Avoiding A Race To The Bottom

There’s a common misperception out there — especially among appraisal clients — that the “oversupply” of appraisers has created a market where there is no fee too low. And indeed, many AMCs have said exactly that with substantial hubris. They’re clearing their rosters of the “expensive” appraisers, or so the theory goes, and taking advantage of a down market filled with too many appraisers, and ratcheting the pressure up and the fees down.

That sounds great, but it’s not really working out as well as they’d all have you believe. And in fact, the loud bragging about going for the lowest cost suppliers backfired. How? Who called their bluff?

The National Association of Realtors. That’s right. Them. The ones you’ve often ridiculed as part-time airheads who couldn’t get a square footage right even if their spa appointment depended on it.

Well, what they do get right is national, forceful, bare-knuckled political power. NAR is what the Appraisal Institute should be, but isn’t. And it won’t be. Ever.

So how did they help? The AMCs bragging about getting appraisers on the cheap in the post-HVCC apocalypse coincided with agents suddenly seeing deals fall through. It didn’t matter if “low appraisals” were the cause. They were a convenient excuse, and NAR went on the offensive. One press conference later, and it was front page news. Politicians, Fannie, Freddie, and FHA were told in no uncertain terms what NAR wanted.

Next thing you know, FHA requires that you be paid “reasonable and customary” fees as though you were independently contracted without an AMC taking a cut, and the GSEs make it clear that competency is more important than price on an appraisal. Thank you, thank you, thank you, NAR. (Wake up, AI. We need you.) (pq)

It’s still a terrible appraisal market, but it’s been pulled back from the brink through some strong-arm tactics by a group that manages to get the same high commissions even when there’s a massive oversupply of agents. There are other factors at work, but clearly oversupply alone isn’t the only issue. Avoiding mutually assured destruction is the key. And to do that, you must have knowledge of what the fee situation really is, and isn’t. Just like the military equivalent, you have to have good intelligence to avoid a catastrophe.

That’s one major reason why we created the Appraisal Fee Reference, or AFR. Agents know what other agents charge via the MLS. If the only knowledge you have of the fee landscape is the calls you get from kids in an AMC boiler room telling you “everyone” is doing URAR’s for $150, then you might as well surrender right now.

You can either choose to believe them, or you can look at what the data says is the baseline for a plain-Jane URAR for your area, and demand that you be paid that amount at the very minimum. Then add on “reasonable” to that — reasonable FHA fees, reasonable turn times, reasonable conditions. (Download your free copy of the Appraisal Fee Reference here.)

And whatever you do, never agree to “stipulate” that the customary fee for your area is whatever the AMC tells you it is. That just lets them get around FHA’s rules. At the bare minimum, it’s what the AFR says it is, plus add-ons. You can, and should, quote us on that.

You can always get in a race to the bottom by selling quickie appraisals like BPOs, as Bradford Technologies has suggested. But how will you get your fees back up after that? You won’t. Better to not go there. With the AFR at your side, you don’t have to.

Get your free copy of the Appraisal Fee Reference now.