[AMC Factory] The Good Appraiser Bait And Switch Technique
Posted by Jonathan J. Miller -Tuesday, June 28, 2011, 12:01 AM
12 Comments
actual AMC (car) factory
AMC Factory For a year and a half, our firm tangled with the bureaucracy of Landsafe, the poster child for the appraisal management company (AMC) industry. While not all AMC’s are bad, their relationship to the mortgage process is fundamentally flawed. The estimation of market value of mortgage collateral to enable lenders to make informed decisions has been commoditized to the point where most mortgage appraisals are generally not worth the paper they are written on. This series is from an appraiser’s perspective, about a profession left to die by the side of the road.
The Good Appraiser AMC Bait And Switch Technique
I believe that there are generally 1-3 good appraisal firms in most markets. A “best and all the rest” list. (Blowhard hyperbole warning: I consider our firm to be one of the “good” firms in our market.)
The proliferation of AMCs used by lenders has exploded since HVCC came to be in May 2009.
AMC’s continue to fight their poor reputation for quality – they generally only require state licensing, inconsistent reviews of sample reports, agreement to fees that are half market rate, 24-48 hour turn times irregardless regardless of valuation difficulties, etc. In order to combat this AMCs use the following marketing technique:
- Call an appraiser who has a “good” reputation and invite them to be on your panel (approved list)
- Promise them they will be paid their regular fees, not 50% as is common; promise to ease up on typical 24 hour turn time requirements and be more realistic about how long the assignment will take to be done correctly.
- The “good” appraiser decides to join the panel and their name appears on the list to be touted to lenders who are being marketed by the AMC and are familiar with “good” local appraisers on the list.
- The AMC never uses the “good appraiser” for actual appraisals (or perhaps use them one time to say they did).
And voila, your AMC now has a more effective marketing technique to solidify quality concerns with potential lender clients.
My firm and those of my colleagues get calls or emails like nearly every week so we make sure not to be added to any list whenever possible to be used as marketing “bait.” I’ve had many AMCs say they really “need” me on their list.
Clueless, politicized, ineffective, non-existent, risk management
Upper bank management executives whose institution uses AMCs can’t do the simple math. Pay someone half the market rate from outside the area and the accuracy of the collateral being valued is no longer reliable. The reason for their disconnect? Bank turnover is high and problems generally don’t appear for several years down the road. The executive has no “skin in the game” to be incentivized to have higher standards.
One other point – bank underwriting is so tight now that meaningless clerical drivel is defining the mortgage application process. Can you imagine if the same zeal was applied to the valuation process of the collateral used for the mortgage?
NEXT on the AMC Factory: An errant email prompts appraisers to say what they really think.
Read other posts in the [AMC Factory] series.
I’ve been thinking about this for some time now and wondering why several area lenders with whom I’d been doing business with for years asked for my updated license and W-9 for their files and not once getting an appraisal assignment. This is after HVCC, of course, and they had their AMC lined up that they were going to use. One said they don’t add appraisers to their rotation (even though I was ‘approved’ and another said they weren’t adding appraisers to their list (right after I’d replied to their request for my newest license and W-9! It makes so much more sense that they were adding my name to their Approved Appraiser roster for some type of Banking audit or to make their list look better by having an experienced appraiser on their list (even though they would never use me). I’ve been appraising in my market for over 20 years.
Thanks Gary – interesting insight about audits. I hadn’t considered that as a motivator to show more experience.
Could not agree more. When I get a request for updated credentials from an AMC who has not ordered since I last updated (if I ever did send them info) I ask to be removed. The reason is that I gain nothing by the arrangement. But I know that the AMCs benefit from their roster of ghosts. Most recently, the AMCs compete with their peers by touting the average years of experience of their roster, yet only when forced do they engage the veterans at a fair fee. How many appraisers are carelessly leaving their names and their years of experience for no benefit to themselves? Do some housekeeping and remove your names!
If you do not count advanced spellchecking, the usefulness of an AMC to an appraiser is to negotiate decent payment from their clients for themselves and the appraiser. When they fail to get the money, and the work is at all complex, they cannot place the order anywhere. I swear some AMCs try for a higher fee from their client by asking for quotes from veterans whose fees they know and they know they will never pay. They use the highest fee quote to get the middle quote appraiser the order, and it looks like they are advocating for that middle appraiser. It is really just a cynical move.
If you get work and like it, stay on the roster. If not, ask to be removed. There must be thousands of ghost appraisers on the rosters out there.
Well said Renee. Fascinating. “Ghost roster” I’ve learned a new phrase! I still find it hard to believe we are having this conversation at all since it is devoid of common sense. Why wouldn’t banks want accurate collateral valuations done? Answer: They have no ultimate skin in the game – the US government has proved itself a worthy backstop.
I couldn’t help but burst out laughing at the requirements from LandSafe Appraisal! And you are going to love this; see, I used to work for a large “Mid-West” appraisal company. I left to go to work for B of A, but had to decline for two reasons; 1. threat of suit by the owner of the company I was leaving. 2. the owner of said company had violated USPAP and state licensing law with regard to over, yes, over 500 pre-foreclosure drive-by appraisals in the Detroit area, and LandSafe/BofA did…..nothing! There is an open complaint against the owner at the state of MI I hear from my former coworkers, but BofA and Landsafe are mum…you just have to be soo bad I guess to succeed in their view.
I believe that there are some valid points in the article; however, the use of the non-word “irregardless” undermines its credibility.
As appraisers, we need to be vigilant in all aspects of our resentations.
LOL – thanks, I fixed. I couldn’t help but notice the last word of your comment. As appraisers, it’s important that we be vigilant.
Where is the support for saying irregardless is non-word? Vigilance is critical, but support is criticaler to an analyst.
Jonathan,
I’m not a marketer (actually I couldn’t sell ice on the Amazon), but how is it effective strategy for an AMC to include a “ghost” since we know the customers (banks) could care less who appraises as long as the loan goes through?
What makes sense to me is that this is “keeping up appearances” for the event of regulator scrutiny.
Incidentally, I still remain fascinated with your methods, but what to do when there is not enough data to analyze for that critical support? Nobody seems to know.
Hi Edd – It’s a forest for the trees thing – one of the problems with the leadership in our profession as well. Although use of the AMC infers that the banks don’t care, I think its more that they are not informed at the top. The ghost list concept is simply a bait and switch at the time of marketing for the executives that actually engage the AMCs (who most likely do not come from valuation backgrounds – otherwise they would advise against).
Being associated with an AMC has been, is, and will continue to be a bad business decision for any appraiser who takes a long view of the appraisal industry.
Me thinks you are generous. But didn’t Ken Lay’s defense have something to do with the ubiquitous, almost mandatory, ignorance of executives?
Anyway, what is a “good” appraiser or for that matter a “good” appraisal. I’ve been emphatically informed, to the extent of blog abuse and notwithstanding mounting judicial opinions to the contrary, it has absolutely nothing to do with accuracy. Some say the standard is “credible.” Would that be what a “snake oil” salesman does?
On second thought, maybe the executives just can’t understand what we say we do when we do it well.
Hmmm, this assumes that the typical AMC knows what a GOOD appraiser actually looks like. I don’t think they do. Their standard for a GOOD appraiser is someone who will work for their fee and get the product back to them quickly.