Questions Banks, Credit Unions and Lenders Should Ask Prospective Appraisal Management Companies (AMCs)

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On a daily basis, I find myself having a conversation with someone – sometimes lenders, sometimes appraisers – who wants to share with me their experiences with appraisal management companies. More often than not, they are not good experiences. I usually respond that “AMCs have been painted with a broad brush, and it’s not necessarily a pretty color.” I do believe that many of the complaints I hear about AMCs stem from natural frustrations on both sides of the fence, but I also believe there is validity to some of the complaints I hear.

So how do you go about finding the right AMC partner? My best advice would be to ask the right questions.

What questions are the right questions? Obviously every institution has unique needs, but the following questions would apply to most organizations needing appraisal management company services:

1. Describe the type of review you perform on the appraisal. Automated only? Manual? Or both?

Many AMCs only perform automated reviews as opposed to a “hands on” review of the report. For the most comprehensive review, an AMC should also be conducting a complete, hands-on review of each appraisal order.

2. Are personnel responsible for reviewing appraisals licensed or certified appraisers?

It is important that those reviewing appraisal reports possess the requisite knowledge needed to review the report for compliance and creditability and ideally, that knowledge was gained from having been professionally trained as an appraiser and having worked in the field appraising. An added benefit is the appraiser-to-appraiser communication that tends to be more effective than non-appraiser to appraiser communication.

3. Do you require personnel reviewing commercial appraisal reports maintain a certified general license and have commercial real estate experience?

Commercial appraisals are often complex. Whether complex or not, the AMC should have staff that are experienced appraising commercial real estate.

4. Are your personnel licensed in the states in which they are reviewing appraisals?

In many states this is a requirement of an appraisal management company, and one which is not always followed.

5. What type of training do you provide your personnel? Internal? External?

The real estate appraisal industry is always evolving. AMCs should have adequate training resources in place, and require that their personnel participate.

6. For residential orders, do you charge a set fee per order or does your fee vary based on the fee paid to the appraiser?

Some AMCs negotiate the lowest possible fee to appraisers for residential orders in order to receive a higher fee themselves. Nationwide, appraisers have been highly vocal and opposed to this practice. Fee transparency ensures that appraisers are being paid reasonable and customary fees for their market.

7. Are you responsible for paying appraisers and issuing the 1099’s?

AMCs should be staffed and willing to handle payments to appraisers as well as providing the 1099’s at year end.

8. Will you use our preferred panel of appraisers?

Working with an AMC doesn’t mean that an institution has to stop using the preferred panel of appraisers that they know and trust. The AMC should be willing to limit orders to only those appraisers on the institutions preferred panel, unless instructed to do otherwise.

9. Do you vet appraisers before adding them to the panel?

AMCs should have the resources and expertise to vet appraisers prior to adding them to a clients preferred panel or their own panel. Understanding an appraiser’s qualifications and quality of work should be the first step in developing an appraiser panel.

10. Do you maintain the appraiser’s license and E&O insurance and ensure that it is updated annually/semi-annually?

AMCs should have the resources to continually manage updating appraiser’s records to include obtaining their most recent license and E&O insurance.

11. How do you view your relationship with the appraisers who perform work for you on behalf of clients?

The AMC should have personnel who are responsible for enhancing the AMC’s relationship with appraisers on their panel.  Their response should speak to whether they view their relationship with the appraisers as a partnership or simply another vendor on the list.

12. Do you robo-assign orders, or do you assign based on the appraisers expertise, workload and geographical proximity to the subject property?

Many AMCs robo-assign orders without regard for the order details. This can result in delays and lesser quality appraisal reports if the assigned appraiser doesn’t have the required expertise based on the property type, or the appraiser’s workload.

13. On residential orders, do you have limitations on the distance the appraiser must travel to appraise the subject property?

Unless a property is rural and there are limited qualified appraisers, in order to ensure geographical competence, appraisers shouldn’t have to travel much further than 30 miles to inspect the subject property.

On the commercial side – it is not uncommon for appraisers to travel distances beyond this – even state to state due to their expertise appraising certain types of properties, i.e., c-stores, elder living facilities.

14. Will support personnel and reviewers be dedicated to our account, or will we be communicating with the next person in-line to take the phone call or email?

Ideally, an AMC will have personnel dedicated to each of their clients. This serves many purposes, not the least of which is timely and quality communications. Each client is unique in their own way (market, order types, appraiser panel, appraisal overlays, etc.) and the process is most efficient when all parties are on the same page. No one likes to call a service provider and speak with a different person each time.

15. What is your average turn time? At what point does the “clock start ticking” – at the point the order is placed, or after the inspection has been scheduled? Do you “time out”  orders for reasons other than the client asking you to put it on hold? If so, under what circumstances do you time out orders and is the time included in your average turn time?

Some AMCs will quote a turn time that does not count the days an order is timed out. Orders are timed out for various reasons thereby stopping the clock and the days an order is timed out are not counted in the AMC’s average turn times. Others will not start the clock until the order is assigned and/or the inspection has been scheduled. It is important to understand each AMC’s practice so that you can compare apples-to-apples.

16. Can you provide customized reports for our use?

An AMC should be able to provide weekly, monthly, quarterly and annual reports that have been customized based on the client’s specific needs.

17. Will you upload our residential orders to the UCDP, clear any warning messages and deliver the SSR’s to us?

Lenders making loans to be sold in the secondary market should partner with an AMC who can upload their files to the UCDP on their behalf and should be staffed with reviewers with the expertise to clear any warning messages received back, and deliver the SSR’s to the lender.

18. What type of internal quality control/audit processes are in place?

AMCs should maintain adequate quality control standards and have audit processes in place to ensure that the standards are consistently being met.

 

Understanding the ins and outs of the AMCs you are vetting is the first step. Only then can you discuss and establish your expectations of your AMC partner. Asking these questions is just the beginning of getting to know the company and how they do business. We, as AMCs, understand that you may not know every detail of the process, but that is what we’re here for. Our job is to be experts in our field.

Ask questions. Start conversations, and request information. If something isn’t clear, isn’t given to you, or seems hidden, maybe that company is not the right fit. At Valuation Management Group, we believe that you should be involved in and have control of your company’s appraisal orders. Transparency and quality service is key to taking the appraisal process from ordinary to extraordinary.

You can enjoy a healthy AMC partnership if you identify the right partner.

 

By Sharon Lynn, Vice President of Client Relations

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