower fees in exchange for no pressure for value, a steady flow of work, no time/resources spent on collection, etc.).
* While seventy-two percent (72%) say they are “generally satisfied with appraising,” over half (52%) say they don’t expect to be appraising full time five years from now.
* Sixty-nine percent (69%) of appraisers are not in favor of the new Fannie Mae 1004MC form but a majority (70%) are in favor of the increased licensing and education requirements imposed by the Appraiser Qualifications Board.

In the feedback we’ve received this year, perhaps the most gut wrenching are the many hundreds of emails that go something like this: “After 25 years I have gone through a lot of changes, been in and out of the professional organizations, worked for large institutions and have had three different, honorable fee shops in my journey. I somehow managed to gain approval with 45 major lenders and institutions and have never been blacklisted (that I know of), and never been sued. I have a solid reputation. I’m honest, hard working, and insist on providing my clients with only quality, comprehensive detailed reports. I don’t think I have ever completed an assignment in less than three days (after inspection); I usually take five to seven. Nor have I ever been pressured to do so. I’ve established my own fees and built a clientele of honest mortgage brokers, banks, attorneys, and accountants, and have never been without work.”

The appraiser continues, “I have never worked for an AMC and will obviously/most likely not be able to. The HVCC is costing me 60-70% of my business and it is doubtful I will be able to survive financially. The cost of maintaining my now one-person practice will be prohibitive, unless by some miracle I find a situation that will cover the cost of my E&0, health insurance, data sources, office and auto expenses, etc. Well, I guess we could move back in with my parents. (I jest, I’m 52.) The loss of so many seasoned appraisers will be devastating but was it really necessary? For now I anticipate having to start over in a new profession, wish me luck.”

HVCC Moratorium
A bill that would impose an 18-month moratorium on the HVCC (H.R. 3044) was forwarded to the U.S. House of Representatives in June by Representatives Travis Childers, D-Miss., and Gary Miller, R-Calif., in reaction to complaints from appraiser constituents. This bill is in the first step in the legislative process, according to Govtrack.us. To weigh in visit Govtrack.us/congress/findyourreps.xpd to find your state representative and how to contact him or her.

Survey Results

>> “Number of years appraising”
• Less than 5: 3%
• 5 to 10: 24%
• 10 or longer: 73%

>> “Was/is the lack of appraiser independence (lender pressure) a serious issue in your practice?”
• Yes: 38%
• No: 62%

>> “Are you in favor of having mortgage brokers removed from the process?”
• Yes: 42%
• No: 58%

Quality, Pressure, Fairness
>> “In your experience with AMCs, appraiser selection is based solely on obtaining the lowest fee?”
• Always: 51%
• Often: 37%
• Sometimes: 10%
• Never: 2%

>> “In your experience working with AMCs, service, quality and other factors play a part in appraiser selection.”
• Always: 5%
• Often: 14%
• Sometimes: 43%
• Never: 38%

>> “Are the personnel at the AMCs you work with knowledgeable and competent?”
• Always: 2%
• Often: 14%
• Sometimes: 60%
• Never: 24%

Fees
>> “Are the fees offered by the AMCs you work with unrealistic given the nature and scope of the assignment?”
• Always: 47%
• Often: 37%
• Sometimes: 14%
• Never: 2%

>> “Do you turn down AMC work because of inadequate fees?”
• Always: 22%
• Often: 45%
• Sometimes: 29%
• Never: 4%

>> “Do ‘low fees’ (from AMCs) effect the quality or completeness of the finished report compared with higher fee appraisals?”
• Always: 15%
• Often: 18%
• Sometimes: 26%
• Never: 41%

Pressure
>> “With the AMCs you work with, do you experience pressure for value?”
• Always: 3%
• Often: 11%
• Sometimes: 40%
• Never: 46%

>>“Do the AMCs you work with provide an adequate ‘firewall’ between you and the loan originator?”
• Always: 33%
• Often: 34%
• Sometimes: 26%
• Never: 7%

>> “With the AMCs you work with, are you asked to re-examine reports with the intention of trying to ‘make the deal work’?”
• Always: 3%
• Often: 12%
• Sometimes: 41%
• Never: 44%

Turn Times
>> “With the AMCs you work with, do you experience pressure for turn around times that is unrealistic given the nature and scope of the assignment?”
• Always: 35%
• Often: 42%
• Sometimes: 19%
• Never: 4%

>> “Does the time pressure (from AMCs) result in a product that is less reliable for the end user, compared to a report where adequate time had been allowed?”
• Always: 15%
• Often: 23%
• Sometimes: 32%
• Never: 30%

Dying Profession?
According to comments posted at the blog and survey, many appraisers doubt the profession can continue to attract competent professionals given the low fees, considerable expenses and licensing/training requirements. Many say they see greener pastures elsewhere.

>> As reported, 52% of survey takers say they don’t expect to be appraising fulltime five years from now but interestingly, 72% answer “yes” when asked if they are “generally satisfied with appraising.”

>> “Are you making plans to leave the appraisal profession?”
• Yes: 45%
• No: 55%

Many express doubts about whether the trainee system for bringing new appraisers into the profession is sustainable: how can you split a half fee in half again? So far, 72% of survey takers say they would not consider taking on trainees in the future.

Other Issues
>> “Is being able to be certain that your clients are receiving an unaltered version or ‘true copy’ of the appraisal reports you send them an important issue to you?”
• Yes: 92%
• No: 8%

>> “Is the data mining of your reports an important issue to you?”
• Yes: 91%
• No: 9%

>> “Is being ‘forced’ to submit your work through a third party entity and pay a fee to maintain a client relationship, an important issue to you?”
• Yes: 92%
• No: 8%

>> “Are you able to charge a higher fee for the new (1004 MC) form?”
• Yes: 34%
• No: 66%

Surviving by AMC Shopping
It seems shopping for the “good” AMCs may be a survival strategy appraisers are adopting. Seventy-two percent (72%) of survey takers report that they are satisfied working with appraiser management companies (AMCs) at least some of the time. (Twenty-eight percent (28%) respond “never” satisfied). Does this mean that those who are surviving are picking and choosing the AMCs they work with and firing the others, just like they did with mortgage brokers?

Fixing the Problem
Many appraisers say they intend to take back control of their profession and their businesses by working only with the AMCs that treat them fairly and by avoiding the ones that don’t.

So far, these are the remedies most mentioned by bloggers and survey takers: appraisers must band together, put their differences aside and speak with one voice to put their interests forward. Many appraisers suggest a short, national boycott to demonstrate their importance to the system. Some say a fixed fee structure is necessary and/or a cap on the percentage of the appraisal fee AMCs may keep. One theme expressed over and over is that no one can make anyone work for low fees. The only way to fix this problem is to just say “no.”

About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at OREP, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states (OREP.org). He has covered the appraisal profession for over 16 years. He can be contacted at dbrauner@orep.org or (888) 347-5273. Calif. Insurance Lic. #0C89873.