Tuesday, March 10, 2009

From the Comments - AMC Regulation

One of the benefits of the increased interest in the Appraiser Active blog is some readers are posting comments to the posts. Some offer support and agreement; others take issue and provide counterpoints. It's beneficial to hear what others have to say and see their point of view.

For instance, in response to the post "It's Time to Regulate Appraisal Management Companies", Robert said:

Dear Frank,I represent an "in development" AMC located on the West coast based in Seattle. For months now I have heard appraisers moaning and groaning about AMC's, specifically how they are ruining their livelihoods. I myself know that the glory days for AMC's are coming to an end. More importantly, I understand that appraisers and AMC share a symbiotic relationship where one cannot survive without the other.

Currently we are in the process of structuring our whole revenue model to remain competitive in the AMC industry and MOST IMPORTANTLY we want to keep our appraisers happy however there has never been any talk about what is "fair." While I do not believe it is "fair" when AMC's take 50% of the appraisal fee, I do believe AMC's are an essential role in the loan process. We are preparing a incentive package which we believe appraisers will love but what are your thoughts?

First of all, thanks for the input. Unlike some of my appraisal brethren, I believe Appraisal Management Companies (AMCs) provide a service and are legitimate businesses. AMCs existed long before the Federally mandated licensing, certification and regulation of real estate appraisers. Quite a few lenders opted to utilize the services of AMCs and a couple of AMCs offered quite a bit of assistance in efforts to get appraisers and appraisal firms up to speed with appraisal software and office management.

My own firm, Gregoire & Gregoire, Inc., received complimentary appraisal forms software from one of the early AMCs. Although my firm was already using computers for appraisal reporting and some analysis, the software provided enabled us to mover from a mini-computer to personal computers and enabled us to update to revised forms more quickly. Gregoire & Gregoire, Inc. enjoyed a mutually beneficial relationship with that AMC for over a decade.

Unfortunately, that relationship started to sour with fee pressure, turnaround pressure and what appeared to be the AMC's accounts payable department taking advantage of the "float" in their payment procedures, policies and responsiveness. We arrived at the realization that it cost the firm just $1.00 less to send an appraisal report out the door than the fee received from the AMC. The seven appraisers, including the principals, were extremely busy, but there was no profit. Instead, we had a flurry of activity and paper and constant phone calls for status and appointments. Our requests for modest fee adjustments were refused. Gregoire & Gregoire, Inc. decided to reduce our volume, enhance our quality and concentrate on the segment of the market more interested in quality than cost and speed.

The Florida Real Estate Appraisal Board was interested in the regulation of Appraisal Management Companies long before there was a Home Valuation Code of Conduct. After reviewing hundreds of workfiles and reading the written and email requests from AMCs to appraisers, the problems were clear. Many, not all, AMCs were making representations to their clients that could not be met and appraisers were pressured to make miracles happen; often to the detriment of the public and appraisers' professional license and certification.

As you suggest, Robert, "fairness" and equity was and is needed. What is proposed for Florida is a fairly simple act that will require registration of AMCs along with their officers and directors. it is only fair that AMCs meet the same character qualifications as appraisers. We also propose that AMCs and their officers and directors comply with the same laws, rules and regulations, including the Uniform Standards of Professional Appraisal Practice, applicable to Florida Appraisers; nothing more, nothing less.

The Florida Legislature is in session right now. We're waiting for our bill to be introduced and being debated. In the meantime, feel free to offer your comments, pro and con.

Thanks for your interest and participation!