Appraisal Management Companies - Do they Make the Cut?

Real Estate Agent with Keller Williams Realty


 Or should I reword .. Did They Give Your Sales Price the Cut?  This seems to be the big chat at the water cooler in the real estate offices ... Appraisal Management Companies and the questions concerning the appraisal products that come from them. 

These companies formed to offer a convenient service to outsource appraisal assignments for lending institutions that did not have the ability to have staff appraisers in the past or financial means to set up a quality pool of appraisers to draw from themselves.  With the Round Robin requirement that appraisers must be an  independent random selection, these companies have become more prevalent.  They offer a financial relief to financial institutions so they won't have to hire staff to oversee this random selection process.

With the utilization of these Appraisal Management Companies has brought criticism that the appraiser quality hired by these firms is lackluster and has contributed to poor quality reports, unwarranted cutting of value of properties and a lack of confidence in the real estate industry regarding the role of these firms.

When an Appraisal Management Company is used, a part of the fee collected for a report is now split between the company and the appraiser they hire.  The rule "you get what you pay for" may apply at times with the appraiser assigned to do the appraisal.  The more experienced quality appraisers generally decline to accept assignments from these companies as the compensation for their work is just not present.  This may leave less experienced appraisers who are not supervised by a review appraiser and my have inferior training.

One of the huge complaints is the appraisers from these firms fail to give effort on the reports and simply slap on the comparables and do not appropriately adjust for points of difference when comparing to the subject.  To add further complication another complaint is poor attitude, not willing to consider pertinent facts, reconsideration of value, place an iron curtain up regarding amending their faulted reports, etc. 

What does all this mean to the consumer and real estate industry?  Frustration and a huge weak link in our industry that has not demonstrated improvement.  Needless sales terminated because a poor report reflects an erroneous value or is poorly prepared that the underwriter rejects.  Needless expense incurred by the consumer as delays or termination and the expense of reports, inspections, etc. are now down the drain as well as a loss of sale and purchase opportunity and a dream lost.

Is there an answer to this complaint?  Not until the quality and professional products of these companies is held to a standard and accountable for performance.  Are the Appraisal Management Companies making the cut .. the answer comes from what you have experienced .. Good or the Bad?

Comments (8)

Patrick White
Home Driven Realty, Inc - Baldwin, NY
Driven to bring New Yorkers home

Good Morning Connie

Thanks for the post and information. Have a great day.

Feb 17, 2011 12:48 AM
Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

Connie, in my experience, just like every profession, there are some good, some bad...lately, mostly bad!

Feb 17, 2011 02:31 AM
Judith Parker
ProStead Realty - Charlotte, NC
CRS, GRI, CMRS, Charlotte, NC

Hi Connie, I am tired of seeing all of the nail biting that occurs until that appraiser submits his/her final numbers.  One hates to move forward and incur other fees until the appraisal is complete.  Good post!

Feb 17, 2011 09:17 AM
Ryan Frost
Compass Lending Solutions, LLC - Draper, UT


Came back to your blog because yesterday's post was so good. You are striking a cord on this one. Buy?sell transactions only makeup a portion of the mortgage industry. In times of improving rates, loan officers can provide their clients with valuable savings with a refinance.

Pre-2009, HVCC (Home Valuation Code of Conduct), if an appraiser did a bad job, you did not use that person any more. If they inflated values, the underwriter would take them to task and you would not use them anymore. If their fee was high, you paid their price for a good appraisal or decided to look elsewhere. 

Post May 2009, you use an automated software system that does absolutely nothing but add a layer of disconnection between UW, LO, appraiser, and borrower. It also costs $100-200 more per appraisal and the appraiser makes less money for the work done so he/she does not care about it as much. Is that really beneficial? Poor ethics still exist and HVCC did not correct or stem that tide. 

At least with a purchase transaction you have a bench mark to look at- The contract sales price! Still it can be troublesome dealing with inexperienced, uncommitted appraisers who are disconnected from the process.

OK, I feel like I hijacked your post. I apoligize. I will keep following your excellent content. 

Feb 17, 2011 10:13 AM
Connie Goodrich
Keller Williams Realty - McKinney, TX
CRS ABR (McKinney Realtor)Texas

Patrick .. thanks for the visit & hopefully it gave you some pause for thought.

Kristin - Bad and awful!  Seems with these companies the experiences we hear are all bad.

Judith - the report is such a huge part of the process, make it or break it.  I see more & more that the contract calls for the appraiser to perform the report within a short period of time as to find out early on if an issue arises.

Ryan - love your comments and it is obvious you are well schooled in this process.  I am an appraiser and full time Realtor and even with my extensive appraisal background I have issues.  Hard to overcome poorly performed reports.  I too have hit a personal passion on this subject.  Appreciate the compliment of your response and return visit .. I'm flattered!

Thank you to all for your visit and comments!!

Feb 17, 2011 11:16 AM
Jim Frimmer
HomeSmart Realty West - San Diego, CA
Realtor & CDPE, Mission Valley specialist

I’m pretty much a fan not a fan of appraisal management companies. I can’t see that they have added anything useful to thte whole process.

Feb 17, 2011 02:09 PM
Teral McDowell
Referral Patners LLC - Murphy, TX

Hi Connie, I was recently in a seminar being conducted by a long-time, local appraiser who said pretty much the same thing you did. He also said he would not do business with the companies. It is interesting to see the subject surface again so quickly. I have not personally encountered a lost sale because of it or should I say yet. I do know about the nail-biting frenzy waiting for the final outcome. Thanks for your input.

Feb 17, 2011 02:30 PM
Not a real person
San Diego, CA

I have had lots of inspections cancelled because the appraisal didn’t work. That never happened during the boom years, but I do like the independent appraisers who tell you the true value instead of what the bank wants the value to be.

Feb 19, 2011 03:24 AM