Happy Fourth of July real estate appraisers and others who follow my blog. I am excited to take a day off to spend time with my family, enjoy a big slab of watermelon, watch some fireworks, and celebrate our country’s independence. On this Independence Day though, I am also celebrating my appraiser independence. No, I’m not talking about the independence from pressure to reach a specific value, which is often referred to as “appraiser independence”. I mean that in 2015 I have not accepted an appraisal order from a single appraisal management company (AMC) or conventional lender.
Why would I exclude myself from by far the largest segment of the appraisal market? Previously I was happy appraising for AMCs and lenders. I had good clients who paid full fees, who had reasonable turn-time requests, and who did not hassle me too much.
Don’t get me wrong, as we still have an appraiser in our office who does work for AMCs and other lenders. He has a select group of clients that he likes, they like him, and we are all happy with that. The following are my personal reasons (experiences may vary) that made me decide to focus my work only on private party (non-lender) appraisals for clients like divorces, estates, pre listings, pre purchase, and litigation.
The number one reason to celebrate independence from lenders and AMCs is because they take business management away from the appraisal company. If I receive an appraisal order from a lender or AMC in a part of Portland that another appraiser in my office is headed to or is more experienced in, I typically cannot simply trade jobs with that appraiser for increased efficiency.
Many AMCs and lenders have long lists of requirements for the appraiser to address that are intended to limit the liability of the lender, but often take the appraiser’s focus off what is most important – appraising. AMCs and lenders will often send pages and pages of instructions with each assignment for appraisers to read. The problem is that the instructions are usually just repeating USPAP, Fannie Mae, or FHA rules with a few “lender-specific” requirements mixed in for the appraiser to hunt down. If the appraiser happens to miss any lender-specific directives, like take photos of smoke alarms, the appraisal report is returned for revision immediately after delivery.
Much of AMC and lender work is all about fee and turn-time. We receive a constant stream of phone calls and emails every day asking, “What is your fee and turn-time for this property.” The AMCs and lenders almost never ask, “What is your experience with this property type or market area?” something that non-lender clients ask regularly.
The system of AMC and lender work can often seem stacked against appraisers who work the hardest. Doing a good job can mean working more and making less money. For example, an appraiser who recognizes how unique a property is (be it condition, features, or location), and reconciles toward the end of the value range is likely to be questioned more regardless of how much explaining and analysis is done. The questioning occurs understandably because the data is not as strong as it would be if the subject’s value falls in the middle of the range.
AMC and lender work is more cyclical than non-lender work. Lender and AMC work peaks when interest rates are low, when loans are being made, and when homes are selling. Non-lender work tends to be less cyclical because such work is driven more by continuous life events.
AMC and lender work typically means waiting from a few weeks to a few months for payment. My company usually pays its employees sooner than AMCs and lenders pay us, which can be hard on the cash flow of a small business. With non-lender work, we are paid prior to the delivery of each report.
AMC and lender work can feel less personal. Appraisals for lenders are just that, for the lender only. Appraisers cannot talk to the homeowners about value opinions. With lender appraisals, the homeowner is often left with resentment toward the appraiser when the value opinion is not as hoped. With non-lender appraisals, I usually discuss the conclusion with the client. In the end, even if the client does not agree with me or is upset by my conclusion, they usually respect or understand my professional opinion.
Did I leave anything out or do you want to join in the conversation? Let me know in the comments below.
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