Last Monday we ran the beginning of Dustin Harris's Open Letter to AMC's. We are excited to bring you the conclusion to this highly read and controversial letter. Be sure to read the beginning of Dustin's letter to AMCs from the June 11th edition of the Buzz by clicking HERE
Some Suggestions to Reverse the Trend
Again, I am not an expert in the financial arena, but I am a capitalist, and I am a multiple business owner. I understand the laws of prosperity and they apply, I believe, equally to both small companies (like the fee appraiser) and medium to large structures (like some AMCs and lenders). So with that, allow me to make several suggestions on how we can work together to change the status quo.
Stop Disqualifying Trainees
I am smart enough to know that this one is mostly not your fault. This directive is mainly coming from regulators, but I am starting with it as it is positioned to have the most immediate effect on the industry, and I am hoping you can be integral in pushing for reform. It has become the "in" thing lately to require that all appraisals be completed by a Certified Residential or General Appraiser only. Trainees may not inspect. Trainees may not work on, and trainees may certainly not sign an appraisal report. If a trainee so much as sneezes in the direction of an appraisal, there's gonna be trouble!
The fact is, both the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie/Freddie allow the use of trainees, and the Supervisor is still responsible for every dotted "i" and every crossed "t" in that report. It is in the best interest of the appraiser to make sure the quality of that report is as high as if they had done it themselves. In other words, the ultimate liability for that report still hangs on the shoulders of the supervisor.
Appraisers are overworked. As a consequence, they are making mistakes, cutting corners, and some may even be using trainees (and not reporting such), anyway. I mention that not to tattle-tale on my fellow classmates, but to help us all realize that the regulation is not having the effect it was intended to. As mentioned previously, we are losing appraisers at an alarming rate, and we cannot replace them. Appraisers want to hire other appraisers. We need trainees to help us take on these extra requirements. Ridding ourselves of this ridiculous disqualification will only allow more appraisers back into the field and give you more choice and higher quality appraisers going into the future.
Again, I realize this is not coming directly from the AMCs (with a few possible exceptions). These requirements are coming from higher up the chain, but maybe we can work together in encouraging those decision-makers to ease up a bit on the whole 'Trainees are Taboo' thing.
Educate Your Staff
Recently, I was asked by an AMC employee to go back out to a house and retake the photo of the attic. "This one has rafters obstructing the view," she said. Maybe this is an extreme example of stupidity (and you can be rest assured that it did not come from your company), but it is one example in a sea of ridiculousness.
The fact is, some staff members who work in AMC offices are not trained properly. Most of them have never been appraisers and just do not know what they are doing. Consequently, we appraisers get bombarded with requests that are just dumbfounding in their scope. Once more, I realize that some of these requests are simply passed on to the appraiser from your clients, but that is the problem; they are passed on. Shouldn't it be the responsibility of the middle man to turn back to the lender once in a while and say, "Ah yeah, I am pretty sure pictures of attics are supposed to have rafters in them," rather than just shuffling the question on to the appraiser? Taking the time to properly train your employees would go a long way in alleviating some of our frustration.
Pay Appraisers More
This sounds like an overly simplistic 'solution' (and likely to come from an appraiser), but allow me to explain. In order for an economic relationship to last, both parties must benefit from the transactions. Ask too high a price for a good or service, and the buyer employs the law of substitution to go elsewhere. Conversely, ask too low a price, and the good or service quickly runs out. There must be a balance.
Let's apply this principle to our relationship (between appraiser and AMC). Our current business climate compels most appraisers to work with AMCs. In return, AMCs must work with appraisers in order to stay in business. You need us, and we need you. Both of us must make a profit in order that we continue working with one another. You, of course, are not the only kid on the block. Just as I can choose to go to a different grocery store for my milk, the law of substitution says an appraiser has many AMCs to choose to work with (or none at all if they choose other forms of appraisal work). Just as the grocery store must price that gallon of milk high enough to profit yet low enough to retain customers, an AMC needs to pay appraisers low enough to still retain a profit, but high enough so they do not leave and go to the competition. It is in your best interest to pay appraisers enough that they can continue to work with you. Appraisers talk to one another (this is especially true in the growing social media world), and you can bet they are asking each other, "So, which AMCs do you contract with that pay well and are good to work with?"
Furthermore (and more importantly), paying a fee that is higher than your competition (assuming that you can still profit) allows you the ability to be more selective in your appraiser vendors. Attracting a larger pool of appraiser applicants puts you in a position to be more picky about only working with the top appraisers. This, of course, reduces your workload (less corrections/revisions) and increases your standing with your clients (the lenders).
Limit Your Requirements to... well... Requirements
Most AMCs do not do work with just one lender. They typically have several clients. Because every lender is different, there are many requirements which an AMC must juggle. Maybe ABC Bank wants pictures of all four sides of the house, while XYZ Loans wants a picture of the street going in both directions. What many AMCs do, instead of separating which requirements go with ABC Bank and which with XYZ Loans, is group them all together. So, if you do work for AMCs R Us, you take pictures of all four sides of the house and the street in both directions regardless of who the ultimate client is. I call this practice 'Scope Creep Dog-pile' and it is actually worse in reality than I have made it sound. It is more than just taking a few extra pictures. Rather, it goes to the heart of every part of the appraisal service. Put a few requirements from this company, a few more from this one, and several more from that one, and pretty soon you have an engagement letter that takes 30 minutes to read.
Are you telling me that, with the technology we have today, you cannot separate out what is required by each lender and just send us the stipulations for that particular request? Furthermore, do AMCs ever question the lender about the requests that come across? I know of one AMC who requires, not only a picture of all four sides of the house, but they want me to also stand at each side of the house (North, East, South, and West) and take a picture looking away from the house as well. Really?
When we say there are three bedrooms, do you really need a picture of each one? If I tell you I did a head-and-shoulders inspection of the attic and crawlspace, do you need a picture of the spiders I encountered before you trust that I actually went in there?
I understand that these requests often come from being burned in the past, but trust is a big deal. To not be trusted is demeaning, and appraisers are tired of being treated like a middle-schooler wanting a hall-pass to use the restroom. Want loyal appraiser partners to work with? Treat us like the professionals we are.
As mentioned, most of my work is done for AMCs. There are still some great ones out there. I know because I refuse to work for those who do not treat me well, and I am still doing good business. Thank you. Thank you for putting food on my children's table and helping me to pay my bills each month. I sincerely appreciate the business relationship that we share.
So, why am I writing to you instead of directly to the big banks, lenders, regulators and politicians? Again, I realize that many of these issues are not caused by you. The answer is simply this; appraisers are not very well connected. Oh there are a few organizations out there, but nothing like a powerful lobby that can really make things happen. You and I have a connection that appraisers no longer share with most lenders directly. Furthermore, you have leverage with the banks (after all, they are your clients) which is more than we have.
Of course, I understand my audience. Though this is an open-letter to AMCs, I realize there is no such living thing as a "company." Indeed, I am writing to human beings who live, breathe, and work within the Appraisal Management Companies. It is my hope that someone(s) within your structure will read, understand and do something about the current crises we find ourselves in. It is my hope that you then bring these problems/suggestions to the attention of the person or persons who can make the decisions which will cause change. Remember, it is in your best interest to do so. It is in all of our best interests to see these changes take place.
Thank you for listening.
With Sincere Regards,
The Appraiser Coach