My New Blog

Appraisal and Appraisal Management Company (AMC)/Third Party Organization Fees

FHA does not require the use of AMCs or other third party organizations for appraisal ordering, but recognizes that some lenders use AMCs and/or other third party organizations to help ensure appraiser independence. To address several questions that have already been raised regarding compensation, this mortgagee letter corrects and expands existing fee requirements set forth in Mortgagee Letter 1997-46.

FHA-approved lenders must ensure that:

· FHA Appraisers are not prohibited by the lender, AMC or other third party, from recording the fee the appraiser was paid for the performance of the appraisal in the appraisal report.

· FHA Roster appraisers are compensated at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised. NO MORE LOW BALLING THE APPRAISERS!!  NOW ITS AGAINST THE RULES!!  YOU WILL BE REPORTED TO HUD!!

· The fee for the actual completion of an FHA appraisal may not include a fee for management of the appraisal process or any activity other than the performance of the appraisal. · Any management fees charged by an AMC or other third party must be for actual services related to ordering, processing or reviewing of appraisals performed for FHA financing.

· AMC and other third party fees must not exceed what is customary and reasonable for such services provided in the market area of the property being appraised.

I want to be clear that not all AMC's are bad.  But a lot of them are!  I work with some very good, honest, and reasonable AMC's that do not price gouge the appraiser or the borrowers.   With that being said, listen to this.....

I have had a couple of AMC's tell me that FHA appraisers are working for them at $225 an appraisal!   This is crazy.   They probably do not realize that the FHA inspection takes a lot of time to complete properly.  You actually have to test all the systems in the house for functionality.  You must drive by and take original photo's of all comparables being used.  You must measure and draw all property structures and much more..    I know for a fact that many other appraisers in the industry are not performing these appraisals up to HUD's minimum requirements (I point it out every time I do a review).  Cutting corners and using less experienced appraisers is the only way they are getting these prices from the appraisers.  I am sure that due to the slow down, some appraisers are desperate for business and need to work at these price levels.  Unfortunately, they will soon find out that working at these price levels is not profitable.   No profit, No business!    The only good thing about these low ball AMC's is that they are driving all these desperate appraisers out of business.   Once they are gone and have chosen to work at McDonalds to make more money (LOL), these AMC's will also go away, because good appraisers will not be working for these low fees.  It does not make sense to work really hard, have no family time, have lots of expenses, Lots of liability and make no money...  What are they thinking????

 And by the way, they are still charging more to the borrowers than my standard fee.   Low quality, high cost seems to be the way of the world for some AMC's.   Good luck if you are using one of these.   Ask them to disclose what they are paying the appraiser vs what they are charging your borrower.  Once you hear the numbers, you will be disgusted!  Stealing money from the Appraiser and your client for doing virtually NO WORK!!