Once the HVCC, Home Valuation Code of Conduct, is enacted the majority of lender and mortgage appraisal requests will be diverted through Appraisal Management Companies (AMCs). Although this may curb the evils of “lender pressure” on us appraisers, it will also take up to 50% of our fee!! For those of you who aren’t familiar with how AMCs work, they are basically a middle-man that routes all appraisal assignments and communications between the ordering party and a randomly selected appraiser.
For their role they take a healthy 30%-40% cut off the appraisal fee. For instance, if they charge the lender $350 for the appraisal they will pay the appraiser $210. Oh yea, AND the appraiser will have to wait 30 – 60 days to get their money. There are many faults with the HVCC but this is a major one; do they really think that lenders will receive better quality appraisals by paying appraisers a drastically reduced fee?
This will result in one of two things: Many appraisers who survive solely on lender work will leave the industry, possibly getting their Real Estate license and once again flooding the market with Realtors. Alternatively, the “Good” appraisers will move on to non-lender work, which will still pay them full fee. This will result in the majority of the AMC work left to be completed by trainees, new appraisers and those who simply aren’t experienced enough to move into another niche. And a final, 3rd option that we can all foresee is that appraisers will begin to look for ways to perform appraisals faster. After all, less money per assignment means we’ll need more volume to make the same amount of money. With that mentality many appraisers will start to cut corners and leave out excess research resulting in sloppy, possibly inaccurate real estate valuations.
Now picture this: A lender orders an appraisal through an AMC. Appraisal is completed by means of “fast-tracking” by the appraisal company to make up for the lower fee. The Lender has several issues with the appraisal and sends it back to the AMC for corrections. AMC contacts appraiser … can you see where I’m going with this? Now you have appraisals that are costing the borrower more, are possibly of lower quality AND are taking longer to receive.
In a nutshell this is NOT good for the industry as a whole. Unfortunately this is the direction our government wants to take. So who is going to save the appraisal industry?
