The Thing About Appraisals - Part 3

The Denninger Report  - by Gini Denninger

Another issue the HVCC regulations caused is that appraisers actually make less money now per appraisal, while they have to provide more information than before. This is because the AMC’s get a large share of the fee paid for the appraisal. Previously the appraiser got the entire fee, now it is much less. According to John LaScala, previously a typical fee may have been in the range of $300-350 per appraisal. Today's AMC’s may be charging the bank who then charges the buyer $100-150 more than that. So now the appraisal can cost between $400-500, which is split between the appraiser and AMC, giving the appraiser anywhere between $200-250. Appraisers are making less money while dealing with additional paperwork and having to split their fee with an AMC. Why should everyone care? This results in a net cost increase to the consumer as well as an additional layer of bureaucracy for appraisers.

Additional causes for concern are the other out-of sight problems most never consider. Due to low fees, higher work load and the rigidity of regulations governing the field, fewer people are choosing this profession. In order to correct this problem, some believe the solution is to raise appraisal fees to the consumer while others favor revising the regulations to remove the necessity for AMCs. Keep in mind when the banks own the AMC they use, they are profiting from this situation while the appraiser and buyers don’t. The HVCC rules have expired, so now the Dodd-Frank Act governs. One line in this act calls for paying the appraisers fair & customary fees. The now firmly entrenched AMCs get around the issue of pay for appraisers by claiming reduced fees paid to appraisers is now customary. Most don’t know that AMCs are one of the fastest growing profitable businesses in real estate.

Many loan officers, Realtors and appraisers believe removing the AMCs is the best solution to the problem. Besides removing the middleman who is taking a large portion of the fee the appraiser used to get, removing the AMCs would help both sellers and buyers by allowing the work to become local again. Appraisers are necessary to my work as a Realtor. Their work is hard and time-consuming. By merely maintaining a list and assigning appraisers, the AMCs make as much as the appraiser who is carrying the work load of delivering an accurate opinion of market value. The intent of HVCC may have been right, but the results have gone awry and created another layer of bureaucracy the buying public is now saddled with. As we all know when bureaucracy is involved, ever higher fees are the result. I have confidence in our local buyers. They are the best judges of what they want to pay for their homes, and have shown this by acting conservatively when buying. Our local market, steady and strong, proves this.



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