While most appraisal management companies can greatly help lenders and appraisers make more money with less hassle by streamlining the appraisal process, the relationship between the two can end up counterproductive and costly if appraisers end up working with the wrong one.
There are a number of competent, efficient and respectable AMCs to choose from, but conversely, there are also some unprofessional and dishonest AMCs out there giving the rest a bad name.
In order to keep our industry moving forward and running smoothly, appraisers and lenders must be aware of what to look out for when selecting their trusted AMC partner.
Licensing is the biggest issue with AMCs. Currently, there are 26 states that require AMCs to be licensed. Although the remaining states are in the process of establishing their legislation and application process, they currently do not require licensing.
Licensing gives lenders and appraisers peace of mind knowing that AMCs are meeting certain standards or have to answer to state regulators. Appraisers should ask potential business partners for their AMC numbers in the states where licensing and certification is required.
If licensing is not required, then appraisers should do their homework and find out if the AMC is operating in other states that do require licensing.
Each state has a registry online so appraisers can easily pull up a list of approved AMCs and get their information straight from the state website. Also, many AMCs post their licenses directly on their corporate websites.
Another key component when choosing the right AMC is to understand the payment terms. Sadly, a major problem in our industry stems from AMCs neglecting to pay on time. If an AMC cannot give the appraiser or lender a specific timeline of when to expect payment, this fact should immediately be seen as a giant red flag.
Professional AMCs pay appraisers within 30-45 days of the completion of the report. Anything beyond 45 days—and at the very latest, 60 days—is another glaring warning sign. The appraiser should be aware that the AMC will most likely request some type of information, such as W-9s, from them so they can make timely payments.
The payment terms should be addressed specifically in the engagement letter with each order.
Another full-disclosure item that appraisers should look for on any engagement letter is the negotiation of fees. Appraisers should never put up with AMCs playing hardball by trying to negotiate fees down lower.
Also, appraisers should be wary of empty promises for volume. If the AMC tries negotiating using the tactic of offering to give a specified number of future orders if the fee is dropped, do not engage with that AMC. AMCs cannot guarantee volume; they are subject to the whims of their own clients so there is no way of knowing where their volume is going to come from.
What AMCs can say is that they will send the appraiser other orders if they get them in the area, but they cannot promise a specific number of orders within a specific time period.
Appraisers should also be cautious of AMCs who charge fees to be included on their appraiser panel. Panels are to be used to list the best quality of appraisers and have them available to handle assignments; they are not to be used as a moneymaker by AMCs to promise appraisers work.
Quality AMCs are in business to forge successful partnerships and lasting relationships with appraisers and lenders. They are in business to handle the heavy lifting of the appraisal process and enhance appraisers’ income.
Unfortunately, there are some that are in business for the wrong reasons, but the good news is they can be easily identified and ignored by looking out for the aforementioned warnings.
Consult appraiser blogs (Appraisersforum.com, OREP.org and WorkingRE.com) that monitor AMCs and include appraisers’ candid experiences working with them. Do your homework. Identify and avoid any red flags. Select a respectable partner. Then enjoy the rewards.
Roger Beane is CEO of LRES, a national provider of commercial and residential valuations and asset management for the mortgage, banking, credit union and real estate industries. For more information, visit http://www.lres.com.