The Real Estate REplay
Host Wendy Gilch, and a rotating cast of expert co-hosts, break down the good, the bad, the unethical (and sometimes illegal) things other sellers and buyers experienced while buying or selling a home.
Learn what went right, what went wrong, what they would do differently and how to spot red flags before they become a problem.
The Real Estate REplay is powered by consumer advocate group, Selling Later.
www.sellinglater.com/resources
The Real Estate REplay
Exposing Appraisal Management Companies: Hidden Costs, Ethical Concerns, and the Call for Reform in Real Estate
Did you know there’s a hidden middleman in many real estate transactions, sometimes taking a bigger cut of your appraisal fee than the appraiser doing the work?
In this episode, Wendy Gilch and seasoned appraiser Joshua Tucker reveal the lesser-known world of Appraisal Management Companies (AMCs). While most buyers don’t realize they exist, these third-party companies were initially set up to keep lenders and appraisers at arm’s length. But over time, some have evolved into a profit-driven layer, adding unknown costs for homebuyers. Joshua shares how AMCs often pocket a hefty, undisclosed portion of appraisal fees, leaving buyers in the dark about what they’re actually paying for.
Together, Wendy and Joshua dive into the ethical and financial challenges this creates for both consumers and appraisers, from murky fee structures to pressure on appraisers to meet minimum standards. The conversation highlights the need for transparency and better regulation, with tips to help consumers protect themselves—and a nod to Taylor Swift to lighten the mood!
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And so we've got examples of where they'll charge the consumer $1,000 for an appraisal and then turn around and pay one of their staff appraisers or a third-party independent appraiser $400, and they keep the rest completely undisclosed to the consumer.
Speaker 2:Welcome to the Real Estate Replay.
Speaker 2:I'm Wendy Gilch, an industry outsider, here to reveal the hidden practices and explain the processes that can impact your next home purchase or sale.
Speaker 2:Alongside other industry misfits, we'll call out these poor practices and equip homebuyers and sellers with insights they need to protect themselves every step of the way. I'm so excited to talk about this because this was brought to my attention like probably three or four months ago, and it's part of the home buying process that I don't get privy to a lot or don't get to spend a lot of time, and it's with a certain third party group that consumers don't probably even know exists, and so I'm super excited to have Josh with me today to kind of dive into this. And Josh and I are going to stay totally on topic because I have to run a Taylor Swift after school program in an hour and a half, so I'm going to stay on topic today. I promise probably not, but we'll see what happens. So, josh, if you want to take a few minutes and introduce yourself and just give a little bit of your individual background, and then we can go into your nonprofit.
Speaker 1:Certainly so. My name is Joshua Tucker, and I'm currently the appraisal manager for a small regional bank, and so I have to make sure that we are following all the rules and regulations that are out there. In addition to that, I also have a certified residential appraisal license, and I do do appraisals on the side, and this is where everything really started to unravel, and how I became aware of what was happening is because I am on every side of the transaction now, and so it led me to actually start a nonprofit along with a couple of other appraisers, because we were seeing how these middlemen that most people weren't aware of, and even a lot of lenders weren't aware of, were price fixing against the appraiser and price gouging the consumer, and so that's really what led to the Appraisal Regulation Compliance Council is we started gathering all this information from appraisers across the US and were able to start putting it all together to really show significant harm to the consumers.
Speaker 2:And so your nonprofit is ARCC right.
Speaker 1:That is correct.
Speaker 2:Okay and then so let's go through, just so everyone's on the same page. Explain to me, as a fifth grader, what exactly is the AMC? Because I know they have been around for a while, but it doesn't seem like until the blow up of 2008 that they really became I don't want to say required, but used more consistently. So, as this third party middleman, what did they do?
Speaker 1:So the appraisal management company is essentially a third party that the lender would hire to handle the appraisal ordering process for them. Some of these appraisal management companies do a little bit more. They may actually review entire appraisal ordering process and even, in some cases, their appraisal department In doing so. Like you said, in 2008, that's when they really started becoming prevalent was whenever they tried to put a wall between the lender and the appraiser, because they said that there's a lot of undue influence where lenders were forcing appraisers to make values and to change reports to do things that they shouldn't be.
Speaker 1:So the idea was to put this middleman there to prevent it. It was good in theory. In application, it's become far worse. So that's essentially what the middleman is, or the appraisal management company does, and it's made it more difficult for consumers to know what's going on with the appraisal process. It's made it more difficult, if they switch lenders, being able to go to a new lender, because now you have to get the appraisal management company to transfer it to the new lender and it just really slows down the process. And we've actually seen the appraisal management companies threaten appraisers to make values or to do as they say, or you don't work for them anymore.
Speaker 2:So let's go back to what a home buyer sees and why. They probably don't know about this AMC, this middleman company that sits in between the lender or the appraiser, Because on your loan estimate or the appraisal fee that you get charged is just one fee. Now who is setting that fee?
Speaker 1:The appraiser usually is setting that fee. The person usually is setting the fee. So that's what we have found is they have what are called these TRID forms, where they will send them to the lender and basically say if the appraiser is doing just a single family property, it's going to be $680. If it's rural, add another $100. If it's over a certain size, add another $100. If it's over a certain size, add another $200. If it's on the lake or water, add an additional. So they have these fee schedules to be able to tell the lenders what to charge, so that it tries to cover the appraisal from their side.
Speaker 1:But what happens is the AMC's fee is completely hidden in this process, and so we've got examples of where they'll charge the consumer $1,000 for an appraisal and then turn around and pay one of their staff appraisers or a third-party independent appraiser $400. And they keep the rest completely undisclosed to the consumer, $400,. And they keep the rest completely undisclosed to the consumer. And so it is probably one of the biggest junk fees in the entire lending process, because this fee was initially supposed to be disclosed but they rewrote the rules to where it went from shall be disclosed to may be disclosed. So some lenders do disclose it. A lot of them don't may be disclosed. So some lenders do disclose it, a lot of them don't. They just put the single fee in there and then the appraiser and consumer end up subsidizing the AMC with unknown costs.
Speaker 2:Right, and so just to clarify so the AMC is like they basically get a request for an appraisal and then they turn around and email all these appraisers to say here is the area, here's the appraisal I need, here's the timeline, send me your price.
Speaker 1:Yeah, and they'll send it out to 100 plus appraisers at once, and a lot of times we'll see them include appraisers that are three hours away, four hours away you know people that don't even have the correct MLS to operate in that market. And yeah, then they prioritize the cheapest and fastest appraiser instead of the most competent, and in some cases it gets even more convoluted. Where you can have Rocket Mortgage, for example, they have their own appraisal management company called Amrock, who also has their own staff appraisers, so they can control the entire process from front to end with really very little oversight as to what's happening.
Speaker 2:That's wild to me, and here's what I want to know is is how intense is the AMC's job that they would justify pocketing $600 out of $1,000 the homebuyer paid?
Speaker 1:Well, that's exactly what appraisers have been saying, because the appraiser license actually is the one that holds the risk, so we're the ones that care about the quality of the report. However, we've got actual we actually have a screenshot from the CEO of AMC basically stating that the lenders actually don't care about the quality of the appraisal, they just care about it meeting the bare minimum standards so they can sell it to the GSEs who actually hold the risk. So the pressure basically happens for the appraiser to just get this done, meet the bare minimum and let us get this sold. So it becomes a very big problem where you have appraisers that really care about the quality of report that they're delivering and making sure it is correct, but then we're fighting against the AMCs and lenders that just want it done here now and let us get this deal closed.
Speaker 2:Right, and you know I would talk to a lend. I'm sorry, I talked to an appraiser. This is probably about a year ago and I think this appraiser is the one that connected me to you both you and, I think, lisa right.
Speaker 1:Who else was on that?
Speaker 2:call with us. It was you, me and Lori Noble Lori. That's Lori Noble Lori. That's it. It was an L word. Ah, so close. So you know the appraiser that actually connected me to both of you. She's the one that originally was telling me about this issue with AMCs and she said if you are not squeaky clean, like if you're turning in appraisals that maybe cause an issue, you just get picked less. So it's not even about like doing, it's about just getting the work done and meeting the numbers and getting things in there, versus like what's the actual true value of this home? To a degree, Like.
Speaker 1:I've got an email basically where an appraisal management company so it was a FHA appraisal and there was a shop in the back or basically a storage shed in the backyard that was really a danger to the property. I mean, it was falling down. It needed to either be removed or remediated in some shape way, form or fashion and the appraiser marked subject to the removal of the shed as required by FHA guidelines. The AMC basically came back and said we need you to mark this as is and that there's not an issue there. Basically, they wanted him to remove the shed out of the report, so it didn't become an issue, and basically said well, if you mark it as it is, we're going to send it to the lender, the lender is going to come back to our higher ups and then they will be sending you less work. So it was a roundabout way to threaten the appraiser do as we say and you'll keep getting work. If you don't, then well, you probably won't be getting any more work from us.
Speaker 2:And the whole point of this was to make sure that homes are appraised correctly. Right, there's no more 2008. But what it's coming down to again is exactly to a degree where we were in 2008, where people were just appraising homes for what the lender needed it for or to not cause issues correct and just make it.
Speaker 1:Yeah, I mean realistically, the way things have worked is the appraiser has no way to really stand their ground and report either the AMC or the lender to hold them accountable. There's not a good reporting mechanism. So we have the FDIC, which has certain lenders under them. You also have the Federal Reserve. You have the OCC for your really big banks Sorry, that's the oh God, I can't remember all the actual acronyms, but they basically control. The OCC controls the biggest banks, your Bank of America, chase, wells Fargo, that sort of financial institution.
Speaker 1:There's no good way for us to report to their regulators that these things are occurring and within what is called the interagency appraisal regulations and guidelines, the lender is directly responsible for any and all actions that their third-party vendor does, and it clearly states that the lender is responsible for everything their AMC does. A lot of AMCs have tried to tell the lenders that you know if you use us, you limit the risk to you and you know you're not basically as responsible for things, and that's entirely false. So it's very convoluted in that we don't have a way to report the lenders to whoever is actually in control of them, to whoever is actually in control of them, and on top of that, the appraisal management companies, whenever we report them to the state board. They also usually have a representative on the state board that also decides punishments against appraisers.
Speaker 2:Good Lord. This sounds familiar. It's just like the realtor associations, right, like they have their own groups and then they also sit on the state commission boards to. Also, it's like almost a self-regulated situation here, where they have their thumb on what happens. And I think it's really important to point out that your group was pushing to highlight this by requiring a copy of the appraisal invoice from the appraiser end up in the buyer's hands, right.
Speaker 1:That is correct, and there's actually a couple of states we're working on legislation to try and get that push through, Because we have a perfect example where, in 2017 in Oklahoma, there was a bill pushed to actually have appraisal invoices included with every single appraisal that was delivered to a consumer. This group called Riva, which is the Real Estate Valuation Advocacy Association I think I have that right and their members are all appraisal management companies. So we're talking First American Mortgage, Amrock. You have Frisco Lending Services, Clear Capital, Class Valuation, Stewart Valuation Option. Really, some of the biggest appraisal management companies across the US are part of this group.
Speaker 2:An advocacy group right.
Speaker 1:Yes an advocacy group.
Speaker 2:An advocate for who or whom. I don't know what the correct way to say that would be, but I'm guessing it's probably not for consumers, but probably for themselves.
Speaker 1:Oklahoma Real Estate Board about the bill and asked kind of you know who it was that was on the committee, because they were opposed to it and said that it would complicate things from an administrative standpoint and that they didn't want to have to turn appraisers into the state board who didn't include the invoice in the appraisal. Our software can automatically do that. It's incredibly easy.
Speaker 2:It's one extra PDF correct. It's not challenging.
Speaker 1:Yeah, it's very, very easy. And I mean we had the at that point in time. The Oklahoma Real Estate Board was for it, All the, the, the Realtor Association of Oklahoma was for it, the Oklahoma Mortgage Bankers Association was for it. Everyone in Oklahoma was for this bill to pass, but it went to the Senate Banking Committee, which was ran by at that time Senator Newberry, and he actually was an executive with Tulsa Teachers Credit Union and he killed the bill Basically. I didn't even allow it to get heard and then he resigned in January of 2018.
Speaker 2:heard and then he resigned in January of 2018. So, like doing someone a favor, it sounds like I shouldn't say that I'm just making up gossip stories at this point, but like that's it's. It's amazing to me how many groups and organizations are on the front claiming to protect consumers, but then on the front claiming to protect consumers, but then on the back end if there's something that doesn't. It might benefit consumers to understand where things are going, but it makes them look bad. It just disappears. It's fascinating, it's really fascinating. It's par for the course in this industry. And I want to talk too, because I know that you guys are are full steam ahead on this. You actually also met with the CFPB, so my question number one is how did you do that? Because they don't respond to my many, many, many emails I send to them. So how did you land that appointment and can you pass my name along? Because they don't get back to me. It's so frustrating.
Speaker 1:Yeah, so if you go through the traditional channels, it's very, very difficult to get to someone that can actually do something. I lucked out whenever we started this process, but at that point in time the assistant director of the CFPB had reached out to me and had initially set up an appointment, and so I actually had direct contact with him. He eventually ended up moving over to FHFA recently, but he actually gave us the information to how to directly get a hold of the director at the CFPB, and so that's how I was able to do that. Now this is where it gets fun is. You know, the appraisal Institute recently fired their CEO, and she was being an advocate for trying to bring this to light, and we tried to go through the appraisal Institute for a month and a half to get that appointment with the director, cause wanted to try and bring appraiser advocates with us.
Speaker 2:Right, you need some power.
Speaker 1:Yeah, exactly, and after a month and a half of them not being able to get it done, I reached out directly to my contact and within three business days we had a meeting where the director actually joined us directly.
Speaker 2:I'm so jealous so I have a whole, but that's probably why they don't want to meet with me. I have a whole book of like emails, complaints, warnings, and it's just crickets. So I'm going to, I'm going to have to try to use your channels to meet them, just because I just need to talk to them. Don't avoid me, cfpb, it's all good things, okay.
Speaker 2:So what did the CFPB say? Because I know at that time that were they not asking for people to submit why things might cost more for home buyers to purchase a home, or was that more recently, I know they're looking for it. Like, where are these costs at that are making it hard, other than like the skyrocketing value of a home, and this, in my opinion personal opinion would be one of them Like why am I paying a thousand dollars for an appraisal and only 400 of that is actually going to the appraisal company and the rest is going to this third party? That's really just an administrator of the process. So the administrator of the process is making more money than the person that's actually doing the job.
Speaker 1:Yeah, and it gets. 400 is a lucky fee to get from some of these AMCs now.
Speaker 2:So we've seen them go down to 250 and then also charge the appraiser $20 for their technology platform taking a cut of the fee and then they're turning around and also charging the appraiser a fee to participate in the program in which they already got a cut from.
Speaker 1:Yeah, oh, good Lord, so yeah, and when you know, one of the things that really helped us was whenever FHFA released their data set of all the appraisals that had been submitted to them in the last 10 years. We were able to actually go through that information and, assuming that the AMC was making $250 to $300 an order, which in some cases we've seen them make far more we have lots of evidence of them making far more per order. Based off of just those numbers, they have taken over $24 billion from consumers in the last 10 years, undisclosed for the most part, and that's a lot of harm to consumers. And then just the fees that appraisers have had to pay throughout that approximate 10-year period, if I remember right, is well over $3 billion out of our pockets. So whenever they're talking about appraisers need to train more, it's next to impossible for us to train new blood whenever, according to the IRS's rules, when we take on a trainee, we have to pay minimum wage or a salary at that point.
Speaker 1:And when we do that, as well as having to now, granted, a lot of appraisers don't they'll do a fee split instead because there's no other way for us to survive. And if you're getting paid $250 to do an appraisal and you have to split that with your trainee and it takes you on average of um you know, eight hours to do one with a trainee. You, you can't survive, you can't stay in business that way, and so that's why so many appraisers have not been able to take on trainees. Um the the AMCs have literally price fixed it because they prioritize where they're going to make the most money and they have these scorecards that appraisers can't even look at to see their score. Some companies do allow them to review their scorecard, but Scorecard based on what Like did you hit the number?
Speaker 1:Well, it's a scorecard based on your return times as well, so how fast you did the appraisal and then how many revision requests you received, you know how professional were you, that sort of thing. But realistically, their algorithms that are set up are for cheapest and fastest and that's one of the criteria to getting it. But, um, there's been issues where we've had requests sent to us to uh, that are actually illegal, in violation of use map. We had one where a house was being used as an airbnb and the appraiser knew where the owners lived. Their home of record was two miles away in the same city, and this AMC demanded that the appraiser change the report from vacant to owner-occupied.
Speaker 2:And the appraiser is responsible if they come back to them and say this was incorrect. Why did you do this? It's on the appraiser right.
Speaker 1:It's on the appraiser, because most of the AMCs are not being held accountable for their staff. Most of their staff that are doing the revision requests are not trained or licensed appraisers are not trained or licensed appraisers, and so I mean we're fighting against people who have no training and in some cases even reviewers out of India. They'll send the appraisals over to India for review.
Speaker 2:And in review you mean like hey, this came in lower than the sale price, or this, basically, a revision is something to get the file moving again, right, Like there's something holding up. Your appraisal flagged something, whether it's the value, the shed that should be falling down, owner occupied and that causes you to have a revision. And then is a revision a negative point on your quote unquote scorecard.
Speaker 1:It is. Even if it's incorrect, the revision is a negative point on the scorecard, and so that's where appraisers are absolutely at their wit's end. And as a perfect example of this scorecard or rating system being used, we have another email from and this was an individual who was an appraisal coordinator within an AMC. They sent us this information, but basically they organized a campaign in 2022 of the summer to push appraisers to take less values and then, if the appraisers pushed back, they changed their rating to where they receive less work.
Speaker 2:Okay, so here's. Here's my next question then who? Who is overseeing these AMCs that somebody should be like. Hey, I noticed you're making more than appraiser. Okay, just a best estimate On average, what percentage of the appraisal fee are AMCs taking? The appraisal fee the homebuyer pays on average, what do you think in the US they're taking?
Speaker 1:It really depends on the AMC. So if you're talking more of a local boutique AMC that is actually ran by another licensed appraiser or a small regional AMC, they are actually probably being pretty reasonable in taking maybe $150,000, $175,000, which is what the initial intent was. The initial intent was these AMCs that are much larger, that are members of REVA. They are taking anywhere from 40 to 70 percent on average.
Speaker 2:Who would be in charge to say, hey, I would like to see your books, or I want to see where?
Speaker 1:you're making money and how many appraisers you keep recycling, like, who's in charge of checking on them? Well, it's supposed to be the lender is supposed to be auditing the appraisal management company. However, from what I have seen is most lenders are not requesting the breakdown of what the AMC is charging versus what they are paying appraisers, and so they will audit them to make sure they're complying with Gramm-Leach-Bliley and that they are following the proper data protocols and E&O insurance and that information. But we haven't seen anyone actually audit what the AMC is making compared to what they're paying the appraiser, and so to me, that is a huge, huge thing that should be taken into consideration.
Speaker 1:We ran into an issue where, at one point, louisiana the state of Louisiana and their real estate board tried to actually implement a minimum fee and similar to what the, basically to match what the VA schedule was.
Speaker 1:Well, the FTC came in and sued the state of Louisiana for price fixing in that point, and from that point on, state boards have shied away from trying to enforce fees.
Speaker 1:So what ended up happening was under Dodd-Frank, where actually and this is section 129E of the Truth in Lending Act there was descriptions as to how a reasonable customer fee was to be determined.
Speaker 1:That included the complexity of the report, where it's located, at how far was the travel, as well as the experience of the appraiser. And the first presumption of compliance is what a lot of the AMCs have used to get away with what they're doing. And basically they said you know, on a typical property, if an appraiser is accepting this fee, that is what is considered customer and reasonable. However, there's a caveat where the appraisal management company cannot be engaged in anti-competitive business practices or price fixing, price gouging that sort of thing. And we have noticed that, basically, with them prioritizing the cheapest and fastest, they really are price fixing at that point in time, because you either take those low fees or they send it to their staff appraiser, who will also. Basically, you know they have to take the low fee, and so we're competing against the staff appraisers who are subsidized, and we either take the same fees that they're getting or we don't get the assignment. And so you're how?
Speaker 2:is an AMC allowed to have a staff appraiser? Wouldn't that kind of be like a conflict, or no?
Speaker 1:From my standpoint, absolutely.
Speaker 1:I consider it a complete conflict of interest, because the appraisal management company's job is realistically to try and keep the lender happy.
Speaker 1:That's how they're competing with each other is to keep the lenders happy. And I don't know how you can say your appraisers are independent if you control the types of assignments they get, how they have to do things, their turn times as far as how quickly you want it and that's another issue is turn times being 48 hours. If an appraiser has multiple clients, there's no way you can actually do a 48-hour turn and provide a good product, especially with the NUCNAR ruling, because the way a lot of these MLSs are set up, they are including agent commissions in the concessions. Now, if you read how the government rules what a concession is, commissions are not part of it. So now we're having to call the agents on an individual basis to try and discern what is actually your commission and what is actually a concession, and so that slows down the whole process. But the AMCs don't want that to be, you know, they don't want it slowed down, so they want that report the next day if possible.
Speaker 2:Isn't there issues with new builds too?
Speaker 1:There is issues with new builds. Where they have, we'll see them put into the MLS systems and they will be offering $30,000, $40,000 in concessions to help with special financing. And that never makes it into the MLS. And so then when the appraiser starts investigating it, we will have some builders that flat out tell us well, that's none of your business. And so then sometimes you're stuck with just basically I can't confirm what the concessions are. So you try and notate it in the report, but that also inflates market values.
Speaker 2:And we know that home builders do not want that value of that home to go down and they will do anything, they will offer you everything and anything before they actually have to lower the price. It's just I don't get it. I mean, it's not surprising, right Like in the real estate industry, I feel like anything goes until enough people get mad. And then they're like, oh yeah, yeah, we should look into this. Right Like this might be a problem. And so, from your end, like, how can we help you better? Highlight whether it's home buyers. Can they request a copy of their appraisal invoice?
Speaker 1:That would be the number one thing I can try and tell consumers is to you better ask for a copy of the appraiser's invoice not the AMC's invoice, but the appraiser's invoice Because we have seen them generate invoices that look like it came from the appraiser but it's actually not, and so, yeah, there's a lot of manipulation and issues coming along. And then, of course, there's also the fact that really, we need to do a better job at educating consumers as to what products are out there. You know, fannie Mae and Freddie Mac have been trying to push a lot of these appraisal modernization products that were developed by the appraisal management companies.
Speaker 1:Shocking, I know.
Speaker 2:Another revenue stream for them. I'm shocked. As if 60% or 70% of the fee wasn't enough.
Speaker 1:Yeah, and so, uh, you know, as of recently, as of two days ago, uh FHFA actually came out and stated that, uh, they are increasing the uh LTV thresholds for appraisal waivers from 80% to 90%.
Speaker 2:And if I were in fifth grade, how would you explain that to me?
Speaker 1:So if you were buying a $500,000 house, the 90% LTV allows you to basically take a $450,000 loan and get an appraisal waiver, whereas before it would have been a $400,000 loan Got it.
Speaker 1:And if you happen to use an appraisal management company's property data collector to go look at the house, then that can go up to 97% LTV. Now here's the part that's really bothersome is that these LTV values are loan to value. Are are basically made from an AVM like Zillow that is controlled by Fannie and Freddie, so it is their own internal AVM that they have developed through basically harvesting appraisers data over the last decade plus to try and develop trends and what is happening, what appraisers adjust for what they don't, and it is a very complex algorithm. However, they are not audited. They have.
Speaker 1:Nobody has actually been able to access how this AVM develops its values, and the state of Maryland actually tried to get information on that. So the actual appraisal board from the state of Maryland tried to get Fannie Mae to explain how this AVM was working, and they basically shot him down and said we're a private business, so you don't have to see that. So it gets very interesting because that's what these appraisal waivers are based off of, and I have a guy here in my own town where, when things were really hot and heavy in 2022, he was putting 50% down and he received an appraisal waiver and it was approved by Fannie Mae, but he ended up overpaying by nearly 90 grand and he never received anything to let him know what Fannie or Freddie was saying the property was worth. So that's an issue with appraisal waivers is you don't actually know what your property is worth, according to even their AVM. They just say it's approved, so you could be putting 60% down but overpaying by 50 grand.
Speaker 2:Right.
Speaker 1:Now this cell goes into our MLS system as a financed cell and becomes a new comparable for the market.
Speaker 2:Even if the value is not correct.
Speaker 1:Yeah, so it creates inflation of home prices.
Speaker 2:Yeah, so it creates inflation of home prices and at one point in 2021 and 2020, about 45% of all refinances and purchases were done with appraisal waivers. Oh, so what?
Speaker 1:do those look like now?
Speaker 1:What are those values. There's been some declines in some of these markets. There's been declines in Dallas and some of those markets and there's still areas that are increasing in my area as well. But I think I saw where, on average, I think Austin Texas took nearly a 10 to 15% loss in values. I think they have some of the most underwater mortgages in the US and that was just due to some very interesting alternatives.
Speaker 1:And that brings me to the property data collectors from appraisal management companies.
Speaker 1:So they're basically saying you have your appraisal waiver and then you have your appraisal waiver plus property data collector where they can send somebody out to scan your home, take pictures and send it back to a Fannie and Freddie and if they like what they see, they will approve you for an appraisal waiver. Collectors are unlicensed, unregulated and their training is done different by every single appraisal management company and they don't hold E&O insurance. So if they do something while they're on the property that gets them injured or they break something while they're on the property that gets them injured or they break something, you don't have any recourse against them. The AMCs hire them also as 1099 employees and basically also has this language that states that they're not responsible for any of the data that the property data collector does. So it's kind of one of those things where it gets to the point how are we actually protecting the consumers? And from what we're seeing there, there is no consumer protection anymore. It's basically you know, as a consumer, you need to watch out for yourself.
Speaker 2:Yeah, you really do, and and you know I I've made a few comments about this too even like the future of the CFPB can vary very greatly depending on which administration is in the office, Cause one wants to abolish it and one wants to let it keep going, or at least either abolish it or completely control the funding through Congress, which is where all the lobbying dollars sit, which is where what NAR, at this point, is like the number two biggest lobbying group. And then you have the AMC lobbying groups. Like there's just so much influential money in there it just seems like it would be catastrophic for consumers. The one question I did want to ask you is how does a lender or a mortgage company like pick their AMC? Does the AMC pay them anything to work together?
Speaker 1:To my knowledge. So, realistically, what happens? Because I've had a lot of appraisal management companies come to me through working out being the head of my bank's appraisal department, trying to get us to use them. And so they are just they. They try to sell things that sound very, very good on both sides of the process to a financial institution or a mortgage broker or lender. It sounds great because you can get rid of your overhead and basically hand it over to the appraisal management companies and let them control everything, and so that's really where the salesman pitch comes and pitching we can get you the reports in 48 hours and review-.
Speaker 2:Someone super cheap, probably doesn't have a lot of experience and didn't take a lot of time to do it.
Speaker 1:Yep, that's happened. We have seen an AMC hire a licensed appraiser to go do a complex property that is over a million dollars in value, which is outside their license scope, and so there's a whole lot of issues. And we also have recently a case from the state I won't name them, just because it's still under review is what's happening, but this appraisal management company hired this one appraiser to do a drive-by appraisal in Virginia, maryland and New York and they apparently completed all on the same day. Hmm, but unfortunately the regulating of AMCs is very complex because it varies by state and the state laws that every state implements are different. Some states have some decent AMC laws, others have almost nothing.
Speaker 1:Then we have some appraisal management companies saying they're federally regulated, when they aren't to escape the states from trying to go after them. The only federally regulated AMCs are appraisal management companies that are actually owned by financial institutions. So, like Red Sky with US Bank, they are actually a federally regulated appraisal management company because they are subsidiary of US Bank. Regulated appraisal management company because they are subsidiary of US Bank. Okay, and if I'm not mistaken, they actually have a lot more oversight on them, specifically in that case, because I believe the OCC actually audits them and how their appraisal management company is operating. I'm not entirely sure on that, but a lot of your other smaller ones, though not entirely sure on that, but a lot of your other smaller ones, though. They're not federally regulated, even though they say they are. They do that to try and push around their weight of well, you can't regulate us, but yeah, it's the wild, wild west and it's really up to the state and whether they have the resources to go after an AMC or not.
Speaker 2:And so, from a consumer's perspective, other than asking for a copy of your actual appraisal invoice, how else can we help shine a light or encourage kind of the exposure of what's happening here?
Speaker 1:Probably one of the best ways is, whenever any appraisers that are watching this, you can send your you know these bid requests and assignments to CFPB evidence at gmailcom, which is you know. We can put that up on your information, just where it makes it easier for them to see.
Speaker 2:Yeah, Is that your email?
Speaker 1:It's an email that goes to our group.
Speaker 2:Okay, I was gonna say shoot, do they have another email I didn't know about, but I see it's yours, so nevermind.
Speaker 1:It's ours and we created it specifically as a collection point for this information, to be able to actually gather the data and show what is happening. And I mean we've got appraisers from all over the US sending it to us. And that also makes it difficult because I mean a lot of these appraisers are breaking some of the protocols that the AMCs demand because of these engagements letter state you will not discuss the fee with the lender or the consumer.
Speaker 2:You know which is wild. Like I am paying you I'm the buyer paying I have a right to know where my money's going.
Speaker 1:Yeah, that was the purpose of Truth in Lending Act, but it has been very much manipulated and consumers really need to know what's happening and that's why a lot of agents have been frustrated because they get these reports that just seem like they're slapped together, and it's because it was. They chose the cheapest and fastest and really didn't try to find a qualified appraiser, and that's. The other issue is the way that the AMCs operate. Is they only see license? They don't see experience or knowledge or complexity. They think every appraiser is the same, or knowledge or complexity. They think every appraiser is the same, and I should say that the larger national AMCs operate this way. Your smaller regional ones don't.
Speaker 1:I actually do know some good regional appraisal management companies that operate very well.
Speaker 2:Right, it's almost like real estate, right? So you have the big, giant, giant brokerages who got their butt handed to them in a lawsuit, right. But there are a lot of the smaller, individual mom and pop brokerages like don't, don't play by those rules. And they were trying to do the right thing, right, they don't have to follow the big corporate rules. And it's like the theme of the industry the big guys get to do what they want and the little guys end up just suffering for their choices.
Speaker 1:Yeah, I mean, it's very true, and you know I mean. The way that a lot of these large appraisal management companies are operating is very similar to pharmacy benefit management companies which are currently getting sued by the FTC. So it's very interesting watching the correlation where these middlemen control the product and who gets paid what. And they've used their position to actually force other AMCs out of business as well as force appraisers out of business. And it's really hard for an independent appraiser to compete with an AMC that has a bunch of staff appraisers, because they can do the report for $230 and also get subsidized from the appraisal management company, who still makes 400 plus dollars undisclosed, and they expect the independent appraiser to take the same amount. And if the independent appraiser doesn't, that's fine, we'll just send it to our staff appraiser because we'll make more money that way.
Speaker 2:I just don't understand. If an AMC is supposed to be a non-affiliated third party to oversee to make sure nothing sketchy happens, how are they allowed to also be the one to do the appraisal? I don't understand that If they have a financial benefit for it and a financial relationship with the lender. I don't understand. I don't understand why that's even allowed. I mean, I'm sure there's some loophole that makes it legally allowed for them to do it. I just don't. This industry is so frustrating.
Speaker 1:We think really it just comes down to nobody's trying to enforce it, because appraisers are supposed to be truly independent. I don't know how you can state they're independent when AMCs are trying to push appraisers to do specific products, like the hybrid appraisals. We've seen AMCs using reciprocal licenses to have an appraiser in Illinois do an appraisal in Virginia Beach, virginia, and that makes absolutely no god awful sense, and that's one of the reasons these property data collectors came to be is because it will allow them to have these individuals go into someone's house, collect the data and then send it to the appraisal management company, who can have their staff appraiser do it anywhere in the US.
Speaker 2:Even though that person collecting the data has no idea what they're supposed to be looking for. They're not licensed I should say they're not licensed and trained to know what to look for.
Speaker 1:Yeah, some of them may have a real estate license or an appraisal trainee license, but most of the time we don't see appraisers doing them because they're charging the consumer $185 to $250, but only paying the property data collector $30 to $50. They might get $100 if they're lucky.
Speaker 2:Wow, oh, what a mess. If people want to find you and reach out to you, like, I'll link your nonprofit to this episode. But is there a better way for people to reach out to you? Do you prefer just them to submit to the CFPB email you created?
Speaker 1:So the CFPB email is strictly for submitting the evidence.
Speaker 2:Correct Appraisals.
Speaker 1:That's evidence only. So we do have another email that is on our website and that's just wwwarcc-usaorg, and that will send you to our website and you can kind of read our request for information we submitted to the CFPB and kind of what we're trying to do. And I mean, if you want to donate to us, you can donate there. We are trying to be able to show up to a lot of these industry events to expose what is happening as well, and those are not cheap, man.
Speaker 2:They are even to go Like I got asked to speak at one of them in between like flying across the US, just eating, like just cheap eating right. Like not even going out to fancy dinners, like nothing, just to be able to put fuel on my body to get a ride from the airport. It was like $800 for two, three days and that wasn't even the hotel. Like it's wild, how expensive this stuff is Awesome. Well, thank you for sharing your story with me and please keep in touch with me on like what, what you're working on or how I can support you. Just to even have homebuyers say, hey, I want a copy of my actual appraisal, like the actual appraisal, not the AMC fake one. Like the actual thing. What did it actually cost me?
Speaker 1:Yeah, the actual appraisal invoice directly from the appraiser. It's like you, you want that one? Um, because that's that way you can actually, as the consumer, say that, okay, why in the world was I charged seven, 50 and my appraisal was charged or paid $250,000. What's going on here? That's absolutely you know. I mean, if anyone wants to talk to their senators and state representatives, even at the federal level, just disclosure needs to be required, and the states do have the authority to require these disclosures at the state level, on the settlement state. So I mean we can fight it from the federal level and the state level. State level will probably easier than the federal, if I'm being honest. But there's just. I mean we need actual disclosure as to what's happening. I mean we need actual disclosure as to what's happening.
Speaker 2:Right? Well, thank you for doing this. I know it's not easy being the person trying to change things when there's companies with big dollars who would prefer to keep things as they are and have consumers not know about them. So I'm sure you get some interesting emails and pushback from certain groups. So thank you for sticking your neck out there, because I know what it's like to be in that position. So we appreciate you, and if anyone wants to reach out to you, they know how to do it. And thank you for joining me. I have to go dance to Taylor Swift now.
