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. But there is a light at the end of this tunnel, and it is brought to us by A La Mode, Inc.
A La Mode is about to release an HVCC compliant version of their little-known appraisal ordering system called Mercury Network. (You can find it here https://www.mercuryvmp.com) This software, which is available to originators as an online system or desktop version, is known as a Vendor Management Platform, hence the VMP. The benefit to appraisers is that they charge a very nominal fee (<$15) for accepting an appraisal assignment that has been placed through this system. For originators, they get a system that is HVCC compliant, easy to use, doesn’t have an appraisal fee markup (many AMCs charge higher than market average for appraisals) AND they can get a quality appraisal from an appraiser who is happy making his full fee. This is a win-win situation for the entire industry.
So PLEASE, tell everyone you know in the industry about this exciting new product, it may just help save all our careers!
And I leave you with a clip from an article written by Micheal W. Armentrout and was published on the AppraisalScoop website:
“If there is one thing appraisers want lenders and the general public to understand, it is that attempting to make appraisals better and more reliable is a worthy cause and one that our profession has fully embraced throughout the past. We however do have legitimate concerns that a totally AMC-based system would cause qualified and experienced real estate appraisers to leave the industry while those willing to produce sub-par reports may flourish. In the end, Americans could end up with a bigger financial mess than we have currently.”