Dodd-Frank FAQ

The real estate appraisal and consulting industry has changed dramatically over the last few years.  Recent government regulations has encouraged the proliferation of Appraisal Management Companies (AMCs).  By some estimates these relatively new organizations, that are largely owned by the largest banks and title companies, control approximately 90% of the mortgage valuations in the country.  Unfortunately for consumers and lenders, the product produced by AMCs are both more expensive and of a far lower quality.

Why is this?

In general, Appraisal Management Companies are huge corporations that were granted an oligopoly over the residential real estate valuation industry by Congress through the Dodd-Frank Finance Reform Bill.  Their business model is to solicit appraisal business from lenders across the country and then outsource the assignment to an appraiser that is local.  In return for matching up the lender with the appraiser they receive 25-50% of the appraisal fee for this service.

Why doesn’t the lender order directly from the local appraiser?

Dodd-Frank prohibits direct communication between the user of the service and the appraiser for federally regulated transactions (read mortgages).    Because Dodd-Frank prevents the local appraiser from servicing the needs of local banks, a need was created for a middle-man (AMC) through which appraisals are ordered.

How do the AMCs find local appraisers?

Any licensed appraiser may apply to be on the “list” of AMCs.  Because AMCs must factor in their huge margin they prefer the least experienced and qualified appraisers who are willing to perform assignments for the lowest fee.  Unfortunately because of the oligopoly created, most appraisers (no matter their expertise) are forced to sign-up with the AMCs to stay in business.

Don’t AMCs review appraisals for quality?

Yes, they say the do.  The reality is that they review appraisals to ensure that they meet Fannie Mae guidelines.  This is far different from ensuring that the appraisals were competently completed according to USPAP.    Because the most experienced and qualified appraisers are typically the small business owner with years invested in developing his skill and business in the local market, the review appraisers are typically not these business owners but instead dislocated staff appraisers from the small businesses.

How are we different?

Asset Value Consulting is the local expert that actually performs the assignment.  Because we are so well established we are fortunate that we do not have to rely on Appraisal Management Companies for business.  Instead of having your important valuation outsourced to an unknown third party, skip the middle man and deal directly with the experts.

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