I recently received an email request for a donation to the Appraiser Prosperity Coalition. I was not familiar with the organization, but I took some time to read up on who they are and what they are trying to accomplish. What I found was a group of well meaning residential mortgage appraisers fighting their latest tyrant – Appraisal Management Companies (“AMCs”).
By way of background, Appraisal Management Companies were formed as part of the Dodd-Frank reforms of the banking industry after the collapse of the financial markets in late 2008, which was the result of the subprime mortgage crisis. AMCs were put in place ostensibly as a middleman put in place to prevent lenders, who previously ordered appraisals directly from appraisers, from pressuring the appraisers to “hit” values.
First, of all, shame on the appraisers who “hit” values. Many were opportunists who are no longer in the business, thank goodness and good riddance, but most were well-meaning and otherwise ethical folks who felt the pressure to make a living.
From the appraiser’s perspective, one evil was traded for another. AMCs are nameless and faceless, and they suck up a lot of the fee while providing little of the value of the assignment. They are often unlicensed, they pressure appraisers on fees and turnaround times and have been complicit in assignment and qualifications “creep”.
It is common knowledge that the subprime mortgage crisis was caused by appraisers who did not take photos of all of the bathrooms in a house.
I have two responses to the Appraisal Prosperity Coalition. First, good for you guys! Fight for your rights using the legislative process, don’t let the Man keep you down!
Second, I say with a heavy heart, your entire business plan is s mistake.
From a technical perspective residential mortgage appraisal is relatively easy. You inspect the property, you pick and photograph the comps and you write the report. Or more accurately, fill in the blanks in a computer-generated form. Since the dawn of mortgage lending and later refinancing, the business flow is steady and relatively straightforward.
The fast food business works because all of the activities are simple and repetitive and can be taught to virtually anyone in a short period of time. The day residential appraisers accepted the Fannie Mae form as its standard, the residential appraisal became a semi-automated task that can be performed by almost anyone with a modest amount of training. But how well do fast food workers get paid? Can residential appraisers expect better treatment over time?
Here is my recommendation to the best and the brightest residential mortgage appraisers out there, and there are plenty of you. Don’t play a game created and controlled by others. Like casino gambling, the House Always Wins.
Don’t be afraid to play your own game. It is higher risk, but with your skills it brings a much higher reward.
– Bob Gagliano