What is an AMC? An Appraisal Management Company is the new “firewall” between lenders and appraisers implemented as a consequence of the Home Valuation Code of Conduct (HVCC) that went into effect earlier this year. The AMC is a middle-man thrown into the process that currently has little to no oversight and many do not fully understand the appraisal or lending industries. As a matter of fact, in many states, AMCs are not licensed or regulated and can operate from out-of-state. Because AMCs typically rely heavily on shaving a portion of the appraisal cost off of the appraiser’s established fee, these out-of-state AMCs are not only hurting the bottom lines of small appraisal businesses and independent appraisers, but ultimately harming our state revenues and local economies. In the past few years, there has been new lending, agent, and appraiser regulation in Washington State including loan originators to be licensed, appraisal and agent trainees to be licensed, and several consumer-based laws that have subsequently been implemented around these professions; the spirit of these laws (for the most part) was to have loan originators be licensed, not only as consumer protection, but also insuring that revenue from transactions occurring within Washington would stay within our state; thus, improving our economy.

From the rise of the AMC, new problems are born: for instance: an AMC located in Arizona or Canada can now benefit from a transaction here in Washington, taking taxable income from our state and our local appraisers and benefiting an out-of-state (or out-of-country) business that in turn, benefits their (not our) economy. Furthermore, AMCs are not required to have any level of education tied to this newly established business. Our state (WA) requires a college degree and continuing education for appraisers and initial and continuing education for real estate agents; the AMC can be operated by a high school student or drop-out. The bottom line is no license and / or regulation = no training / education necessary.

Many states have introduced AMC legislation and the federal government has been working on drafting similar laws. Until these laws are enacted, out-of-state AMCs can operate like vampires to our economy and independent appraisers. There are some locally operated AMCs that are struggling to gain market share among the AMCs used by the large banks; these are the ones I personally seek to work with. Is there still a fee taken from the appraiser? – Yes. But, not as much as the larger AMCs and, at the very least, I can be sure the revenue is being taxed and used within our own state economy.

Update: since this post was originally created, Washington State passed legislation to regulate AMCs; this is thanks to the hard work of the Appraiser’s Coalition of Washington (ACOW) and Stan Sidor. Although the legislation does not go as far as I and many other appraisers would have liked, it does address many of the largest issues including local and state revenues.

2 Comments

Categories Residential Appraisal | Tags: AMC, appraisal, Appraiser, economy, home loan, HVCC, local, market, mortgage, real estate, revenue, Seattle, seattle appraiser, washington

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2 Comments to Out of State AMC’s Hurt Local Appraisers and Impact State and Local Economies

1. by Brandon Groce

   On April 13, 2010 at 1:43 am

   Sounds no good to me. What exactly are these dropout AMCs doing that warrants lowering your fees?

2. by Michael Eachus

   On June 30, 2010 at 10:20 pm

   Hi Brandon. The funny thing is that the AMCs really do not do anything that warrants lowering an appraiser’s fee. But, because many of the AMC’s are owned by the big lenders, they are forcing all of the loan originators to use their (bank-onwed) AMC in order to broker home loans through their banks. When they do this, they hire the cheapest and fastest appraiser without (or with very little) regard to quality and then turn around and charge consumers the “customary and reasonable” appraisal fee while skimming the difference. The difference, in many cases, can be $150-250 that the consumer thinks is being paid to an appraiser, but is actually being taken by the AMC. And, because many hard working appraisers have spent years building Mortgage Broker clientelle, a large percentage of many appraisers’ work load is now in the hands of the AMCs owned by the big banks and being redistributed to the cheapest and fastest appraisers who, typially, are either less experienced, out-of-area, or have a quantity-over-quality approach in order to remain profitable while taking low-fee appraisal work from these AMCs.

   Any way you cut it – it is harmful to consumers who:
   1) think they are paying a full fee to an appraiser, but really paying up to alf of the fee to an AMC
   2) expect a quality appraisal by a qualified professionsal and, in many cases, are getting a sub-standard product
   3) may be paying too much for a home because the appraiser is simply hitting the sale price / number
   4) may have to face another housing crisis because the banks that the tax payers bailed out are more interested in creating additional revenues within the mortgaeg system than securing high-quality appraisals to back their investments.

   There are more issues as well… It is clear that the big banks now have more power in the lending inddustry than ever; it appears true that “the fox is now watching the hen house”.