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Appraiser Fees and AMCs

November 18th, 2013 by Bill Collins Leave a reply »

Appraisers Seek to Maximize Mortgage Appraisal Business at a Time of Declining Mortgage Appraisal Volume While Seeking Additional Private Appraisal Business

This week, I spoke with a representative from an appraisal management company (AMC) that my Long Island based appraisal company has had pleasant dealings with during the past several years.  It had been some time since we had received an order from this AMC and the representative indicated that her “caseload” had declined by over 50% since springtime.  This anecdotal evidence is in line with what we have reported in past newsletters regarding the declines in mortgage lending and layoffs in the mortgage business.

While appraisers should not “give up” on mortgage appraisal business, they must be much more aggressive in order to obtain their share of business.  Pick up the phone, call! Don’t assume that you will obtain orders in your geographic area when banks and AMCs have them.

Also: don’t forget about attorneys, accountants, tax grievance companies, private property owners and the many sources of private appraisal business.

Interesting survey: On October 22nd, the Appraisal Institute released the results of their survey of 591 appraisers in which both residential and commercial appraisers projected an increase in appraisals for financial institutions and AMCs.  A link to this survey, which appears to go against the evidence for reduced mortgage appraisal business, is found here: Appraisers Expect Continued Growth: Appraisal Institute Survey

One last thought: we hear so much about the “aging appraiser demographic”.  Maybe younger appraisers should seek out these senior appraisers and inquire as to whether they might be interested in selling their practice either immediately or in a phased sale over several years.

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Reader Comments Regarding Recent Newsletters

Delaware appraiser Bridget A. Weaver writes:

“A couple of comments on the [ongoing] fee discussion. 

I’m 95% with Mr Conti, as I too know exactly what is required of an appraiser for USPAP compliance and I believe that fair compensation is essential for a profession that is research based and relies on accurate logical value estimates.  I do not lower my fees.  I disagree mildly in his assumption that the appraisers who accept lower fees have been in the business too long.  On the contrary, the newer appraisers have generally been trained in situations where volume is the key to profit for the business owner.  So these people not only lack self confidence, they have been trained to assume that low fees are necessary. 

Mr. Johnson sounds like he owns a business that employs appraisers, since he talks about overhead as a significant expense.  Yes, I’m sure he does enjoy the higher fee efforts of appraisers like Mr. Conti and myself, as we have put our livelihoods on the line to push for fair compensation.  Sometimes our efforts end up as the fair and reasonable fees that AMC’s pay.  You’re welcome, Mr. Johnson.  But not very welcome, since the fee situation would be far better if we all respected ourselves and our employees.

Mr. Bucknum is so right!  The situation is abusive, as anyone who has witnessed or escaped from an abusive personal relationship can see.  I say, let’s remember that AMC’s, as demeaning and psychologically invasive as they are, are not showing up at our workplaces threatening our security and that of our coworkers, nor do they use physical punishment to bring us to heel. 

Let us also remember that we let them do it.  I assert, without equivocation, that we can stand up to them without fear for our lives.  So let’s do that.

I don’t think we need a union.  We need to have operational self respect.

Thanks for the hearing, have a great day!"

North Carolina appraiser Paul Ray writes:

“Please note that I completely agree with your writers that fees offered by most AMCs in the industry today ARE WAY TOO LOW for UAD appraisal reports with the MC sheet attached. Those accepting these type of orders for $300 or less with a 24 hour turn time should get out of the appraisal profession NOW as they certainly cannot be providing their clients a quality report with all the of the new data fields that manually have to be entered into each of these reports now. The other great concern I have is that payments for appraisals completed and submitted to many of these AMCs and smaller lending groups are NOT TIMELY and not received within 30 days of report submission. In most cases, they are received beyond 45 days in turn time (along with several phone call and/or email inquiries), which wreaks havoc with my accounting and book keeping to stay afloat of my operating expenses as my service vendors require payment within 30 days without penalty”.

Oklahoma appraiser Michael Hardwick writes:

“One AMC rep told me that his company is not concerned what the appraiser is getting, only what his company can make on the appraisal. That is the bottom line. Also, some appraiser’s are low balling to get work at any price, or they are ignorant of the importance of keeping a standard which is typical for our area.

…I think it should be a national regulation that makes the AMC disclose the amount that the AMC is receiving from the client…Most of the time, borrowers do not understand that an AMC is in the middle taking part of the fee. So, once again, the borrower believes that the appraiser is charging a certain fee, which is incorrect.

All-in-all, AMCs need to be regulated, not left to their own devices to get the highest fee they can extract from the process.

…I understand the challenge for the National AMCs. Fortunately, I do not have a problem with my local AMCs which work for banks in my area”. 

Colorado appraiser Christie Brady writes:

“I’m an appraiser and have noticed your newsletter is “SO” negative that I can barely bring myself to read it anymore. I’m tired of appraisers complaining about this business. If it’s so bad, I wish they would get out. I’ve had the best year ever and happen to like my clients.

Is there any way you can try to have an even balance of positive and negative input in your “reader comments section”?  If you aren’t getting any positive feedback and continue to publish nothing but negative comments, I will unsubscribe to your newsletter.

Thanks”!

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A Reminder for Commercial Appraisers

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AppraiserNews is a FREE publication, supported by advertising and sales of products designed to help appraisers support and grow their businesses. Please consider supporting us today by seeing what we and our sponsors have to offer.

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Recent Real Estate Reports

CoreLogic released their “Commercial Market Monitor” last week.  Included in their findings were:

~Nationwide in 2013, an estimated $370 billion in commercial mortgages will mature and need to be refinanced or sold.

~The number of commercial real estate transactions slightly declined in August from the previous month.

~The top four states ranked by number of sales and total value of sales of all commercial property were: California, Texas, New York and Florida.

~Notice of defaults generally declined during the past three months, as shown by the following regional breakdowns:

Midwest: August (868); September (970); October (689)                                                                                                                                          
Northeast: August (640); September (410); October (265)

South: August (945); September (929); October (962)

West: August (1,683); September (1,251); October (808)

Nationwide: August (4,136); September (3,560); October (2,724)

During the 2nd Quarter of 2013, the top three foreclosing plaintiffs by number of actions were: Wells Fargo Bank NA (740); JP Morgan Chase Bank (515); and Bank of America (410)

Two weeks earlier, CoreLogic reported that home prices nationally rose by 12.5% in September from the same month last year; at the same time, prices increased by 0.2% from August of this year.  A link to the CoreLogic news release with breakdowns by region as well as type of sale (i.e. distressed vs. non-distressed) is found here: CoreLogic Reports Home PRices Rise by 12 Percent Year Over Year in September

Reis reported last week that there was limited improvement in the office market during the 3rd Quarter with vacancy rates nationally declining from 17.0% to 16.9% and asking rents increased by 0.3%.  Tech and energy markets showed the greatest improvement including New York, San Francisco, San Jose, Austin, Dallas, Houston and Seattle.  Reis projects a continuing recovery during the next five years.

On November 10th, a National Association of Realtors news release titled “Improving Communication Between Appraisers and Real Estate Agents Vital” included the comment by John Anderson (a Minnesota real estate agent) that his informal poll of agents indicated that 80 to 90% of them reported that appraisals were their chief concern.  Mr. Anderson went on to say that “I’ve personally had more appraisal problems in the past year than I’ve had in the past three decades.”

No further comment about this is needed except to suggest that this provides further evidence to regulatory authorities to end Broker Price Opinions (BPOs) now.  A link to the NAR news release is found here: Improving Communication Between Appraisers and Real Estate Agents Vital

John O’Donnell of the Online Trading Academy posted a chart last week displaying the relatively wide difference between three home price indexes: the National Association of Realtors (NAR), CoreLogic and Case-Shiller.  A link to this is found here: Which Home Price Index Do You Believe?

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Rates & Dates

Freddie Mac, the Mortgage Brokers Association (MBA) and HSH Market Trends all reported rising mortgage interest rates in their most recent surveys. 

On November 14th, Freddie Mac reported that 30-year fixed-rate mortgages rose to 4.35% from the previous week’s rate of 4.16%. They also noted that last year at this time the 30-year rate was at 3.34%. 

Frank Nothaft, vice president and chief economist for Freddie Mac is quoted in the release as saying:
“Fixed mortgage rates increased this week following stronger than expected economic data releases. Nonfarm payrolls increased by 204,000 in October, above the consensus forecast. In addition, revisions added 60,000 additional jobs to the prior two month releases. Preliminary estimates indicate Real GDP growth in the third quarter was 2.8 percent, also above consensus”.

The MBA in its most recent Weekly Mortgage Applications Survey released November 13th for the week ending November 8th, reported that 30-year rates with conforming loan balances ($417,500 or less) increased to 4.44% from 4.32% during the previous week.   The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) also increased to 4.48% from 4.37%.  Rates for FHA backed mortgages rose from 4.07% to 4.16%.

In their press release of November 13th, the MBA reported a decline of 1.8% in mortgage applications with refinance applications remaining at 66% of all applications.    

One day later, the MBA released their Builder Application Survey data for October which showed that mortgage applications for new home purchases increased 11% from September.

One week earlier, the MBA reported that delinquency and foreclosure rates continued their dramatic decline with delinquent mortgage loans (for one to four family dwellings) falling to 6.41% of all loans, the lowest level since the 2nd Quarter of 2008.  During the 3rd Quarter of this year, the percentage of all loans on which foreclosure actions commenced fell to 0.61% from 0.64%, the lowest point since the beginning of 2007.  Jay Brinkmann, the MBA’s Chief Economist and SVP of Research and Education, noted that New Jersey was first in new foreclosure actions filed followed by Delaware, Maryland and Indiana.  New York and New Jersey were the only two states which reported an increase in the percentage of loans in foreclosure.

On November 15th, HSH Market Trends reported that 30-year mortgage rates increased to 4.45% from 4.34% the previous week. Rates for FHA-backed mortgages rose from 3.97% to 4.06%.

In their news release of November 15th, HSH commented that:
“Unfortunately, the vast majority of lenders are still keeping the credit bar high; even as yesterday’s losses continue to fade, the new regulatory and secondary market environment (let alone massive lawsuits) continue to keep the pressure for perfection on. It bears noting that while many (perhaps most) housing markets have nearly fully recovered, that Fannie and Freddie persist in charging risk-based add-on fees for all markets, even though the vast majority of them no longer face ‘adverse’ conditions. These fees were first instituted in the early days of the crisis when home prices were declining rapidly.

With Fannie and Freddie now making profits, and having almost fully ‘paid back’ to the Treasury the monies they needed to survive, is it possible that some of these fees and pricing add-ons will begin to fall or disappear? If we hope to continue to expand the availability of credit to keep the housing market growing, there may be no choice, as there are only so many well-qualified borrowers to go around”.

Additional information from Freddie Mac can be found by going to: Primary Mortgage Market Survey PMMS – Freddie Mac

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

Additional information from HSH can be found by going to: HSH.Com

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Ask Angie

We would first like to congratulate our most recent winner: Coral Springs, Florida appraiser Scott Sehr.  Scott covers the south Florida counties of Broward, Palm Beach and Miami-Dade.  He was the first to answer correctly that George Bernard Shaw was the author of the quote “Democracy is a form of government that substitutes election by the incompetent for appointment by the corrupt few”; the quote “Every election is a sort of advance auction sale of stolen goods” is attributed to H.L. Mencken; and Imelda Marcos said "Win or lose, we go shopping after the election.

Today’s questions:

1. Who said: “The thankful receiver bears a plentiful harvest."

a) The Dalai Lama
b) William Booth
c) William Blake
d) Jimmy Carter
e) None of the above

2. Who said: "As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them."

a) Mother Theresa
b) Mahatma Gandhi
c) John Fitzgerald Kennedy
d) Melinda Gates
e) None of the above

3. Who said: "I celebrated Thanksgiving in an old-fashioned way. I invited everyone in my neighborhood to my house, we had an enormous feast, and then I killed them and took their land.”

a) Groucho Marx
b) Jimmy Kimmel
c) Jon Stewart
d) Rodney Dangerfield
e) None of the above

The first person to respond with the correct answers wins a choice of one of the following:

One Free Regular Listing on AppraiserHelp.com

A Free Copy of the Directory of Appraisal Management Companies (Available to Members of AppraiserHelp.com and FHAAppraisers.com FREE!)

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Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!

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We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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