Real Estate Thoughts

The residential appraisal industry has been affected by the drastic changes within the mortgage industry over the past four years. Our business has been affected by the opportunities provided by the type of clientele that we have been involved with. In 2006 the decline in business began due to the decline in home values and lending restrictions, than the HVCC disaster was in place. The HVCC eliminated the clientele of many appraisal companies and relinquished a growth of AMC, agency management companies. The intention was to separate those parties that are paid upon any commission basis from having any interaction with the appraiser. However, like many great intentions, a backlash of unforeseen events occurred. The affects eliminated many small appraisal firms to one person, individual sub-contractor status. Gone were the support staff, trainees and staff appraisers, literally overnight. The appraiser no longer had legal right to collect their fee from a consumer and was forced to receive their orders from these new AMC companies at significantly reduced fees. Although the consumer continued to receive increased appraisal fees, the appraiser was instantly forced to accept 40% - 90% of their normal fees. All of the contacts that the appraisal firms had were gone. Now the speedy development to get your name placed upon an approved list of 300+ AMC’s was the struggle for survival. The appraiser no longer could run a business, however, they were still able to be a subcontractor and choose which AMC to work for. Or in other words they could choose upon how much of their fee they were willing to relinquish.

Another intention was to improve the quality of the appraisal process. The increase of requirements imposed upon the expected content of a typical “SUMMARY” appraisal report continues. As the time to complete an appraisal grew from four hours to eight hours the pay was declining and the expected turn time declined to three working days. The acceptance of assignments was not based upon quality but upon turn time and accepted fee structure. In other words if you could complete an appraisal turn time in two days (weekends included) and accept a lower fee, than you were a tier one appraiser for that AMC, congratulations! The quality of the appraisal was not the primary basis for the selection of an appraiser. Although this process is still in place by some AMC companies, many are implementing some form of quality control.

There was a bright side of the business; the HVCC did not apply to a loan generated for F.H.A. insurance programs. Although the big banks and many small banks continued the F.H.A. mortgage needs through the AMC process it was not required by F.H.A. Therefore, the small brokers were not going to relinquish the control of their business to an AMC. They continued their relationship with the appraiser and continued to have input and control of their business. In other words if you were an appraiser and you could satisfy the need of the broker, you could continue on with your business relationship and most likely your fees were not affected at all. And with the increase in F.H.A. mortgage programs over the prior four years; your business may have increased.

What a great loop hole for those appraisers that appease their clientele with their needs on a consistent basis. Recently I had a friend tell me that they had an appraiser perform an appraisal at their home for a refinance and the appraiser inspected a 2,400 square foot home with an in the ground swimming pool in under 10 minutes. No measuring of the home, just pictures and a placement of the rooms within a boxed sketch. All three pictures of the comparables were from the local MLS, certification that the appraiser drove through the neighborhood and observed the comparables from the street were made, no cost approach was performed, no income approach was performed and the status of the defined neighborhood was stable, in balance and between 3-6 months with no additional documentation to support. The cost to the consumer for this appraisal was $475 payable to the appraiser. Sure beats my $235 for an F.H.A. appraisal report of 52 pages and nine comparables that took me nine hours to complete.

So my wife wants to know how I can shorten my time and increase my fees…………