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HUD needs to define normal appraiser fees for FHA appraisals before AMC's do!

HUD has stated that in addition to adopting HVCC language, that appraisers should be paid their normal market fees for FHA appraisal products.

Well after my discussion with a well known. long standing Appraisal Management Company who most appraisers know as they have been around forever, here are their exact words to me as of yesterday "

"The new national debate will be over exactly what is "normal", and as I understand it, that is a question that will be answered market by market. "

This same Company also tells all appraisers that Appraisers set their own fees, they have control over their fees the AMC does not......That language sticks in my craw BIG time. Why? Because if Appraisers set their normal market fees they will NEVER get work from AMC's. AMC's DO set the appraisers fees as the appraiser is forced to reduce their fees in order to get work from them. I know this because I do NOT get work from them because I refuse to work for 1/2 my NORMAL Fee. I complete a very thorough report and I know the value of my work.

BUT here is the issue.....If HUD asks AMC's what is the normal fee for FHA appraisals in their given market, that NORMAL is reduced by anywhere from $100-$150.00 per report because that is where they set their FHA fees in order to get work from AMC's. So HUD may in error think that this is the true NORMAL fee, when in reality it is not. If they were to call an appraiser and ask what is your normal fee for FHA appraisals they would give you a totally different number than if they were to ask what is your fee for an AMC..

So Realtors, Buyers, Sellers and BANKS need to know the value of a good appraisal and that one has to pay the fee for a truly accurate and meaningful report.

Please see my other post below about what you can do to help with this problem:

http://activerain.com/blogsview/1304602/realtors-you-can-take-control-of-the-appraisal-process-and-hvcc-by-doing-just-one-thing-

Our mission in life is to protect the BANKS risks, this is HUGE...Let me repeat Appraisers exist in this world to protect the Banks Risks, by analyzing and reporting their findings. WE DO NOT DETERMINE VALUES. This being said would you want an appraiser whose fee has been cut in half doing apprasials for YOUR BANK? I think not!

The trend is to standardize all appraisal reports and automate them as much as possible, based upon software that will essentially produce reports with a great deal of numerical analysis, unbiased reporting and market based adjustments for variances in comparable sales vs. the subject property. BUT you cannot automate the entire process.

SOME AMC's want to automate and standardize our process as much as possible so that the time it takes to complete a report is cut in half and yes you guessed it keep our fees LOW. But when you appraise in an area like ours, you are not dealing with cookie cutter properties and you cannot automate the entire process. You still have to be adept at determining which neighborhoods are really comparable, which sales are really comparable and to do this you have to know your market WELL.

There is a shift toward using appraisers who live close to the subject property and who regularly appraise the area. I am all for that shift. When appraisers drive 30+ miles to homes they just do not know the ins and outs of that particular county and neighborhood, unless they work in the area on a daily basis. But it happens all the time as that is where the work is for many appraisers.

So my request of HUD is this, do not use AMC's fee data to determine what is normal market rate. It is far from normal. They essentially drive down and dictate our fees FOR us as they pit appraiser against appraiser for the best fees. We do not have control of our fees with AMC's. There are a very few AMC's that do pay FULL fee to apprasiers and I commend them for this. I hope most banks work with them. SOLIDIFI is one of them. www.solidifi.com They do not feel the need to dictate fees or dictate every step of the appraisal process to the appraiser and how it should be completed. They look for experienced, well seasoned appraisers to get the job done....as it should be!

It is very important that all parties understand the importance of good appraisal reporting See post below on this subject.. and YES..appraisers need to be paid for their expertise.

http://activerain.com/blogsview/1312887/buyers-sellers-realtors-banks-do-you-really-understand-the-value-of-a-good-appraisal-

The housing industry will rise again or fall based upon the quality of a GOOD appraisal. BY good I do not mean make the number work, I mean to report the REAL value of the property in question. Remember we are protecting the Bank's RISK.

Posted by Mary Thompson Lake Lanier Appraiser in Georgia on 10/31/2009 08:25 AM

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38 Comments on HUD needs to define normal appraiser fees for FHA appraisals before AMC's do!

NOV

Another sad part of this is that many AMCs are charging the borrower big fees. In my market I have heard reports that appraisal fees had gone way up lately, to like $400 & $450 for a normal tract house report. This is quite a bit more than what I have had for a full fee. And at the same time, I have not heard or seen any AMCs raising any pay to the appraisers. I'm with you, FHA really has to be carefull about how they handle this. If appraisers could go on strike, maybe we could get some action, but I think there would be way too many not smart enough to realize what was at stake, & jump in to fill the low pay gap. Appraisers really need to recapture our business from Lenders & AMCs who have held & pushed fees down so much. Last time I checked most things cost a lot more than they did in the mid 90's, so why are so many so egar to work for last centurys pay?

I hope FHA does this right. But then, I was hoping they would go back to their roster system they used to have, instead of letting AMCs run their show. I think both appraisers & borrowers would do better.

The AMC's are charging HIGHER rates and paying LOWER fees. This happens when working BPO's as well.

I have also heard that AMC's charge exorbitant fees to the buyers but pay appraisers very little for their work. How banks do not recognize that this is not in their best interest is beyond me.

This is really a huge problem that needs to be addressed. Appraisers shouldn't be making less to receive work from AMC's.

I believe it's the same every where. I know our best appraisers are saying exactly what you are saying. This means we are not getting our best appraisers to do the FHA appraisals. It's really a shame.

The AMC's need to pay more to get high quality appraisers. I had a deal a few months back...high balance FHA in a declining market = 2 appraisals. First one comes in at $650k...2nd one at $550k. They were done at the same time. 1st appraiser was local and knew the market...2nd wasn't and rode up on his motorcycle with girlfriend in hand...had comps in hand...problem was property had been remodeled with permits and was double the size of the comps he had. Oppps...just goes to show you...you get what you pay for. Something needs to change.

uugghhh! more appraiser worry....the $450 my buyers pay doesn't mean a thing because these appraisers are just doing whatever it is they want to do these days and it is virtually impossible to get their crazy reports changed even IF you prove that they are undeniably WRONG....we are in battle with one as we speak...im still wondering how the bank let this appraiser get away with letting an appraisal report pass where the comps are blatantly inferior to the subject property when there at least 30 better comps that support the price....im confuzzled by this!

Good and well told information. Thanks!

good topic. Just one of the many new issues that HUD is bringing to us.

Very well written. I have seen exactly what you are talking about in our market, too. I had a high value appraisal come in from an appraiser in our market, and an appraisal evaluation $150K lower. The comps they used were so off, it seemed incredible that this person who was "appraising it" could come up with such nonsense until I found out they were in TEXAS! (I'm in Arizona)

NOV

Thanks for comments one and all.

PAUL TODDand anyone who has interaction with HUD, send them this blog post. I have also written a letter to HUD on this topic because if the AMC's keep ruling the world as they do now, the problem with appraisals will continue.

Craig Chapman: I love the strike idea, but there are too many appraisers who will work for whatever it takes to get the assignment. With the inception of HVCC many appraisers lost business with mortgage brokers, so they are scrambling to find work...Not a good situation as the AMC's have control, not appraisers.

You can make a differenceby checking which lenders are involved and if they are using AMC's BEWARE, if you can have them use lenders who do not use AMC's these big banks that do use AMC's will get the point loud and clear.

I had one Lake Lanier Realtor tell me she hopes I get the appraisal on her recent sale, when I found out the lender was Wells FargoI told her I was sorry but I will not be getting that order since I refused to work for the AMC that Wells Fargo uses. They pay their appraisers really LOW fees and want the reports back in 2-3 days! Needless to say the Realtor was NOT happy about that as they most likely will send someone out there that has no clue about Lake Lanier values.

It is a sad state of affairs. I do want to say that not all appraisers who work for AMC's are BAD or out of the area, but I will say that anytime you are forced to reduce your fees, the quality of work over time will suffer...it is just a fact.

Good luck out there. Make noise with HUD and Conventional Lenders, we can make a difference if clients refuse to get loans with these big banks who use AMC's UNLESS they tell the AMC's to pay us what we are worth and use only those appraisers who know the areas in which they appraise! The buyers and sellers out there suffer more than they realize!

The word normal is a moveable feast, there is no one definition so it is meaningless. What has meaning is paying for excellence. If the profit motive means hiring anyone off the street that is not only bad business, it is dangerous. Give my client the best. They need protection too.

I met an appraiser the other day that decided it would be best to drop his fee so that he would get more work. He just became a licensed appraiser this year.

Mary, There are very good appraisers that are excellent at their craft. The problem I have with our current system is the wall that has been built between me, the Realtor, and the appraiser...and the fact that the appraisal is golden. This ONE individual's OPINION of value trumps what a buyer and seller have determined as a products worth. I had an appraisal that came in $11,000 less that sales price, $252,000 vs. $241,000. I could not, was not allowed to speak with the appraiser to show this individual they simply used 2 of the 3 wrong comps. I had seen 5 of 6 comps(sold one of them). So I feel I know VALUE pretty well for this subject property. Used my market knowledge when I listed this home and priced it correctly. The home went under contract in 7 days. We were feeling pretty good, seller's were concerned we UNDERPRICED the home, of course I assured them we had not, which we hadn't. Then comes the appraisal, I of course request a copy, I then see that 2 of the comp's used were terrible and there were at least 2 if not 3 other comp's that were much more like the property. Couldn't get any response from the appraiser, not a peep from the appraiser or the lender. The appraiser has been doing appraisals for 2 years. For this appraisal, he had only seen the inside of 1 of the homes, the SUBJECT property. Sale went down, all because of 1 two year experienced appraiser's OPINION of value. I know it is a little off subject, but I feel better.

The incompetence of the federal government never ceases to amaze me, and it's run by well educated folks. I am not against regulation, but the manner and subject matter expertise (lack thereof) in which it is done is dismaying at best.

... And here I had hope when I heard FHA was going to make AMCs pay fair fees.... Of course there's glitch for the AMCs to use to their advantage. Congrats on the featured post... can you write a less depressing one next time? ;-)

I am not surprised that the AMCs are the winner (monetarily) throughout all of this!

Mary - So what happens when FHA or lenders makes changes and want a Market Addendum done on every appraisal? Shouldn't you be able to charge more because it requires more work? Luckily I work for a small mortgage banker and we are in full HVCC compliance, but we also pay our appraiser a fair amount. When we realized the extra work involved in performing appraisal reports, we adjusted the fees to them accordingly. But again, because of our size we value the service we receive from our approved appraissiars and aren't only concerned with cutting our costs.

Thank you for such a thorough discussion on this topic. It's good information.

sigh. HVCC strikes again

Mary -excellent topic of which I appreciate getting an experienced appraiser's opinion. This has caused me to do some checking around in our neck of the woods and see what's happeing. Getting paid less seems to be the story of the last year. Many of our agents work far more and make far less.

Scott B: There is nothing wrong with placing an envelope in the home with For Appraiser FYIon the cover of the envelope. Then inside include FMLS sheets of the comps you used when you listed the home (assuming they are not too old) there is nothing in HVCC that prohibits this. Make notes on any homes that you have been inside regarding condition or any special circumstances that the appraiser would not be privy to. Maybe the home smells inside but the pictures make it look great. Maybe there was a divorce involved and it was not common knowledge. Chances are the appraiser will review and use some of your information. As long as you do NOT try to push comps down their throat you are fine.

Remember, appraisers are trained to come up with a value for a property and if they know the area and are good at what they do, their word should be final as this is what the client pays for....our expertise, but when you have appraisers who do not know the area that is where the problems come into play.

Kevin L: All appraisals including FHA already require the use of the 1004MC report. That started in May, 2009. The only type of reports that do not require this extra form is for REO foreclosures as a loan is not involved. The bank already owns the property. So most of the banks did pay us more for the report but the AMC's paid a very small amount and some paid NO extra fee as they said it was part of the process we must go through in the current market we find ourselves. They keep adding more requirements and yet say, hey since this is part of your job, you do not get paid any more money ....but you can be assured that the AMC will charge the BANKS more money!

Also FHA will no longer let brokers order apprasials as of January 1st as they are adopting the HVCC as it relates to this issue. So now all appraisals must be ordered either by the BANKS by a non production staff member and who is trained to handle such a task OR an appraisal managment company.

I thought HVCC was going to be discontinued. Hopefully it will. Lets let appraisers just do what they do well, APPRAISE.

Boulder City Steve

Actually, I think the proposed FHA rules on appraisals make sense. I wrote a post on this subject and I believe the new guidelines will eliminate AMC's. One of the rules is that the appraisal fee must go to the appraiser. If the AMC cannot skim any money off the appraisal fee, they cannot make any money and die. Also, FHA will insist on geographic competence, which means that the appraiser must be familiar with the area where the subject property is located. What a novel idea! Also, a broker can order an appraisal and communicate with the appraiser. Under the new FHA guidelines the person communicating with the appraiser cannot have a financial interest in the successful completion of the transaction. In other words, a commission. All that needs to be done is have a secretary in office or some other salaried employee do the communicating. Actually, I think things are looking up.

This stuff is such a mess

I Know several appraisers and their charges (or what they get paid) is nowhere close to what appears on the HUD. He claims that Wachovia plays hardball with appraisers and will refuse to give them appraisals if they do not appraise for loan amount.

Mary - HVCC's days are numbered and the elimination of this horrendous mistake is already in the works and when it passes (not if it passes but when it passes) this will also apply to FHA appraisal guidelines as well. Since the implementation of HVCC, appraisal fraud has increased astronomically because of AMC's so like HVCC, AMC's days are also numbered and they will be driven out of the industry along with HVCC.

As for who orders appraisals, all that really needs to be done is to enforce the rules and regulations that were already on the books and in place to protect the consumer from getting screwed and appraisers from getting pressured. Appraisers should have a process as to how to report someone who is pressuring them. Anyone getting reported for pressuring an appraiser should be punished and dealt with to the full extent of the law. PERIOD!

Appraisals now take longer and appraisers are working areas they are not familiar with. This is no improvement.

I think most of us are with you on this. All I can tell you is I am as frustrated as you with things.

This HVCC is the cluster(*&^ of the real estate industry. Can the people of New York state please elect a normal AG. Please, for the rest of us.

NOV

AMC's are the death of good appraisers and appraisals. Please send this blog and the link to my blog that I wrote last week on the emminent death of HCVV to anyone in the industry you can.

Thanks for the great discussion here! One thing I want to make clear, I am FOR HVCC...why? Because it has essentially ended the calls from Brokers asking for a "comp check" to see where the value will come in before they order the appraisal. This is a welcome relief not getting these calls. Also this was against USPAP....Unless of course they paid us for a Desk Review product, but they never did. They always wanted us to work for FREE when checking values.

I also think HVCC is good for the consumer...Gone are the days where there was pressure to hit a number. HVCC precludes the orders from showing the loan amount, the loan to value or an ESTIMATED value. So As for the comment about Wachovia wanting appraisers to hit the LOAN amount, they are breaking the HVCC guidelines there as the appraisers are not supposed to even see that information. I like the fact that we are finally left to do the job for which we are trained.

NOW as for AMC's you know how I feel about them, BUT they have been around for years and I am sorry to say they are HERE to stay. The FHA rules on adopting some of the HVCC language still allows AMC's to charge their normal fees for their service in addition to appraiser fees, but now the appraisal fee and the AMC fees will be separated so consumers can see what the appraiser was paid and what the AMC charged. So AMC's will either have to start paying the appraises more or they will have to start charging less for their service. There are some AMC's out there who only charge $50.00 over the actual appraiser fee, but there are many more who charge HUNDREDS over the appraiser fee. That cannot and will not be tolerated.

As for HVCC being DEAD and gone, well I just talked to 2 AMC's who talked to Freddie and Fannie and BOTH said that if HVCC dies on the vine, they will write into their regulations essentially the same workding as HVCC especially when it comes to no one who has a financial interest in the loan, ie Brokers, Realtors, etc can order appraisals from appraisers. They will NOT buy the loan if these rules are not followed. SO HVCC in essence is here to STAY.

The main thing I am for......Use only appraisers who have expertise in the area of the property and pay them their normal FEES.....PERIOD.

Yes we are waiting for the oversight committee to have one central place where we can complain about any pressure from Banks to commit any kind of Fraud. I am guessing the appraisal fraud that has increased is FHA as the bulk of the loans went FHA when HVCC took effect in the Conventional sector. I am quite sure HUD will follow suit with Fannie and Freddie on requiring HVCC type procedures for all appraisal orders even if HVCC is eliminated.

We need to realize that loans will fail if the home is not really worth it....and as long as we have experienced appraisers who are NOT under pressure to hit a magic number....we will gain stabalility in this market and move forward from there.

Mary,

Some of the reason you like HVCC are right on, but I still want the rules to go away. We need to take those good points and impliment them. I am doing are-fi right now and everything is in at the lender as of yesterday. Now, we have to wait until Thursday to order an appraisal. Las year, I could have ordered the appraisla a week ago if I wanted, locked this week and closed next week. I do not even know how long the appraisal will take so I have no clue how long of a lock I need. Way too diffivult from my perspective. I fell your pain about agents asking you to do work for free. Can you feel my pain as a loan originator about loss of time and control. My clients are upset that things take so long.

Good Lord, I'm glad I'm not doing residential appraisals subject to HVCC and AMC's...

Mary, please keep your sanity...

Have you ever thought of just giving up and doing non-bank work? I do very little bank work now and stay very busy throughout the entire year.

NOV

Charles: I would love to do that and each year I have been expanding my personal business. Since we specialize in Lake Lanier property we get a good deal of business from individuals and Realtor referrals and we too have started marketing Consulting Services so I do hope we can get away from lender business totally over the next few years.

Congrats on getting your business away from lender work.

IF the quality of appraisals has gone down (and I contend that in at least some of these cases the issue is that people haven't seen an honest appraisal in so long that they don't know what one looks like) it can be blamed at least partially on the fee structure of AMC's. When an appraiser makes half the money, then he or she has to do twice the amount of work in order to make a living wage. Hurried work is never good work. Along that line, many AMC's expect to have the report in hand within 24 hours after the inspection. How is it possible to really take all of the information gathered at the inspection and create a thorough appraisal with the best possible comps in that period of time? The only way is to pre-select your comps before you've even seen the property so you can inspect and photograph them at the same time (MLS photos are never allowed). If the comps aren't that good, oh well - it's what you've got. We need to be given the TIME to do a thorough job in addition to being PAID for a thorough job.

As for the FHA rules beginning January 1...FHA states that the AMC's have to charge their fee separately from the appraisal fee instead of hiding behind it and skimming an undisclosed amount from our hides. Hallelujah! They need to come out into the light and be accountable for their services and their very existence, which at this point doesn't even show up on the HUD statement. Once they have to charge separately for their fees, what would be their incentive for underpaying the appraiser? I don't think there is one. Their $200 (or whatever) will just be another junk fee to heap onto the pile and the "appraisal fee" of $400 to $500 will stay the same, only now it'll all actually be going to the appraiser. I don't really see a downside. Borrowers aren't going to lose loans over the separate AMC fees. They'll simply be paying for the service they're receiving from the AMC rather than having the appraiser pay for it.

Regarding the banks not knowing how much the AMC's are taking from the appraiser...I dispute that. Most of the AMC's I work with are, in fact, owned by the bank that they're placing appraisal assignments for. So in many cases (not all, of course) the banks have been complicit in this all along. I'm sure it's been a nice money-maker for them.

I for one completely support the HVCC. Appraisers and lenders/originators have been in bed with each other for far too long, to the detriment of honest appraisers, borrowers who shouldn't have been approved for a loan based on an inflated appraisal, and banks that have ended up losing their shirts on upside-down properties. Crooked appraisers and originators sure got fat and happy when they could collude to "hit the number", but at the expense of whom?

Elizabeth:

I am in TOTAL agreement with everything you have said. Some AMC's are not not owned by banks, but YES many of them are and so this is how they are making money after they lost so much due to the housing crisis.

"IF the quality of appraisals has gone down (and I contend that in at least some of these cases the issue is that people haven't seen an honest appraisal in so long that they don't know what one looks like"

You have nailed it right on the head. People are used to overinflated appraisals so when they complain that they are coming in so low...in reality they are coming in right where they should have been all along.....REAL opinions of value....What a concept! LOL

Thanks for your commentary!

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