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AMC Appraiser: How Am I Supposed to Appraise This Thing?

June 30, 2009 | 10:41 am |

I was recently speaking to a real estate agent who was quite upset and was asking me for advice on on a particular situation.

You can’t make this up.

I never saw the appraisal report and don’t know if it was right or wrong. It’s the process that amazes me. The agent told me:

I’m refinancing with a bank where I already have a mortgage – [Large US Bank Who Took TARP Money].

The appraiser who came to my apt [threw] his hands up in the air and said “how am I supposed to appraise this thing” and indeed he did not as the comps he used were completely not appropriate and he did not look at the info I sent to him PER HIS REQUEST.

To make a long story short, I have escalated this as much as I think I can at [Bank Name Redacted], but I see no results and Monday will be exactly 2 wks since this happened.

The agent just got back to me and told me the bank stood by the appraisal.

Of course, the bank has little to do with the review – that’s because national lenders are centralized, nearly all rely on Appraisal Management Companies and have little or have no local knowlege in housing markets or have relationships with someone who does. The AMC who hired the appraiser for the bank is likely the one who reviews the report. Remember, they are the same firm who felt it was appropriate to use an out of market appraiser, so how reliable will their review be?

The AMC position tends to be: if you are licensed in New York State, you should be qualified to appraise in all counties of the entire state.

A state appraisal license does not equal experience or competence. It’s a revenue opportunity for state governments and it is a very low bar to cross to get a typical state license. Basically a half dozen courses and 2 years experience.

In this case, the out of market appraiser based in Armonk, New York, and was hired by an AMC on behalf of a bank to appraise a duplex co-op penthouse in Manhattan. This is becoming a more common occurrence in appraisal function of the national retail banks, all of whom are using Appraisal Management Companies.

From the appraiser’s reaction in front of the bank customer/borrower reaction, I would guess he’s not familiar with this type of property, nor does he act as a professional while on the inspection. A low bar indeed.

Another large US bank I know uses nearly 300 appraisal firms in Manhattan with appraisers driving as much as 4-5 hours to bang out a bunch of co-op reports in one day. In my nearly 24 years as an appraiser in Manhattan, I am aware of only 4 firms that regularly do Manhattan work.

I don’t think the banks are stupid (I know, I know). I think they see the mortgage universe as short term profit and loss, rather than as long term preservation of capital. It’s a modern cultural thing I suppose.

If that’s not the case, then they don’t see what value appraisers bring to the table (no pun intended). It is going to be much harder for appraisers in the post-credit bubble universe to make a compelling argument for competent services if the market doesn’t seem to need them in the current structure and where most of the competent appraisers were put out to pasture.

Speaking of pastures…although I’m based in New York, I’m thinking of flying out to Montana and banging out a quick appraisal of a 100,000 acre cattle ranch for $175 in 24 hours.

How do I make money this way?

Volume, my friends.


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[Vortex] Fee Simplistic: Needed – Driving the Wooden Stake In the Bank/AMC Vampire

June 14, 2009 | 1:16 pm | |

Guest Appraiser Columnist:
Martin Tessler, CRE

Fee Simplistic is a regular post by Martin Tessler, CRE whom after 30 years of commercial fee appraiser-related experience, gets to the bottom of real issues by seeing both the trees and the forest. Marty has never been accused of being a man of few words and his commentary can’t be inspired on a specific day of the week.
…Jonathan Miller

The Wall Street Journal article of June 9th entitled, “Appraisals Roil Real Estate Deals” should be required reading for anyone who has opined to an opinion of home value. For those who missed it, the article details the swing of the pendulum from the high flying days of pre- 2007 when appraisers could not come in with values or, should I dare say, “numbers” high enough to justify a loan. In comparison, today’s lending world has swung 180 degrees to the low end of the pendulum where no value can presumably be low enough. The article goes on to portray the “usual suspects”- house values that have plummeted from the sky high years to todays’ nadir with some added color such as:

    • A Fairfield County CT appraisal that came in at $50,000 below the contract price necessitating either a new appraisal or renegotiation.
    • A JPMorgan Chase home equity line of credit predicated upon a 2,650 sq ft Manhattan duplex appraised at $1.475 MM in 2005 being reduced due to the bank’s estimate coming in at $600,000. The borrower then was able to produce a new appraisal that valued the property at $1.8MM. A spokesperson for the bank said that they use “an automated appraisal system on our portfolio” and that they encourage borrowers who feel that if their valuation is too low to order an outside appraisal and will reimburse them if it supports their claim.
    • Banks requiring appraisers to use sales comps that closed within the past 90 days with some asking for at least one sale within 30 days.
    • Agreement by the appraisal industry and Fannie/Freddie to adopt the Home Valuation Code of Conduct intended to prevent loan officers, mortgage brokers or real estate agents from selecting appraisers. This is to shield them from pressure on coming up with pre-ordered values, a major issue raised by NY State Attorney General Cuomo and on several postings in Matrix/Soapbox last year.

A significant issue not quelled by the Code is that it allows if not encourages lenders to outsource the selection to appraisal management companies or AMC’s who will charge the appraisal firm anywhere from 30%-40% of the fee for administration, overhead and, pardon the sarcasm, quality control. Exacerbating the problem is that lenders can own stakes in AMC’s. Thus, the conflict of interest is ever present.

Reports are prevalent that AMC’s shop around for the lowest appraisal fees that frequently end up on the desks of appraisers who are geographically distant from the subject property’s market, are not fully familiar with the local market and thus present sales that are not directly relevant.

It is obvious that AMC’s are clearly conflicted if owned either partially or fully by a lender. They are recipients of profits generated by a company that is not arm’s length from their fiduciary role where they require the borrower to buy the service. As for tools such as JPMorgan Chase’s “automated appraisal system” these are only rough guides to average or ranges of value from a large data bank of properties and extreme care must be taken in applying such macro data to a specific property or micro set. It is therefore not surprising that Chase allows for an independent appraisal although I’m not sure that it allows the borrower to select the appraiser as the article implies and, if so, it’s a violation of FIRREA if not the Code.

If no reforms of the Code are made to disallow AMC’s from ownership by lenders it is my opinion that history is doomed to repeat itself in the next frenzied lending cycle. Let’s get the stake ready now.


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Catch-22: Fannie Mae, AMCs and a $39 suit

March 22, 2009 | 12:00 am | Milestones |

Read More

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[Sounding Bored] Mortgage Appraisal Havoc – Of AMCs and Code of Conduct

January 14, 2009 | 9:23 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. There have been more changes made to the profession in the past several years than in the entire history of the profession, and most of the changes have not resulted in a more credible service. Still, I’d like to hope that the latest financial services sector turmoil will bring a clean slate approach to better regulatory oversight (devoid of insanity).


Also posted on Matrix

The appraisal world changes on May 1, 2009.

I have been on a mission over the past year to creat awareness of the continuing issue of appraisal pressure and to prevent the enabling of appraisal management companies via the Cuomo/Fannie deal to dominate the mortgage appraisal business. It appears a foregone conclusion that appraisal management companies will dominate the mortgage appraisal process and as a result, will end up with a system worse off than before the credit crunch began.

Earlier this year, Mr. Cuomo threatened to sue government-sponsored mortgage investors Fannie Mae and Freddie Mac for allegedly failing to ensure that appraisers were shielded from pressure to inflate their estimates. Appraisers have long maintained that many loan officers or brokers, whose pay depends on how many loans they complete, pressure them to come up with value estimates high enough to ensure approval of the loans.

In March, Fannie and Freddie, eager to avoid a legal battle, agreed with Mr. Cuomo on an appraisal code of conduct. That plan drew fire from mortgage-industry groups and some federal regulators. Among other things, they said the code could raise costs for consumers and cause unnecessary disruption in the appraisal business.

One of the key issues facing appraisers was the pressure we were placed under to “hit the number” during the recent mortgage/housing boom. 20 years ago our clients were stodgy financial institutions with a separate appraisal departments surrounded by a firewall to keep loan officers away from the appraiser. Just before the onset of the credit crunch, the mortgage system originated something like 3/4 of its volume via mortgage brokers, who are paid when the loan closes. They select the appraiser {red flag} to perform the appraisal for the mortgage. If the appraiser comes in low, eventually, maybe not initially, the mortgage broker would find someone “better” {wink}. I can tell you, 75% of the appraisals completed for mortgage purposes are not worth the paper they are written on.

New York State Attorney General Cuomo opted to start with the appraiser and follow the mortgage. He ended up striking a deal with then GSEs Fannie and Freddie to curtail some past practices called Home Valuation Code of Conduct or HVCC. Some appraisers lovingly call the agreement “Havoc” because of the chaos it created. It enabled appraisal management companies.

One of the main changes was removing the ability of mortgage brokers to order mortgage appraisals directly if the mortgage was to be sold to Fannie and Freddie. If a mortgage application has an appraisal order through the mortgage broker, then Fannie Mae and Freddie Mac won’t buy it from the bank. This is a significant incentive for a lender because many banks need to sell their loans rather than retain them in portfolio in order to recapitalize and lend more.

I thought this was a terrific idea because stopped this tainted relationship structure between the person setting values and the person being paid on a commission if the value was high enough. But with this solution, a problem was created and that new problem outweighs the former problem.

Because of the way the HVCC is being implemented, most lenders are effectively incentivized to order appraisals through appraisal management companies. The best way I can describe much of this cottage industry is:

a centralized appraisal ordering and management organization run by 19 year old kids without any real estate experience who focus nearly exclusively on turn time and half market rate appraisal fees.

Kenneth Harney, of the nationally syndicated column, The Nation’s Housing in the Washington Post writes in his article: An Appraisal Upheaval

When you apply for a mortgage to buy or refinance a house, should you be concerned that your appraiser is being paid much less than the $300 to $600 you’re charged, perhaps half?

Should you know who pockets the rest, or that cut-rate fees are too low to attract the most experienced appraisers?

Should you care that the appraiser might be pushed to come up with a number so quickly — almost overnight in some cases — that he or she doesn’t have the time to do a proper inspection and accurate evaluation of comparable properties, pending sales contracts and local market trends?

Without realizing it, Cuomo has moved the problem from “values biased high” to “values unreliable”

But some prominent appraisers are scathing in their criticism of management firms. “Their quality is terrible — all they want you to do is crank it out at the lowest cost,” said Jonathan Miller, president and chief executive of Miller Samuel, one of the largest appraisal companies in the New York City area. Only “the least experienced people” are willing to do the work, he said, “and the product is unreliable.”

In recent issue of American Banker, Kate Berry wrote an article Re-Appraisal: How Revision is Recasting Expectations

“You’re creating a situation where a lender is going to have to order a lot of appraisals from an AMC,” said Jonathan Miller, the president and chief executive officer of the New York appraisal firm Miller Samuel Inc.

Mr. Miller said, “Appraisal-management companies are subject to the same pressure as mortgage brokers; only there’s actually more at stake. They’re almost more vulnerable” because most of the companies depend heavily on a few lender clients.

Do you remember the AMC known as eAppraise-it?

Cuomo sued them for all the reasons this agreement shouldn’t be implemented without modification.


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[Mortgage Appraisal Havoc] Of AMCs and Code of Conduct

January 14, 2009 | 2:07 am | |

The appraisal world changes on May 1, 2009.

I have been on a mission over the past year to creat awareness of the continuing issue of appraisal pressure and to prevent the enabling of appraisal management companies via the Cuomo/Fannie deal to dominate the mortgage appraisal business. It appears a foregone conclusion that appraisal management companies will dominate the mortgage appraisal process and as a result, will end up with a system worse off than before the credit crunch began.

Earlier this year, Mr. Cuomo threatened to sue government-sponsored mortgage investors Fannie Mae and Freddie Mac for allegedly failing to ensure that appraisers were shielded from pressure to inflate their estimates. Appraisers have long maintained that many loan officers or brokers, whose pay depends on how many loans they complete, pressure them to come up with value estimates high enough to ensure approval of the loans.

In March, Fannie and Freddie, eager to avoid a legal battle, agreed with Mr. Cuomo on an appraisal code of conduct. That plan drew fire from mortgage-industry groups and some federal regulators. Among other things, they said the code could raise costs for consumers and cause unnecessary disruption in the appraisal business.

One of the key issues facing appraisers was the pressure we were placed under to “hit the number” during the recent mortgage/housing boom. 20 years ago our clients were stodgy financial institutions with a separate appraisal departments surrounded by a firewall to keep loan officers away from the appraiser. Just before the onset of the credit crunch, the mortgage system originated something like 3/4 of its volume via mortgage brokers, who are paid when the loan closes. They select the appraiser {red flag} to perform the appraisal for the mortgage. If the appraiser comes in low, eventually, maybe not initially, the mortgage broker would find someone “better” {wink}. I can tell you, 75% of the appraisals completed for mortgage purposes are not worth the paper they are written on.

New York State Attorney General Cuomo opted to start with the appraiser and follow the mortgage. He ended up striking a deal with then GSEs Fannie and Freddie to curtail some past practices called Home Valuation Code of Conduct or HVCC. Some appraisers lovingly call the agreement “Havoc” because of the chaos it created. It enabled appraisal management companies.

One of the main changes was removing the ability of mortgage brokers to order mortgage appraisals directly if the mortgage was to be sold to Fannie and Freddie. If a mortgage application has an appraisal order through the mortgage broker, then Fannie Mae and Freddie Mac won’t buy it from the bank. This is a significant incentive for a lender because many banks need to sell their loans rather than retain them in portfolio in order to recapitalize and lend more.

I thought this was a terrific idea because stopped this tainted relationship structure between the person setting values and the person being paid on a commission if the value was high enough. But with this solution, a problem was created and that new problem outweighs the former problem.

Because of the way the HVCC is being implemented, most lenders are effectively incentivized to order appraisals through appraisal management companies. The best way I can describe much of this cottage industry is

a centralized appraisal ordering and management organization run by 19 year old kids without any real estate experience who focus nearly exclusively on turn time and half market rate appraisal fees.

Kenneth Harney, of the nationally syndicated column, The Nation’s Housing in the Washington Post writes in his article: An Appraisal Upheaval

When you apply for a mortgage to buy or refinance a house, should you be concerned that your appraiser is being paid much less than the $300 to $600 you’re charged, perhaps half?

Should you know who pockets the rest, or that cut-rate fees are too low to attract the most experienced appraisers?

Should you care that the appraiser might be pushed to come up with a number so quickly — almost overnight in some cases — that he or she doesn’t have the time to do a proper inspection and accurate evaluation of comparable properties, pending sales contracts and local market trends?

Without realizing it, Cuomo has moved the problem from “values biased high” to “values unreliable”

But some prominent appraisers are scathing in their criticism of management firms. “Their quality is terrible — all they want you to do is crank it out at the lowest cost,” said Jonathan Miller, president and chief executive of Miller Samuel, one of the largest appraisal companies in the New York City area. Only “the least experienced people” are willing to do the work, he said, “and the product is unreliable.”

In recent issue of American Banker, Kate Berry wrote an article Re-Appraisal: How Revision is Recasting Expectations

“You’re creating a situation where a lender is going to have to order a lot of appraisals from an AMC,” said Jonathan Miller, the president and chief executive officer of the New York appraisal firm Miller Samuel Inc.

Mr. Miller said, “Appraisal-management companies are subject to the same pressure as mortgage brokers; only there’s actually more at stake. They’re almost more vulnerable” because most of the companies depend heavily on a few lender clients.

Do you remember the AMC known as eAppraise-it?

Cuomo sued them for all the reasons this agreement shouldn’t be implemented without modification.


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[Sounding Bored] AMC Enabler Wreaking Havoc With Best Intentions

May 2, 2008 | 12:20 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week I play a simple game of absolute havoc.

With the comment period of the Cuomo Fannie Mae agreement officially closed, it’s time to reflect on what it means to us. The word “havoc” is disaffectionately derived from the HVCC acronym for the Home Valuation Code of Conduct (Hat tip to Ann O’Rourke).

There has been a lot of anger originating from the appraisal profession, most of it warranted but some of it based on misinformation or misinterpretation. I think the Attorney General of New York, Andrew Cuomo and his staff were the first government entity to actually understand what appraisal pressure was, why it is bad and how if proliferated. For the first time someone started with the appraisal process and “followed the money.”

By forcing the GSEs not to purchase mortgages whose appraisals were ordered by mortgage brokers, they succeed in breaking the impact of self-dealing on property values.

I get pretty annoyed when mortgage brokers say they will go out of business without being able to order the appraisal and it will cost the consumer more. That thought is based on a premise that the appraisal result is influenced by the person ordering it who in turn is paid a commission. Please.

Dave Bigger of a la mode (who makes an awesome appraisal software product) was quite outspoken about this agreement several days before the close of the comment period.

In case you don’t know yet, the new regulations came out of a lawsuit brought by the New York Attorney General against Washington Mutual and eAppraiseIT, centered on coercion of appraisers.  In a settlement agreement spawned by the suit, the GSEs (Fannie Mae and Freddie Mac), and the Office of Federal Housing Enterprise Oversight (OFHEO) agreed to change national appraisal rules in exchange for the Attorney General’s office terminating its investigation of the GSEs. Unfortunately, while we believe the agreement has the best of intentions, the hastily written embedded regulations (called the “Home Valuation Code of Conduct”, or HVCC) do not solve the problem and in fact severely punish appraisers, and ultimately consumers.  If there ever was a case of the cure being worse than the disease, this is it.

He makes a great case with one significant flaw based on this comment:

The value of the client relationships you’ve nurtured, many times for decades, could disappear immediately under the HVCC as lenders are forced to shift their orders to AMCs.  You won’t even be able to speak to your current clients’ loan officers again if the HVCC is left as-is.

Here’s the problem with this argument: The mortgage lending system has no business allowing loan officers and appraisers to interact. This is old school and one of the reasons we are in this credit mess. Speaking to a loan officer is no different than speaking to a mortgage broker. It’s called collusion and has been in place so long, many of us don’t see it anymore.

Here’s the real problem with the HVCC concept and the deal in general: Appraisal Management Companies will be enabled by enforcement of this deal. This poses a significant threat to the appraisal industry for the wrong reasons yet I don’t see how this can be legislated out of the lending process.

Appraisal Management Companies survive on appraiser willing to work for fees that are typically half the market rate. Keeping costs low is certainly no crime, but it has been my experience that the appraisers who generally work for AMC companies don’t need to have much overhead because they don’t need to do any research. They fill out the form and arrive at the borrower’s estimate or the sales price. There is no penalty to the AMCs to reward this practice. I think the AMCs need to rep and warranty the mortgage or they have no skin in the game.

It has been my experience that employees in AMCs that interact with appraisers are very young and inexperienced (cheap) and are paid based on the average turn times and fees of appraisers under their control.

The AMCs are subject to pressure from their lending clients which is what brought Cuomo to take action in this matter (WaMu/eAppraisIT) just like appraisers are. There are no checks (no pun intended) and balances.

If mortgage brokers can’t order appraisals for mortgages, then the responsibility falls to the lenders again (which is not a bad thing since they are lending against the collateral being appraised). So who is the bank going to call to order hundreds of thousands of appraisals across the US next year? They have already severed most of their appraisal relationships by using AMCs or emphasizing wholesale lending channels for new business.

Banks will be forced to use AMCs to complete appraisal reports for their loans. Poor quality will replace poor reliability. We get to the same place as before but take a different path.

That means little good news for the good guys.


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[Sounding Bored] Old AMCO Down The Drain, Appraisers Can’t Feel Flush Yet

April 10, 2007 | 10:36 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week, I feel lucky to be flush.

Over the past 6 months, we have been pretty open about our long running issue with AMCO for their unreasonable delays in paying our bills. After a lot of ranting, and a flurry of emails and involvement by one of our clients, we were finally paid for all but one (as of today’s mail) of our appraisals (our A/R was as high as $30K at one point.) In the interim we have declined all new assignments from AMCO, even when they offered to pay us in advance. I guess we were just uncomfortable with them as a client.

Here’s our saga.

Last week, there was finally some insight into their financial problems and some discussion as to payment of overdue appraisal fees for members of their panel. As evidenced by feedback from Soapbox readers, the amount of arrears for some was pretty significant, which is unfortunate. We were lucky I guess.

Valuation Review posted a pretty thorough discussion of the AMCO announcement made last week that the Cleveland-based firm is going to be sold to a new investor on May 1st and all outstanding appraisal invoices will be paid at that time.

I am scratching my head at this whole thing. I find it really amazing, (and a miracle) for those still waiting to get paid, that AMCO would be able to locate someone to salvage them and then still make it a priority to pay what is owed. If they didn’t do that, their value as an organization would probably approach zero.

I’ve got to think that other appraisal management firms could follow AMCO down this slippery slope with the drop in purchase volume and issues with subprime lending, will probably make banks think twice before going this route as credit continues to tighten.

If AMCO can make good on their stated intentions, they are worth another look. However, until they make good on their debts to the appraisal community, I won’t be accepting work (not that they would offer us any).

As appraisers, I think our industry is very weak at account collections. We feel we have to beg to be paid what we are owed and we are worried about pissing off the clients that still owe us money.

Its a trap. Someone once told me:

Work like you don’t need the money.

I think it needs to be modified to:

Work for clients who respect you so you don’t need to worry about getting the money you earned.


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[Sounding Bored] AMCO Opts To Partially Pay Some Very Old Debts

February 14, 2007 | 11:25 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. I am still hung up on this AMCO thing, but I think I am getting close to the end of the final chapter.

Two weeks ago after I posted my last discussion about AMCO, I started to get nervious about our non-payment of $15,000+ in outstanding appraisal fees, the majority of them are more than 6 months overdue.

I had been promised by AMCO that a check was written for $10,000, but no check ever arrived. Thinking that they were not likely to ever pay us, I decided to involve my former client in my efforts since I wasn’t really sure if they understood that most of their appraisers were cut off from work once they moved their business to AMCO. Since I wasn’t getting satisfaction of my debt, I felt I had nothing to lose.

I sent several emails to AMCO, copying my client, demanding payment of my debt. I explained the over six month thing, the lack of returned calles from accounts payable and the $10,000 check that never came.

Low and behold, I got an email from AMCO saying a check was being paid to us for $13,000 and they even provided a check number as proof. I was pretty skeptical until I got an email from my original client saying that they had interceded and forced the issue. They also informed me that they would be taking control of the appraisal process and we would start getting work again.

Wake me up: am I dreaming?

On the same day, we got an order from AMCO on behalf of this client. We had not received an order since November 14th. Coincidence?

We said we would only agree to do the appraisal if we were paid the $2,225 balanced owed, since all of it was over 90 days. They refused saying we were no different than other vendors but asked us if we would accept this new assignment if they sent us the payment for the new assignment via FedEx that night. We still declined the assignment since we had vowed not to work for them until we were paid in full. Even after that point, I don’t think its worth the risk.

The feedback this particular lender who interceded for us, indicated that several other national lenders have grown tired of the appraisal management company concept considering the poor quality of work being completed and the weakening real estate environment.

I hope its not too late, but I must admit, I am pretty happy about that new development.

AMCO Gets Credit Line Renewed, Appraisers Hope Checks Are In The Mail

Is AMCO In Financial Trouble Or Managing The Float?


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[Sounding Bored] AMCO Gets Credit Line Renewed, Appraisers Hope Checks Are In The Mail

January 24, 2007 | 11:37 pm | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week I will find out whether I can buy winter coats for my kids since AMCO was able to borrow $2M.

Last week in my post Is AMCO In Financial Trouble Or Managing The Float? about how AMCO was in massive arrears to my firm and I was getting nervous because their reason for the 7 month delay seemed to be because they were having problems with their credit line and had to delay payment. In this day in age of easy credit and the fact that AMCO is a large national firm that tries to position themselves as appraiser-orientated (I think they are the best of the AMC bunch – not that this is very complimentary), is particularly alarming.

Today, Patrick C. O’Brien, their Chief Operating Officer, issued a press release that they finally obtained their credit line. Now I can hope to get paid my $15,000+ in outstanding appraisal fees, the majority of them are more than 6 months overdue.

The day after my original post last week, I got a follow up email from AMCO indicating I would be cut a check for $10,000 of my old invoices on Monday. Should I bank on the idea that this will actually happen after 6 months of what now in hindsight, seemed to be stonewalling? Pardon me if I am a bit upset about this.

Here’s the press release sent to me today. I am at a loss as to why this is worthy of a press release or that it should even be announced.

>

AMCO Completes $2 Million Credit Facility

>

For Immediate Release (1/24/07)

CLEVELAND, OHIO — AMCO, a national valuations service provider to the lending and relocation industries, today announced that it has completed a $2 Million Credit facility with New York based Access Capital.

“This was an important step for this organization to solidify itself for the long-term with both our client and vendor partners, as AMCO’s leading position in valuation quality is further enhanced by this financial partnership”, said Chief Operating Officer Patrick C. O’Brien. “Adding a strong and committed financial partner like Access Capital will provide AMCO the capital to continue our growth and strategic initiatives.”


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[Sounding Bored] Is AMCO In Financial Trouble Or Managing The Float?

January 17, 2007 | 9:09 am | Columns |

Sounding Bored is my semi-regular column on the state of the appraisal profession. This week I break out in a cold sweat as AMCO delays paying their bills.

As a matter of ethics, our firm avoids working for appraisal management companies, because as a rule, they encourage poor quality by demanding below market fees and unrealistic turn times. As a results, AMC’s in many markets can attract individuals who do no real research and serve only to make the number for their clients.

The one appraisal management company we had worked for on a regular basis is AMCO because one of our long time clients, US Trust Company, moved their appraisal ordering process to AMCO because upper management wanted to save internal administration costs and benefit from one stop shopping. They likely saw the appraisal as a commodity, like a flood certification. (Note: Be careful what you wish for.)

AMCO tout themselves as The Nation’s Leading Independent Valuation Management Solutions Company and their rep was that they pay a fair fee in a reasonable period of time.

AMCO was told by UST to use us for our market because we had a 16 year relationship. They did for a while but slowly moved the work to their army of form-fillers. We continued to work for them because they accepted our normal fee and turn time requirements. We were mainly hired for complex, high end assignments. We figured it was a matter of time befefore we would no longer receive work from them, so we kept at it until that day came.

A little over a year ago, we noticed they were becoming eratic in paying their bills. They would pay some, but not all of them. Payment times expanded. We have invoices we have been calling on regularly since June and July. We would be directed to their accounts payable department who NEVER returned our calls. I repeat: NEVER.

They owe us over $15,000.

Yesterday we got the following email from one of their reps:

I apologize for the delay in payment. AMCO was expecting to have the funds from a line of credit in December but did not receive them and so that pushed back our payment. We are now expecting to have the funds in the next 2 weeks.

All unpaid invoices thru October will be paid at the end of January. November invoices in February and December invoices in March.

Thank you again for your patience and understanding.

Of course, if the appraisal is a day late, we get yelled at by someone fresh out of high school who doesn’t understand what an appraisal is (ok, so I am exaggerating a little bit, but it makes me feel better).

Here’s an excerpt from my response yesterday:

…Taking 7-8 months to pay bills by a large national coporation is not reasonable and we are seriously concerned that you are having financial troubles or simply managing the float for a greater return. We would not have charged the same fees if it was going to take more than 6 months to get paid on a substantial amount of work.

Are payments prioritized by those who have the most outstanding or simply by their age? One of the advantages and reasons we agreed to work with your firm, as an AMC, was your sterling reputation for being fair about payment which now that seems to be an outdated characterization…

Is anyone else having this problem with AMCO? Do we have any recourse before I hire a lawyer?


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[Soapbox Cleaning] Readers Get Worked Up About AMC’s, Wamu Layoffs

July 17, 2006 | 8:29 am |

Soapbox readers provided commentary about last week’s decision to close the in-house residential appraisal department at Wamu signified the end of an era. AMC’s won because when you get right down to it, its all about short-term costs in upper management, not about long-term exposure and risk. Soapbox would like to thank today’s B-Schools for this.

Soapbox readers write:

  • I am saddened by the shift to AMC’s. It is nothing short of catastrophic that these “efficiency’ mills win because of greed and impatience. We will all pay for it in the long run.
  • Optis was there homegrown loan Origination System that they completely blew up. I believe they dumped over $1B into this system that never worked. There appraisal management system is Optis Value, not Optis. This system functions fine and actually enabled WAMU to benefit from enormous increases in processing efficiencies and staff reductions on their operations side. This fact was reiterated by WAMU executive as recently as yesterday. There is nothing wrong with there Appraisal Management System, this was purely a senior management decision to move from an in house Appraisal Department to a VMC model.
  • May its time the appraiser took a stance against the AMC’s. You know full good and well that the fees that have been paid will be cut in half or better. The AMC are acting more like an employer every day. Maybe they should be made to toe the line like an employer and the appraiser gets additional benifits. Looks like the ranch is looking better and better every day now.
  • Yes, as an independent fee appraiser I have seen most potential review assignments go to the same low price fast turn-around incompetent form fillers who write the garbage reports that are up for review. They all must have been gone the week of the 4th, because I picked up a few review assignments, with my standard fee and turn times, and I can not believe the crap some appraisers are trying to get away with now days. All three sales from another county when there are three good comparables within a few blocks of the subject; 20% to 50% price inflation instead of the 5% to 10% that we are all used to seeing; and reports without ANY comments!

We even had someone who felt AMC’s were the only way to order a USPAP compliant appraisal because it eliminates the everyday pressures applied by mortgage brokers. You gotta think the reader’s heart was in the right place.

  • AMC’S are the only entities that contract out for unbiased appraisals – in other words they are the only entities that order USPAP compliant appraisals. Our office has a swinging door for standard mortgage companies that order appraisals because they only order until the first one does not hit value, then they go somewhere else. In my review work, only about half reflects good work, the rest are just trying to keep their clients. I hate AMC’s, but it is the price I pay for being honest.
  • You make an interesting point and I think your heart is in the right place but I disagree with the intentions of AMC’s. AMC’s don’t order appraisals based on making the deal like the mortgage brokers are often accused of. However, the fees are so low, that for the most part, and no offense, but their appraisal panels are the bottom of the barrel. Does the lender get a better understanding of the collateral? No. AMC appraisers quite often rely on all their comps from the broker involved in the sale who has a vested interest in the outcome. In other words, the order AMC process may be not as biased toward the outcome, but the mechanics of the appraisal certainly are and the outcome is the same.


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AMC’s Put The Pressure On To Take The Pressure Off

December 21, 2005 | 10:33 am |

In yesterday’s American Banker, a column submitted by an executive and board member of ATM Corp. of America in Coraopolis, Pa., which provides settlement service technology to mortgage lenders called: Appraisal Managers Can Take the Pressure Off suggests that appraisal management companies can reduce inflated appraisals because they eliminate contact with the lender so they can be thought of as a buffer for appraisal pressure.

They claim that:

Appraisal management companies were introduced in the 1980s, in part to provide lenders with a way to secure unbiased appraisals.

While I don’t question their genuine conviction that they believe what they are saying, it is amazing how far off the mark they are.

Its been my experience that one of the problems with AMC’s in general is how detached upper management is from the appraisal process, understanding the problems and issues appraisers face every day.

Of course this article is targeted to a publication whose primary reader is their client base.

AMC’s are physically unable to perform true qualitative reviews for their reports. They can measure turnaround times and perform “electronic” reviews, flagging reports for exceeding guidelines. But someone sitting in a cubicle in Maine, doesn’t know the market, block by block in Idaho like a local lender would.

It gets worse. The quality of the reports, which can’t be measured by AMC’s in qualitative ways, are submitted by appraisers who are generally at the lower end of the quality spectrum. Why? Because the AMC is the middleman and the lender still pays the same appraisal fee. They get a piece of the action. The good appraisers are generally unable to afford to work for AMC’s without cutting costs or taking shortcuts that directly impair the quality of their reports. Of course there are always exceptions.

Specifically in our market, you can’t believe the quality we see for reports completed in this manner. They are usually not worth the paper they are written on.

Articles like this in prominent publications are misleading, and because of the lack of a unified voice for the appraisal industry, no one challenges it. After a while, repetition leads to a false sense of truth and the appraiser ultimately loses.


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