The Problem with Appraisal Management Companies

For all intents and purposes, Appraisal Management Companies (AMC) are nothing more than a fancy term for the middlemen who work between the lender and your Austin real estate appraisers. And there have been quite a lot in recent years. Their role is essentially to serve as the buffer between the lenders and appraisers, with the goal of producing a USPAP-compliant and unbiased real estate values. For providing this service, AMCs take a sizeable fee. When it comes to commercial real estate appraisals in Austin, this fee can be as high as 30% of the fee you are paying!

But like most things, it’s not completely without a hitch. Here are some of the top complaints about AMCs that you should be aware of…

Announcing low fee orders

One of the biggest complaints that companies get is how they broadcast orders to numerous appraisers in an effort to canvass for the lowest fee for servicing an order. Because most experienced appraisers will not provide service at such low rates, the result is that a lot less qualified and less experienced appraisers who aren’t at liberty to decline the low-fee jobs take it on and deliver sub par work. This has also resulted in a lot of seasoned real estate appraisers to leave the business because they cannot compete with such low rates when their staff requires a much higher base pay.

The result is of course, a lot of sub par work, leading to more paperwork including increased lender requirements.

Very low quality assurance and quality control

Obviously every AMC will claim to have exceptional quality assurances and quality controls, but this isn’t always the case. In most cases, AMCs follow automated systems that will ask appraisers to answer additional questions, which will then require a review to determine whether they are compliant with lender requirements. This will require adding several days to the process before the AMC can even deliver the report to the lender, making the process more tedious.

Technology fees

AMCs make money by taking a cut from the appraisal. But in addition to this, AMCs will also charge appraisers a “technology fee” which they tack on in order to receive and process a particular order.

Ownership of AMCs

Most AMCs are wholly owned subsidiaries of various banks whose appraisals they process. Following this process flow, the AMC then is able to take a portion of the fee for their appraisals without necessarily getting a neutral middle party between the bank and appraiser, defeating the entire purpose of an appraiser to begin with. Since the middleman is now owned by the bank, the entire process of having an AMC becomes moot; this also potentially raises the cost of the borrower to cover the operating expenses and profit margins of the AMC.

In some cases, AMCs are owned by individuals, but are typically bought out by the banks, leading to these independent companies to dwindle and making it ultimately harder for them to keep up with the bigger, bank-owned institutions.

Lack of regulations for AMCs

Most states have minimal rules and regulations for AMCs. Despite being a significant part of the home buying process, states barely have any rules and guidelines for these organizations to follow.