What are Customary & Reasonable fees when residential fees are changing rapidly?
I don't think that residential fees have ever gone up this quickly, both for non-AMCs and some AMCs. Keeping up on residential fees in my local market is tough. Of course, the "flip side" is that fees will go down when the boom is over, especially AMC fees.
Some consider VA fees as C&R, but they are increasing also in some areas.
Although some AMCs keep looking for appraisers who will do a quick turn time for a low fee, it is becoming more and more difficult as fewer appraisers are willing to do this.
I recently attended a CE class nearby that focused on AMCs, who said that there were big issues with turn times and fees from their lender clients. The September issue of the paid Appraisal Today will have an article on what was discussed at the class, "AMCs Tell All to residential appraisers".
Why were fees relatively stable for decades? Prior to HVCC, in my market, fees would gradually go up over time, increasing $25 to $50 when demand was very strong. Most fees were in a fairly narrow price range. We made money on the easy tract homes and lost money on the "tough ones".
Why have fees gone up so dramatically? Appraisers are reporting turning down (or not responding to) 20-30 or more requests a day from AMCs. Residential appraisers had never competed much on lender fees prior to HVCC. I do commercial appraisals, where bidding has always been done. Fee ranges of $1,500 to $3,000 for the same property have never been unusual. The time and cost of bidding is included in the fee. Most AMCs have been using bidding as there was an oversupply of appraisers. When business is slow, they offer lower fees. Now that business is strong, they pay higher fees. Of course, there are still some appraisers doing them for low fees.
In some areas, AMCs are desperate for any appraisers at any fees to accept appraisals, especially for purchases. Particularly tough are markets where an AMC has one, or a few appraisers. NAR warned real estate agents not to try for 30 day closes.
How do AMCs handle the high fees? This depends on their lender agreements. TRID is a factor as loan officers usually set the fees, which are very difficult to change. Some lenders will allow AMCs to charge more for a specific appraisal. If not, the AMC has to pay the additional cost.
What about turn time? If a loan needs to close quickly, such as a purchase loan, some lenders are offering very high fees. Be careful taking them - be sure to see how difficult the appraisal will be before accepting as turn time is very critical. Also, you will doing less work for a regular "A list" clients.
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Everybody Has a Plan for Fannie and Freddie But Nothing Gets Done
Excerpts: The stakes are high. Earlier this month, the Federal Housing Finance Agency, which oversees the GSEs, said Fannie and Freddie might need a $126 billion rescue if the economy were to stumble hard again. In recent years the Treasury has collected more than enough money from the GSEs, in the form of dividends, to cover a bill of that size.
Plenty of ideas have been floated. Former FHFA Director Edward DeMarco and ex-Senate Republican staffer Michael Bright have proposed turning the GSEs into lender-owned insurers. Others have suggested transforming them into what amount to mortgage utilities, with capped rates of return, essentially keeping them in place in a more regulated form.
My comment: No outdated appraisal forms?? No CU?? No Fannie Mae "rules"?? Yay!!
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Using an Appraiser's Judgment for adjustments
Excerpt: It is common for USPAP instructors to hear this question: "I know my adjustments are supposed to have market-support. However, what should I do if there just is not any market support for a particular adjustment? Should I not make it even though an adjustment for difference-X really needs to be made?"
Since the imposition of collateral underwriter (CU), it is clear that an adjustment in an appraisal report must have market support. For those of you who have taken the 2016-2017 7-hour USPAP update class, you know that the idea of support for adjustments is woven throughout the class. It is also clear that The Appraisal Foundation (TAF), as well as all of the national appraisal societies, have bought in to this conclusion. The problem is that term "market-support" has no structured definition. Therefore, neither boots-on-the-ground appraisers nor state appraisal boards have any definition for the term "market-support."
Read the full article. Worth reading.
My comment: USPAP does not contain the word "adjustment". If you work in conforming tracts that are relatively new, there are usually not many adjustments to consider as compared with areas with much older homes. I quit making adjustments two years ago, except for market conditions, as I don't do any newer tract home appraisals and don't any lender work. I only do qualitative analysis. I quit doing them as our state regulator expects to see support for them.
The author states: " on rare occasions and under unique market conditions it is clear that an adjustment is necessary..." This was not "rare" for my appraisals. I still occasionally make dollar adjustments for critical factors by going back in time, interviewing agents, etc. For example, the value of a 3rd bedroom in a condo, where there very few 3 bedroom condos exist.
In the September issue of the paid Appraisal Today, my article "The Art of Appraising" discusses why appraiser's judgment is needed and the "Curbside" approach. CU and AVMs will never be able to provide accurate analysis on all properties.
