Missing: Invoice For Appraisal Services

Typically when you sell a service, you include an invoice to the buyer or consumer for the services you provided.  This invoice lays out the products sold, the quantities, and services provided as well as the price or fee charged.

The invoice is a vital part of any business. It is an official document that businesses use to show the terms of the agreement, it specifies the buyer of the product or services, and it documents the terms of payment. An invoice allows businesses to keep track of payments made or outstanding payments due. Some business will even tack on fees if the invoice is not paid within a proper amount of time stated on the invoice.

As a Real Estate Appraiser and business owner, I always include an invoice to my clients for their records, and mine as well, and that invoice is always attached to the appraisal report—my product—when I deliver it to the client. When I say ALWAYS I mean my private clients. (“Private” means consumers hiring me directly or a direct lender who does not use an Appraisal Management Company or AMC).

You see, there is an issue with AMCs and the process of using invoices which we will get to in a bit.

For those unfamiliar with AMCs, they are the appraisal middleman companies put in place after the housing crash of 2008. Their intended purpose was to serve as a firewall between appraisers and lenders. They were to manage the appraisal ordering process by assigning orders to appraisers, doing some quality control before the report is delivered to the client (the client being the lender), and paying the appraiser for doing the appraisal report. While this sounds like a good idea, it has turned into a mess.

The mess I speak of is this: The AMCs make their money by tacking on a fee beyond the appraiser’s fee or they simply bill the lender and then take a portion of that stated appraisal fee.

For example: A lender is told the appraisal will cost $600. The lender agrees and the process begins. The AMC then does two things. First, they take the portion they claim for their services out of that total fee. Second, they set out to find an appraiser willing to accept the assignment for the lowest fee possible so that the AMC can make a larger profit. What they don’t tell the lender is how much of the “appraisal fee” the AMC keeps versus how much the appraiser is actually paid.

Some states like Georgia have laws requiring that the appraisal report specify both the AMC fee and the fee paid to the appraiser. While this is a good thing, without reading the entire report, the lender/borrower may not see where the fee actually went. It gives the impression that the AMC is the entity that developed the appraisal and wrote the report.

This brings me to the whole point of this post and one word: TRANSPARENCY. Where is the invoice that would break down the fees paid and to whom? Where is the invoice that states the terms of payments? It’s missing from the report. Why is that? I’ll tell you why. Most AMCs specify in their engagement letters that the appraiser is NOT to include an invoice within the report. Some will have the appraiser upload it separately and some will bypass an invoice altogether. Why is that?

It’s part of business right? You get an invoice for your lawn service, from your mechanic, from other businesses that you order products from online and so on. So why are appraisers not allowed to send an invoice attached to their appraisal product with the stated fees for their service? The answer is simple… AMCs don’t want to make it easy for you the lender or the borrower to know where the money went and for what. It makes it easier for the AMC to take more of the fee they quoted for the appraisal and pay the appraiser less. Imagine being charged $600 for an appraisal. The appraiser would normally charge,  say $350, for that service. You’ve just paid $250 to a middleman to manage an order. Did you know that? As a lender or a borrower, are you being told the appraisal would be $600 or are you being told it will cost $350 with a $250 fee to the AMC for whatever they do? Are you aware of the breakdown of the costs? Probably Not.

Another aspect of the problem is this: The Bid Request Are you aware that many AMCs broadcast bid requests to many appraisers at once? Specifically to find the cheapest so that they can retain more of the total fee? Probably not. The AMC sends out requests for bids on a job, although they’ve already charged you $600. If they look long enough, they’ll find an appraiser who will do the appraisal for $250, and the AMC has a minimum fee of $100 per order. They charged you $600 for the Appraisal. That leaves $250 left over. Shouldn’t the borrower be given a refund for that $250.00? I would think so, however it’s my guess that $250 will go into the pockets of the AMC. Are you okay with this? I know I wouldn’t be.

This is where transparency comes into play and the invoice breakdown will show just that. To be fair, not all AMCs practice this behavior. Some actually only take a set fee for their service, pay the appraiser customary and reasonable fees, and they disclose to the appraiser the fee breakdown. But there are very few of these reputable AMCs out there. Ask any appraiser. 

This practice of not including an invoice needs to stop. Consumers have the right to know where their money has gone and for what.

A recent House bill has been introduced and assigned to the Financial House Committee, which is a positive step in the right direction. In short:

The bill states that all fees SHALL be stated on the settlement statement and broken down into appraiser fee and AMC fee. Now lets take this one step further and start allowing appraisal business owners to include an invoice with the fee breakdown in ALL reports. While the AMC may not be able to hide this from the consumer, they are still hiding it from the appraiser. Why?

It’s time for another change. It’s time to allow all parties involved in the process to know who is charging what fees and for what. Is there some big secret the AMCs are hiding from appraisers? Will allowing the appraiser to know what the AMC is making be an issue?

The solution is simple: Separate the fees paid to the AMC and the appraiser. Allow appraisers to include an invoice on every report that breaks down the fees for services. If this practice of AMCs charging a fee then paying a separate fee to the appraiser is to continue, then its only right that it be disclosed on an invoice for all parties to be in the know. Then again, AMCs need not take money off the top of the appraiser’s fee or add money to it to make a profit. This fee should be paid to them separately. If lenders want to use an AMC ( which they are NOT required to do) then the AMC and the lender should have an agreement in place regarding the AMC fee to be paid per order. The Appraiser fee should be what the lender/appraiser deems acceptable in their market for the scope of work and service provided, and should be paid directly to the appraiser from the borrower or from the lender, NOT THE AMC. AMCs should never have to touch any money owed to an appraiser and if the reason is unclear, please see these two previous blog posts:

https://thepeoplesappraisalblog.wordpress.com/2019/02/12/planet-of-the-cheapskates/

https://thepeoplesappraisalblog.wordpress.com/2019/01/30/appraisers-outraged-end-the-appraiser-payment-issue/

Do you know what you are getting into?

I have written many blog posts here, mainly for the consumer to read and understand what is actually happening in the world of Real Estate Valuations. My blogs range from being overcharged for appraisals so the middle man (the appraisal management company or AMC) can make money, lenders still pressuring appraisers to hit a value, and now having untrained and unlicensed people perform inspections (see my last blog entitled “Deception”).   

Well. This blog is for the Appraiser as well as the consumer.  I hope you read it and understand the extreme importance.   

Recently, as we all know, the new “Hybrid appraisal” has come onto the market. Fannie Mae has developed the 1004P form.  Lenders and AMCs have developed their own products as well, with false information claiming appraiser shortages, claiming they will be faster and better, and claiming they can still be done accurately saving consumers hundreds of dollars.  First thing, we all know that there is no shortage.  Secondly, there is no proof that these are faster and better products, and thirdly, where is the proof it’s saving them money?   

There is proof all over that AMCs are charging consumers outrageous amounts of money for a full appraisal, only to find the cheapest appraiser so they can make a bigger profit and pad their pockets. (Read my blog entitled “What’s Not In Your Wallet”). Who’s to say they aren’t charging the consumer the same or close to the same fees for these so-called faster Hybrid products?  

If you are still in your basement or even have no internet access, then you should know what this product is. If not, here is a quick synopsis. The definition of Hybrid: A thing made by combining two DIFFERENT elements.    

Elements of a Hybrid Appraisal: 

1) An inspector to gather data, take pictures and measure a home

2) A licensed or certified appraiser to complete the valuation

So what’s the problem here, you might ask?  Well, let’s just point out the main issues.  

1) Using an unlicensed and or untrained person to collect the data, measure the home and pretend to act like an appraiser. Appraisers have had to endure years of training under a supervisor, pass state tests, take continuing education, and make sure they abide by USPAP and state laws. The non-appraiser inspector?…a couple hours of training, if that! Hell, they don’t even have to be background-checked or carry any type of insurance. Seriously? Lenders, AMCs and the Government are ok with having just anyone out there with a heartbeat come to your home and gather data, and take pictures. (Yes. Appraisers have ethics and rules they’re bound by, so you never know what these unlicensed and non-background checked people will be taking pictures of and putting all over the internet.)   Maybe it’s worse. Maybe the non-appraiser person who comes to your home just got out of jail, maybe he/she is a pedophile, or worse, maybe a rapist or paroled felon.  Are you okay with this?   

2) Appraisers are in place to ENSURE THE PUBLIC TRUST!!!!  TO PROTECT THE CONSUMER. This isn’t something that just happens overnight. Years of training and supervision plus education and tests have to be overcome to gain the title of Certified Appraiser. Appraisers have the experience to note that a home has polybutylene plumbing…that “salt” on the block basement walls is a sure sign of past or current water intrusion issues, the ability and knowledge to look for things NO ONE else would even think to look for, to correctly measure the home for proper livable square footage and basement square footage per correct standards, to correctly judge the quality and condition of the subject by observing all aspects of a home upon inspection, and in the end be able to combine that inspection knowledge with market data to accurately value your home. Appraisers have to follow USPAP (Uniform Standards of Professional Appraisal Practice), which if you don’t know what that is, it’s pretty much the Bible and laws for appraisers.   

The non-appraiser inspectors:  Well, they don’t have any rules to follow, they aren’t trained to see the things appraisers are, they don’t have to have the extensive education or practical on-site knowledge and training. They just get paid to take pictures, take notes, and check off boxes on a sheet. Do they know the different types of plumbing? The differences between a bi-level home or a split level?  What is considered a basement and what is not?  The different types of home siding?  The quality or condition of a house in its current state? If I had to bet, I’d say no.   

All this leads me to this point: Recently, an AMC named Clear Capital, who has already been known to put out a bad Hybrid or desktop product. I have seen where an investor bought a townhome in Atlanta Georgia based on the output of this particular product. The appraiser was licensed in Georgia, however resided in a different state some distance from Georgia, and a third party non-appraiser inspector visited the property. Upon refinancing this home, a real, true and detailed appraisal was done by an appraiser who valued the home way lower than the Clear Capital Clear Val Hybrid desktop appraisal result. We won’t talk specific value, but it came in WAY less. Reasons? The Clear Val comparable sales used had been very inaccurate. Comp 1 sold as a 3-unit block, Comp 2 sold as a 4-unit block and comp 3 sold as a 2-unit block.  To value a townhome. This was never addressed in the Desktop appraisal. Well, needless to say the buyer got a terrible, over-valued product that he relied upon.   

Ok so where am i going…HERE.  Clear Capital recently sent an email to appraisers on their panel. Go ahead and read it….

  

Back? I hope you read what I just did. They are NOW telling appraisers that the Quality and Condition ratings, WHICH ARE TWO VERY IMPORTANT ASPECTS of an appraisal, will now be left out by the inspector so that the appraiser can make their own judgement. Wait. What? The appraiser should make his/her own judgement on pictures that may or may not be taken properly & an observation by Johnny Superstar Inspector who may have missed many things due to having no training or knowledge?  

But wait there is more….

The AMC goes out of their way to have you consider language they came up with for your report. First they have determined the scope of work for you. Secondly you are agreeing to this scope of work and that the third party inspector is sufficient enough to collect the data to comply with the Scope of work. HUH?

Now they have also admitted here that these inspectors were previously offering appraisal opinions via Quality and Condition ratings. Say what? They also state that there are many other areas within these reports that are also appraiser opinions that are being given by non appraisers. Makes sense right?

What purpose does this serve for the Consumer? Seriously. I know I am sick and tired of these AMCs and lenders taking advantage and spewing out garbage to pad their pockets. As a consumer, I would be livid if I found out that the person in my home is NOT qualified to do what they’re doing. The person in my home has no knowledge, training or even a background check. The person in my home measured it incorrectly. All of which adds up and can lead to major valuation issues. Sure, the appraiser is there in the end and doing the valuation on your home, however if they get bad data from these so-called inspectors, then that data is going to lead to a bad valuation of your home. Just to save a couple bucks on your biggest asset. What a shame.   

So consumers, be aware of what you are getting into and make sure to find out if a licensed expert is coming to your home and not Johnny Superstar Inspector. Make sure you get all the details and make sure they do things properly.   

Appraisers,one word: LIABILITY. Inspectors have 0% while you have 100%.  Can you really afford to risk your career over $50-$100??   

Of note, this how I see this playing out. 

Consumer: “You valued my house wrong as you stated it was in below average to average condition.”  

Appraiser: “Based on the information I had, that is what I determined.”

Consumer: “Well you weren’t here and didn’t see everything and have no idea what the quality and condition are.” 

Appraiser: “Correct. I based it on the information and photos the inspector sent me.” 

Consumer: “Well it’s incorrect and I will be filing a complaint with your state board and possibly looking to sue you!”   

In the end…Crickets…Can’t blame the unaccountable inspector since, well, they have 0 liability. Sorry, real estate appraiser. You’d better hope your E&O will cover you.   

I’m not an Appraiser, You just think I’m one

Ever see the AT&T commercial where the surgeon walks in and he says ” I Just got reinstated, Nervous? Thats ok so am I “. If not see here: https://youtu.be/1YT3erQZoq4

Or the late 1986 commercial with Peter Bergman that states ” I’m not really a doctor but I play one on TV”. If not see here https://youtu.be/ts0XG6qDIco

Well get ready Consumers because the person that is about to visit your home IS NOT an appraiser or just pretends to play one without the proper training.

See, Fannie Mae and the Appraisal Management Companies (AMCs) are ready to send appraiser imposters to conduct appraisal inspections on our homes.  These same AMCs were created to manage appraisal processes for lenders, but without laws, standards or accountability, their self-defined charters have morphed into other functions.

They sell their services as being the only way for a lender to procure the best “Qualified” appraiser for a particular assignment.  In fact, they will shop around until they find the cheapest appraiser.  Hey, we all like cheap, right??  We routinely shop for bargain prices on all kinds of things, but honestly, would you settle for the cheapest mechanic trusting he’ll keep your car safe, hire the cheapest plumber for you home’s systems, or seek out the cheapest lawyer to safeguard your interests??

We want the best car repair service, the one with the best reviews. We research the best qualified plumber to reduce the risk of more costly household issues later. And when we face a lawsuit, or have to sue to retain our rights, we pretty much want the best legal representation available, right? So why would we settle for low/no standards when it comes to our homes, the most valuable single asset most of us will ever own? 

That’s essentially what’s happening when an AMC sends a “non-appraiser” to photograph, measure, sketch, and observe a property, it’s quality, condition, and surroundings instead of using a qualified appraiser. That’s the AMCs’ bifurcated appraisal where the observation function is totally isolated from the valuation.

Don’t we have a right to expect that someone coming into our home, to develop an opinion of its value, is specifically qualified to do so? Aren’t we trusting that person to gather the information necessary to develop an accurate valuation of our real estate? And yet, are we willing to allow an AMC to instead send an appraiser imposter, someone who has little/no training, to perform the observations that will be the foundation for the value opinion of our home? 

As a consumer, ask yourself those questions another way: Am I really okay with someone coming into my home, expressly to determine its value, who has zero appraisal training, zero knowledge of what is significant to observe, zero valuation experience, and not insignificantly, zero liability? That party’s only accountability is to hand over their gathered info to an experienced appraiser who will then do their best, under severely limited circumstances, to come up with the value of your home.

Why not just have a real appraiser do it? The fully qualified, certified, bound to standards of ethics and competency, continually educated appraiser? Good question

Ask yourself that again… Are you ok with someone coming to your home that has 0 training, 0 knowledge as to what to look for and 0 experience only to hand that info over to an appraiser who may or may not be experienced to come up with the value of your home? Why not just have the appraiser who has all these qualifications already do it? Good question right?

Lenders and Fannie Mae along with the their Appraisal management companies have decided that to speed up the process, its better to have unqualified people go out and obtain the information on a property and submit that info to an appraiser to do a valuation. Read that again. “Lenders and Fannie Mae along with the their Appraisal management companies have decided that to speed up the process, its better to have unqualified people go out and obtain the information on a property and submit that info to an appraiser to do a valuation.” This is like me an appraiser coming to your house to tell you how to run your electric lines on your new addition. I have 0 clue but hey I’ve seen 1000’s of homes and should have some ideas right?

Their reasons? 

1) To speed up the process, in theory. The reality is that the AMCs are spending days and weeks shopping for the cheapest and fastest appraisers before an appraisal assignment even makes it to an appraiser’s desk. 

2) To make it cheaper. For a bifurcated appraisal, they’ll pay an unqualified person $25-75 to observe the property, and then have an appraiser do the rest at $50-150, all while charging the consumer far more so that the AMC can pocket the substantial difference. 

3) To take advantage of the available technology. They’re enamored with “Big Data” and are pushing appraisal waivers in lieu of appraisals. They think technology is great with all the appraisal data they’ve compiled over the years. However, look at Zillow and her sister sites where the estimates are based on broad algorithms and not property-specific. 

Frankly, if I had to guess, I’d say 90% of their valuations are over-inflated. Does it make any sense at all to depend on such a product? Is it worth saving a couple hundred dollars when the value of such an important asset—our real estate—is at stake?

Let’s be honest here. AMCs bring nothing valuable to the valuation process. They were put in place after the housing crash to serve as a middle man between the appraiser and the lender. However, they haven’t been regulated, and their main lobbyist group, REVAA (Real Estate Valuation Advocacy Association), seems to think they have some sort of power, now that they are creating products that ONLY benefit AMCs and not consumers. 

Want an example? Coester VMS, an AMC who has gone out of business, owes millions in fees to appraisers for jobs completed. REVAA allowed this company to be a part of their network, to be represented by REVAA, even knowing that Coester VMS had a poor history as a company. REVAA’s panel includes some of the most notorious, low-paying AMC firms, and those that have decided to be more than a middle-man and take advantage of the consumer. 

Don’t believe me? Here is another example.

Clear Capital. An AMC out of California that has a product called a ClearVal. I won’t belabor the description of this product as it has already proven to be not only deceptive but completely inaccurate. There are many articles written about this product and how the company uses out of state appraisers to perform the analysis.  So now adding unqualified inspectors to the mix, with the out of state appraisers performing the analysis….. What could go wrong???   

Think about this…. We will go out there and find the best TV to buy and pay for it. We will go out there and find the best lawnmower and pay for it. Why? Because we want the best so we don’t have to deal with potential issues down the road. But when it comes to valuing our home, does it make any sense at all to allow someone, with literally zero clue about appraisal, to be the individual making the observations that will inform the appraisal? 

Makes no sense to me…especially when that 50″ TV is sitting in the pawn shop or on eBay because I decided to allow Johnny-No-Knowledge to collect the data for my home for $50.00 and then expected an appraiser, who consequently had zero clue about my home and its surroundings, complete a valuation with uninformed secondhand data.

It amazes me how many people complain about the tax assessor increasing taxes based on incorrect info, and then they’ll carefully seek out someone experienced to solve that problem, typically an independent local appraiser with the training and experience to provide accurate market-reflective data. If we can be that outraged by the county assessor, then how can we NOT be outraged by the ill-advised shortcuts, the untrained individuals, and the non-experts doing our home inspections to value our homes?

I will end with this. When we choose to use these cheap and fast products and untrained people, we have no one else to blame when things go south, and they will. It’s exactly the same dilemma as buying a car without the due-diligence research or buying a home and skipping the home inspection. Those choices come with consequences, all of which rest on the shoulders of the consumer and nowhere else. Think About It!!!

A Little Push Can’t Hurt Right? Wrong!!

Well, here we go again.

In my previous blog posts titled “Round and Round” and “Pressure My Story”, I spoke to examples of how lenders and/or AMCs have been pushing and pressuring appraisers to hit certain values on transactions. If an appraiser did not hit these numbers, or make changes to make the transaction work in the lender’s favor, the appraiser would be threatened with non-payment, removal from appraiser panels, and/or blacklisted. If you haven’t read those blog posts, feel free to go back and have a look. This post, however, is about another issue that has recently come to light.

Let me set this up for you. A consumer is looking to refinance their home. They get everything set up on their end and ready to apply for the loan. But as the process with the lender gets going, they get a letter like this one below from the loan officer or banker:

I don’t know about you, but in my opinion, this violates Dodd Frank, Appraiser Independence. It clearly shows that issues of the past are still being presented today, just in a different way. It’s not necessarily the lenders that are directly trying to influence values (although many still act as described in previous blog posts), but they are instructing the homeowners to exert influence, and as this person said, “PUSH” the appraiser for a certain value because the lender is prohibited from doing so. The very person the consumer is trusting to do what’s right on their loan, is now instructing the prospective borrower to “SELL YOUR HOME to the appraiser” to achieve the magic number that will close the loan. Forget ethics, forget trying to do what’s right, and forget the risky position foisted on the consumer by the loan officer. Have we as members of the national economy not learned anything from ten years ago?

Since the crash, laws have been put into place to protect Appraiser Independence and YOU as the consumer. The Dodd Frank law specifically spells out what must not happen among lenders, AMCs and appraisers. 

The following is directly from Dodd Frank:

Dodd-Frank and discussions between appraisers and agents

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) prohibits “any act or practice that violates appraisal independence…” It also states:

It shall be unlawful, in extending credit or in providing any services for a consumer credit transaction secured by the principal dwelling of the consumer, to engage in any act or practice that violates appraisal independence as described in or pursuant to regulations prescribed under this section.

For purposes of subsection (a), acts or practices that violate appraisal independence shall include—

‘‘(1) any appraisal of a property offered as security for repayment of the consumer credit transaction that is conducted in connection with such transaction in which a person with an interest in the underlying transaction compensates, coerces, extorts, colludes, instructs, induces, bribes, or intimidates a person, appraisal management company, firm, or other entity conducting or involved in an appraisal, or attempts, to compensate, coerce, extort, collude, instruct, induce, bribe, or intimidate such a person, for the purpose of causing the appraised value assigned, under the appraisal, to the property to be based on any factor other than the independent judgment of the appraiser;

‘‘(2) mischaracterizing, or suborning any mischaracterization of, the appraised value of the property securing the extension of the credit;

‘‘(3) seeking to influence an appraiser or otherwise to encourage a targeted value in order to facilitate the making or pricing of the transaction; and

‘‘(4) withholding or threatening to withhold timely payment for an appraisal report or for appraisal services rendered when the appraisal report or services are provided for in accordance with the contract between the parties

Now that you have read the above excerpt from Dodd Frank, notice that in #1 the word INSTRUCT shows up twice. The example provided here appears to be a clear violation, by the loan officer, of the law as it’s written.

Now read #3 again. Yet another clear violation of the law as it’s written. This is a perfect example of the collusion that still goes on today, besides other indirect ways that lenders influence value and violate appraiser independence.

Consumers already face many challenges when obtaining a loan. They shouldn’t have to face another with loan officers’ unethical and illegal practices. Influencing a value just to make a loan is not protecting you the consumer. The consumer shouldn’t be directed to influence the appraiser in order to get a professional opinion of the value of their home. The loan officer shouldn’t have to instruct the consumer to influence the value because he “can’t talk to the appraiser.” If the value is there to make the loan, then great. If it is not, the lender should move on to the next loan and the consumer should move on to their own next step. 

This is why appraisers exist: to provide an unbiased and honest opinion of value of a property. Where are the ethics and laws to protect the consumer from these types of lenders? Today’s lenders want fast and cheap and will do anything they can to close a loan. They will use desktops, appraisal waivers (which the consumer should never agree to without an independent appraisal as well), AVMs, and yes, they will do exactly what this person did in the example above. Is the consumer protected? Does the consumer’s confidence in the integrity of the loan process improve because the loan officer is asking them to press the appraiser for a value? My answer is NO

The only unbiased part of the process is the Appraiser and it should remain that way. The Appraiser should not be influenced in any way at all in order to give you the consumer the best professional opinion of your home as possible. The Appraiser has no interest in the transaction, is the expert when it comes to the valuation process and is bound by USPAP (Uniform Standards of Professional Appraisal Practice) as well as state and federal laws. Consumers should remember this and remember that Appraisers are not trying to screw you out of a loan or make things difficult for you. Appraisers are there to protect the public trust, you the consumer and provide the lender with an accurate opinion of market value.

I suggest to any consumer reading this to remember that your home is most likely your biggest asset and that obtaining a loan based off an overvalued valuation set forth by influencing the professional appraiser may come back to bite you in the end. All because you were instructed to do so by the loan officer or others wanting to make your loan close and pad their pockets. Do you really want that issue later on?
Think about it…

Planet Of The Cheapskates

Where to start with this? Do I have to refer you back to my past articles like “What’s Not in Your Wallet or Appraisers Outraged?” Where do we even begin….

We begin here. Another story of an Appraisal Management Company going out of business owing tons of money to appraisers for services they provided. Coester VMS that was once one of the biggest players in the game closed its doors recently. They closed them leaving appraisers with thousands of unpaid invoices for services that who knows if they will ever be paid for. As stated in previous blog posts, these amcs are acting as agents of the lenders that choose to use them. The lenders sign contracts with the AMCS to provide a service to them in order to help keep Appraiser Independence as stated in Dodd Frank legislation. So who is really responsible for payments to appraisers. The Lenders? The now out of business AMCS? Who? Who do appraisers turn to when the AMC goes out of business owing them money? Many states but not all require a surety bond in order for an AMC to do business in that state however as was the case in NC, the bond amount was only $25,000.00 and appraiser claims exceeded the amount in 4 days leaving most appraisers to be paid on a pro rated basis. So who else is responsible? Maybe you the Borrower? Do we really know? The laws are so vague it’s actually quite disturbing.

So lets start with a good story. A story of a lender named Sierra Pacific out of CA that has been bombarded with requests from appraisers to pay fees owed due to the now defunct Coester VMS appraisal management company. Sierra Pacific was the lender using Coester VMS as their AMC. When Coester decided to close its doors and leave appraisers unpaid, Sierra Pacific stood tall and has since been doing the right thing. They are paying appraisers for work done for them even though Coester VMS took the money from borrowers and ran. They have stepped up to pay appraisers for fees owed to them for prior appraisals. So bravo to you Sierra Pacific. We thank you for doing the right thing. See the letter below and know that Sierra Pacific is a quality Company.

Now we get to Planet Home Lending.

This was another company that had entered into a contractual agreement with Coester VMS. They are the Lender that hired Coester to be their agent and provide a service to them. Appraisers have contacted Planet Home Lending demanding payment for appraisals done for them. Unlike Sierra Pacific, Planet Home Lending decided to take a different route as seen below:

So what does this all mean??? You have one lender paying appraisers due to their admission they used a deadbeat AMC to represent them and want to do what is right. Yet another flat out states they don’t care nor will they pay due to not having an agreement with the Appraiser directly.

Here is the ultimate question? Who is responsible? The lender doing the loan or the AMC representing the Lender? Does it matter If the lender collects the fee for the appraisal from the borrower and passes it along to their agent to pay the appraiser or if the agent or AMC charges the borrower the fee directly? Good question. Why? Because this is the only profession and industry where there is a third party making contracts, taking payments on behalf of others, and making decisions with your bank or lender, while the actual entity that performs the service is left out. So another question? Why are AMCS taking payments directly from the borrower? What about Escrow accounts like Realtors have to use or how about the borrower pays the appraiser directly. We are in a day and age where borrowers can pay the appraiser directly via numerous avenues due to technology, Apps on devices, PayPal, credit cards or yes even cash or check. Why for the nth time do we have to have appraisers go unpaid for services due to an AMC failure? WHO MADE THESE TERRIBLE AND RIDICULOUS LAWS? You guessed it. Our government, who is indifferent to small businesses, the backbone of the economy but they sure will support the banks and lenders.

Enough is enough and as consumers you should be outraged as well. You could one day wake up with a lien on your home. Maybe a lien on an investment property? Maybe you just get calls from the appraiser who wants his payment. Are you ready for all of that?

Your money is not going where it should but instead enriching the lives of others at the expense of real estate appraisers and small business owners due to these poor laws, legislations and the blind eyes not paying attention.

It’s time for a change. It’s time to have lenders pay AMCS separately from the appraiser . Its time for TRANSPARENCY and ACCOUNTABILITY! It’s time for appraisers to be paid fairly, rightfully and on time. It’s time to change the poor laws.

Appraisers Outraged! End The Appraiser Payment Issue!

” I am owed $20,000.00″. “I am owed $2000.00”. “I am owed $500.00”. “I am owed $1500.00”. These are just some of the quotes pulled from various groups, message boards and forums from appraisers all over the country that are owed money for the appraisal services they provided. Services they provided for a Lender, Mortgage Company or Bank through an Appraisal Management Company or AMC as they are known.

What’s an Appraisal Management Company you ask? Well for those that do not know, AMCS have been around a long time. Appraisal management companies (AMC) are business entities that administer networks of independent appraisers to fulfill real estate appraisal assignments as Agents of the lenders. However it wasn’t until the financial crash of 2008 that they became a permanent fixture in the Real Estate Process due to the HVCC (Home Valuation Code of Conduct now known as DODD FRANK). They were installed as the “Middle Man” between appraisers and lenders to help insure Appraiser independence and manage the appraisal ordering process. Overnight many of these Amcs were formed and began entering into contracts with the lenders to perform the duties of managing the appraisal process as Agents of the Lenders. Notice how Agents is in Bold? I’ll explain shortly.

So now that we have that out of the way lets get into the real issue here. Appraisers are being left unpaid by Appraisal Management Companies and it’s an outrageous, painful and terrible result of poor legislation and regulation. I will compare this to the recent Government shutdown. The outrage of federal workers not getting paid. The outrage of them not being able to pay bills. The outrage of how could this happen. It’s nice to see all the outrage over this but where is the outrage over appraisers being owed money and not being able to pay bills? Exactly. There is none because no one knows about it. Let me give you some insight and maybe you too will have some outrage.

First lets go back in time.

2011 an AMC named Appraisal loft closed its doors unannounced owing appraisers Millions. The scramble began by appraisers to get their monies owed. Some appraisers were successful but most were not. In this case Lenders were collecting the fees from the borrower and passing them along to Appraisal Loft to pay the appraiser. But over time that didn’t happen and the doors closed leaving appraisers not paid for their time and services.

2012 an AMC named JVI Solutions closed its doors owing appraisers Thousands of Dollars. Once again appraisers scrambled to get their monies owed however only some were able to do so. In this case as well Lenders were collecting the fees from the borrower and passing them along to Appraisal Loft to pay the appraiser. Some appraisers sued the lenders that used JVI and one in particular won his case (no update on if he actually received the monies owed). However others were left without payments ever being made.

2013 an AMC named Evaluation Solutions filed bankruptcy thus leaving appraisers without payments. JP Morgan Chase was the largest client of Evaluation solutions and through a courts decision in Florida the Amc and Bank were absolved of all payments and liabilities to appraisers. Once again borrowers paid for appraisals to the Lender and the AMC failed to make those payments to appraisers.

2018. An AMC named CoesterVMS goes silent and leaves appraisers unpaid. Per numerous articles, web searches & message boards appraisers are owed thousands of dollars and hoping to get paid. According to other various articles, blogs and web searches, Coester VMS stopped responding to appraisers, was paying them late, owed payments from over 6 months and more and now is apparently out of business. Once again appraisers are scrambling to get paid. Many have called the lenders that used CoesterVMS and some lenders have paid up however most have not. Many Lenders as in the other examples state they already paid the AMC for services and are not responsible for any further payments.

There are a couple other AMCs that have ceased business between 2011 to now as well. Some have tried to settle with pennies on the dollar and some have just disappeared. Hell there are some that just rename themselves and continue to not pay appraisers.

Now let me explain this. Most states have AMC laws and regulate them. Many require an AMC to carry a Surety Bond in order to do business in that state. Some don’t. So referring back, one AMC had a surety bond in NC that was for $25,000. When it was announced that the AMC had canceled the surety bond, appraisers flocked to file against that bond for payments. Within a day or so the bond was exceeded. Yes $25,000.00 was exceeded in 1 state. Imagine the filings in other states since the company operated in all 50 states plus Puerto Rico.

So a question comes to mind. If these AMCs are doing this much business and handling this much money then why are they only required to carry a $25,000.00 Bond? A million seems more reasonable.

This brings me back to the beginning and the word Agent. As an independent appraiser I work for myself. I am considered an independent contractor. According to the laws and regulations an AMC works as an Agent of the lender. If they are acting as an Agent (they have a signed agreement), how come the Lender is not ultimately responsible for making sure the appraiser that their Agent obtained is paid properly and on time? Think about this for a minute. The borrower paid the Lender and the lender passed that payment to the AMC to pay the appraiser however no payment was made. Who would you hold accountable?

If the lender takes payment from the borrower and then passes it along to the AMC for the appraisal then shouldn’t the lender who hired this Agent make sure they are doing things correctly? I would think so. I’d like to know if my agents were doing things correctly representing me.

Now what can be done here? I have a couple thoughts:

  • The laws need to be redone to make all parties (Lenders/AMCs)responsible for paying the appraiser and in the event the AMC goes under the Lender takes full responsibility.
  • As discussed earlier, A Larger Surety Bond of at least $1,000,000.00 should be required.
  • Lenders pay the Appraiser their fee for the report and pay the AMC they hire a separate fee. Separate checks or transactions.
  • Escrow Accounts. Money is collected by the lender and put into an escrow account OR if the AMCs do collect money they take their fee and put the rest in escrow.
  • Do not let AMCs handle the appraisal fees. They should have nothing to do with collecting or paying appraisal fees.
  • Go back to the days when the actual borrower paid the appraiser at the door for the appraisal service. With technology today the appraiser can be paid quickly via many different payment options without having a 3rd party commingle in the process.

Enough is Enough. It’s time to change the way appraisers are paid for their services. With all the talk of technology and changing the way appraisals are performed one would think with said technology appraisers can be paid properly. It’s time make changes and that time is NOW!

**** all info regarding AMCs was researched via web searches, blogs, and other public articles*****.

AGA Is On Your Side

We have all seen the the commercials for Nationwide Insurance and that they are on your side. As real estate appraisers do we know who is really on our side?

There are so many organizations that represent appraisers. Many claim to help appraisers, many do help appraisers, many are out there to fight for appraisers, many offer education and many just want us to join them in their own agenda journey made up of false narrative and false promises. I’m not here to force you to join anything. I support the state coalitions and I also support the organizations that are willing to help appraisers even if I’m not a member. But there is one organization that puts YOU, the appraiser, at the front of the line every time. That organization is the American Guild of Appraisers or the AGA.

First lets get this out of the way. The AGA as many think is a Union. Well that’s not true. The true Fact is that the AGA is a Guild with Union affiliations. These affiliations allow the AGA to offer benefits, tools and resources to help support the appraiser and as the Guild grows so do the benefits of those union affiliations. Many big organizations that represent appraisers have the funds to do things the AGA cannot at this point in time. However the AGA does one thing most other organizations don’t and that is work for their appraiser members on a one on one basis and help them with issues such as: blacklists, getting paid, & state board complaints. Yes. All of these. The AGA works hard for YOU, the Appraiser. They don’t stop there. They even work on national issues in support of or not in support of issues pertaining to the Real Estate Appraisal Profession with other organizations to make a change.

To clarify more I personally say the AGA is like car insurance. Kinda like your E&O insurance but better. You pay car insurance just in case something happens for the year. If nothing happens you are at a piece of mind knowing you had it. But what happens when you get into an accident? The insurance company is there to help cover you. Well the AGA is the same way. You pay a fee for the year and if you get in trouble with a complaint, a blacklist, not getting paid etc, you now have the AGA there to work hard for you to help resolve this. Don’t believe me? Here is one member that was kind enough to write a review on the AGA:

Being a real estate appraiser can be challenging.  We don’t advocate for our “clients” which could be a bank, a homeowner or a potential buyer.  We advocate for public trust.  Yeah, try explaining that to most people who engage you for your services.  There are often times when an appraiser performs his or her job correctly that one party may be negatively affected by the outcome.  Of course, this is no new story to any of us.   Every appraiser has that little voice in the back of their head saying, “it’s not if, it’s when.”  When will that certified letter show up for your state board?  That’s right, somebody filed a formal complaint on you as an appraiser.  Of course, this type of thing can happen for many reasons, some of which are warranted, some of which are not.  Good news, you don’t have to be alone.

In mid-2018 I had one of these certified letters show up for the first time in my career.  My immediate reaction was stomach sickness, literally.  After the initial shock and review of the complaint, I took a breath and started tapping my resources on the best way to handle the situation.  I reached out to a few of my peers for guidance and was reminded that I was an active American Guild of Appraisers member, the AGA.  Once I contacted Jan Bellas, she very professionally ran me through the motions of what the AGA was going to do for me and how WE were going to handle the complaint.  This initial phone conversation was probably the most reassuring thing I have EVER heard in my appraisal career.  

Once I accepted the help from the AGA I was instructed to send the same information to her (Jan) that the state was requesting.  Within a few days the head appraiser of the review committee, Mike Ford, responded with a VERY detailed peer review letter of my appraisal, work file, and complaint associated.  I think the best part of working with Mike on my complaint was his brutally honest and matter-of-fact approach.  Some of you may know Mike, and if you do, you know what I am talking about.  I’m very confident if I were to have been I the wrong, he would have told me.  However, he STILL would have been in my corner to help me through my predicament; even if it meant telling me things I didn’t want to hear.  The good news for me was that I wasn’t in the wrong.  After only 2 months of the pending complaint being opened, the state notified me that no action against me was going to take place.  Those of you that have been through this know what kind of relief comes over one’s body when receiving this letter.

Ladies and gentlemen, I am not here to sell you on anything.  This organization does that on its own.  I am merely here to tell my story and how much the AGA made a difference for me.  If you have ever been in this situation you may know how alone and stranded you feel.  The AGA is not only fighting for the appraiser, they CARE about the appraiser and the appraisal industry. The process of working through my complaint with the AGA was invaluable, educational and REAL.  If you are looking to be a part of an organization that has your back or, if you make honest human errors that will work to mitigate ‘damage’ I highly recommend talking to an AGA representative.

(from *.K., TX)

This is only one example of many that illustrates the impact of the AGA.

I also was turned into the state board for a complaint that was dismissed due to the help of the AGA and while I was panicking and worried, I felt very good knowing that the AGA and the Peer review committee were up for the task. They exceeded my expectations and I was even given some pointers on my work by Mike Ford to help me going forward.

I really hope this blog explains the AGA more and that you will consider looking into becoming a member not just for you but to also be a part of an organization that will continue to fight for the real estate appraiser profession. For the cost of 1 appraisal per year you can know that the AGA is really on your side and working hard for you.

Change is only made if YOU and others want to make it. The AGA wants to make that change. Do you?

Closed for business! Sorry Folk

It feels good to be back. Thanks for all for waiting. For those who aren’t familiar with what an AMC is, its short for Appraisal Management Company. After the 2008 crash they were installed to be the order manager for the lender and ensure appraiser independence. If you’ve already read “what’s not in your wallet or round and round” go get a little more familiar before reading this.

Amcs are to manage the orders. They find the appraisers to give the orders to and then through quality control are supposed to help facilitate the process so that the lender can make a lending decision. These AMCs are then the ones to pay the appraisers for work done.

Over the course of the past 10 years we have seen many AMCs collect the money you pay to them to which they are to pay the appraiser they hired. Now many AMCs do a good job at paying appraisers however there are many that do not or worse, they leave appraisers in pain and suffering wondering what the hell just happened.

See there were companies like Appraisal Loft, a big AMC who pocketed millions of dollars from consumers only to never pay the appraisers, close their doors and leave appraisers without compensation for their work. JVI AND ES. Companies like Newtown AMC, Maverick AMC, Nationwide AMC who did the same, made money, never paid appraisers and closed their doors but were all owned by the same guy who once again formed another AMC called Atlantic 1 who well you guessed it, isn’t paying appraisers. Valuation Concepts as well as COESTER VMS are the newest additions to this trend. Not answering calls or emails leaving appraisers without their hard earned money. Some AMCS are closing down and are trying to settle for pennies on the dollar with appraisers. This is a major concern. Hard working appraisers not getting paid for their work. I’m sure you would be upset if your company didn’t pay you. So here is theQuestion?? Where’s is your money, the money owed to appraisers going? Good question. I’m sure some of these current and former amc owners are living much better than all of us.

Under Dodd frank lenders are supposed to be responsible for the third party amc they have chosen to work with. However that’s not the case. Many lenders simply say sorry, or if they do do anything many will get you some sort of compensation. However that’s not good enough. You the consumer paid for a service. You paid for the product and the person who supplied this gets 0? I’m sure you wouldn’t be ok with this. Refer back to my blog post “what’s not in your wallet.” Revisit how it used to be. I’m sure your mechanic, plumber or your lawyer isn’t doing work for free or allowing anyone else to collect it for them before they release your product. So why do independent appraisers have to abide by different rules than anyone else? Why do we have to wait 30-60-90-120-600 days to get paid and risk another company going out of business never to see our hard earned money? Why do independent business owners have to have someone else collecting their money and determining when they get paid. Why does it take 30 days+ to get paid when it used to be at the door when we did the inspection? If you have paid for the appraisal up front before it’s ordered then why can’t the appraiser be paid the moment he submits the report? I know when I do work for the consumer directly they pay me before I leave the site. Independent appraisers are subcontractors NOT employees. This system is broken. It needs to be fixed.

Anything can happen. Maybe one day you will have to fork over money you already paid.

PRESSURE: MY STORY

In just 16 years as an appraiser, I’ve seen and heard many things. Some, I just want to forget and some I wish I never heard.

Appraiser pressures aren’t normal everyday life pressures, they’re different.Typically, when business is good, it’s for reasons like doing a great job and providing a great service. Or, it could be because one aims to keep the client happy by hitting value, which is not exactly a good thing. If business is slow it could be because the market slowed, the quality of service is poor, not providing obscure requests for updates, or maybe they removed you from their list of approved appraisers. Hell, we all know it could also be because your fees are reasonable but considered unreasonable to the AMC and they continue to shop for the cheapest. Truly sad days in this respect.

We became appraisers to do the best jobs possible for our customers, abide by laws and regulations, and uphold the public trust.

Today, too many AMCs are controlled by lender demands and if they can’t make the lender or client happy they risk losing the account. To leverage themselves, they’ve negotiated my time, my expertise, and my contribution to the process on my behalf and unfortunately, they’ve done a very poor job negotiating and it’s starting to show.

In this example of client pressure, a subject property appraised for $180k; the contract was for $225k. Five comparables were provided on the subject street including one across the street. All five were renovated like the subject and the sale across the street was an almost perfect match to the subject; it sold for $180k a month prior. Three others on the same street sold between $175 and $180, within 3 months of the appraisal. They were the same style of home and similar size, too. The last one was around the corner and sold for $195k and a little larger in size.

When I submitted the appraisal, I was BOMBARDED with requests to consider other sales that were larger, sold several months back, and one had a basement. After I addressed as to why they weren’t used, I resubmitted the report. They sent it back again with two more sales to consider that were also less relevant than the comparables provided. In total, this happened three times. So basically, what they were saying is that all of research and verification of recent sales on the same street were insufficient compared to cherry picked sales from around the market area. This is what value pressure looks like. Pressure to change the value to meet everyone’s expectations to make the deal work, not what is right or correct to protect the public trust.

I did not succumb to the pressure and for that, my assignments went from several to zero.

In another example, a subject appraised for $370k, the contract was for $385k, the list price was $400k (this is important). I used sales in the immediate subdivision, three of which had finished basements, that ranged from $350k to $385k. Once the report was submitted, I was immediately contacted by the selling agent claiming I failed to do my job and failed to consider chandeliers and drapes and two Tupperware containers that were claimed to be rain collection systems (I’m not joking). I was then supplied with two new sales to use; both from other subdivisions down the road. I was also provided a prior appraisal that was completed three weeks earlier. Upon review, I see this is not an appraisal report at all, it was a desktop report and the appraiser picked the top 3 sales from other areas instead of using the comparables in the immediate neighborhood. The desktop value of $400k is the (same as the list price). An interior inspection was not completed and relevant adjustments for differences in basement area and finishes weren’t considered. I received three messages from the agent threatening to turn me into the state. The lender asked to reconsider value three times.

I did not fall for this pressure and continue to uphold the public trust to do what is right for everyone, not my wallet.

THIS IS WHAT PRESSURE is like for appraisers. Hit value, get paid. Don’t hit value, get fired or quit.

I work hard and do the best I can possibly do, yet some who have never understood appraising, have the education or credentials to appraise, are suddenly somehow now the experts.

Bill Black describes it perfectly as the Gresham’s Dynamic in valuation which simply means that bad ethics and practices push good ethics and practices out of business. No one cares until it’s too late and THEN want to cry wolf.

I am sounding the alarm for consumers, if you really want to know your net worth, hire an independent and trustworthy credentialed appraiser to serve YOUR best interest. This is about your home and the well-being of your family. I am the appraiser who does not fall for control fraud and neither should you.

HELP WANTED

Real Estate Appraisers

REQUIREMENTS

Active appraiser license, preferably certified, a computer, appraisal software, MLS, E&O insurance, dependable vehicle, camera, smart phone, a background check (by us) because the one your state requires every year is just not good enough and good communication skills (see smart phone requirement).

JOB DESCRIPTION

You will be responsible to perform valuations subject to 30 pages of requirements set forth in the engagement letter. We will require availability always to answer our redundant calls and emails.

Special note: if you live in ND and have a license in GA, TX, and NJ you qualify for our special desktop hybrids and never have to visit a property site again.

Using your smartphone, assignments will be broadcast at fees WE determine acceptable for the area. The fee is non-negotiable as we have included our special fee in addition to your fee and cannot go back to the lender/client for more money. All jobs will be bid out to our panel of appraisers and those who accept the assignment first will get the order (so make sure you are quick and have that smart phone or tablet with you at all times to accept the orders).

On occasion, we will ask for a fee and turn time to build an AMC C&R survey. Jobs are assigned to the lowest fee and fastest turn time submitted to us. You don’t have to be located near the subject property but reports are required within 48 hours. Nearby proximity to a subject property and expertise are not important factors.

Upon completion, please be available at all times to answer superfluous stipulations to meet UAD or address all value reconsiderations or sales sent to us by the lender, realtor or any party that believes your opinion of value is not high enough.

COMPENSATION

DO NOT INCLUDE INVOICE WITH APPRAISAL REPORTS. We do not accept invoices this way by our team members. Upon completion, we will send you your payment in 30-days or more, depending on your state AMC regulations and rules.

COMPANY MISSION AND VISION

Our mission is to maintain infinite client satisfaction.

If you feel that you can meet the job description, send your resume, three sample appraisals, your driver’s license, bank account info, credit check and health history.

AMC

Unintended Consequences, USA