Here’s a story about one appraiser who makes working for AMCs work for him. Many appraisers choose not to work for Appraiser Management Companies (AMCs) because, they complain, the top priority of AMCs is getting appraisals fast and cheap — with quality a distant second. This story is about one appraiser who disagrees and has found a way to work with AMCs ethically and profitably.
The landmark agreement between New York Attorney General Andrew Cuomo and lending giants Fannie Mae and Freddie Mac, which could turn the industry upside down, puts AMCs center stage as they stand to become the main conduit for appraisal ordering, filling the vacuum as mortgage brokers are forced out.
AMCs control an already large and growing share of appraisal ordering nationwide; they’ve caught on because they provide valuable services to lenders- appraiser selection, quality control, billing and more. The problem is that while lenders receive the services AMCs provide, it is appraisers who pay the price with the cut rate appraisal fees AMCs demand. AMC-appraisal orders often go to the lowest bidder, with appraisers willing to take the hit because of the Golden Rule; AMCs have the gold (i.e. appraisal orders).
Texas appraiser Ken Verrett says his firm provides a quality product to his AMC clients at a reduced rate and still makes a profit. How does he do it?
"We made a conscious decision to serve the AMC market eight years ago and gradually transformed our business model to servethat market,” says Verrett. “We successfully made the transition and make a profit at the current (reduced) fee structure by employing as much of the productivity tools and economies of scale as we can. The appraisers who built their businesses over the last few years on the last remaining full-fee niche in the lending market (local lenders and mortgage brokers) will see many of those clients disappear and be replaced by AMCs (as a result of the Cuomo agreement). They're not likely to see the same number of orders and the orders of their former clients will now be dispersed among a wider appraiser base.”
According to Verrett, these appraiser firms will have scramble in wake of the agreement. “My firm took several years to make the transition,” says Verrett. “Those firms will have less than a year. It won't help if they blame the AMCs for the fee decrease. It won't help if they assume firms like mine provide an inferior product for that reduced fee. If firms like mine didn't produce an acceptable, quality product, we'd be cut out of the market. Lenders and their AMCs demand quality and service. Firms like mine have spent years developing our businesses to compete in the AMC niche. Quality and service and efficiency all have to be honed as best they can to remain competitive.”
Verrett offers the following about how he created efficiencies for his firm:
Verrett offers the following suggestions to appraisers who are coping with a slow market and a potential paradigm shift in the way business is done.