REQUIRED READING: Due to recent changes in industry regulations, lenders and independent appraisers find themselves working more and more frequently with appraisal management companies (AMCs). Many companies in the industry, however, may not be fully aware of what service they can offer.
In the proverbial nutshell, an AMC is a business that manages a network of independent appraisers in order to produce real estate valuation reports for mortgage lenders and other financial institutions. The federal government defines an AMC as a company that manages 15 or more appraisers in one state or 25 or more appraisers in multiple states.
Although the AMC sector has been around for over 20 years, there has been a significant rise in the number of AMCs over the last several years. So what, exactly, do they do? What is the value of working with an AMC today?
For the lender, the cost of fee panel management, state certifications and appraisal management is effectively eliminated by working with an AMC. For the independent appraiser, working with an AMC provides access to a larger client base, likely resulting in a higher volume of assignments.
There are three primary reasons why lenders should consider working with an AMC. First, there are the appraiser-panel and appraisal-operational-process-management aspects – AMCs can handle a wide variety of functions and responsibilities.
Whether they are focused on a regional or national market, AMCs put great emphasis on their appraiser panel selection process. This includes the verification of appraiser credentials and the selection of qualified appraisers. Lenders that would otherwise spend the time hunting down educated, experienced and qualified appraisers for each loan can instead, have the option to hire an AMC to manage this process for them.
Not only will AMCs conduct the research required to find qualified appraisers, but they will also verify the credentials of the appraiser, complete the selection process and perform reviews of the appraisers chosen. It is also the AMC's job to coordinate with the independent appraiser and deliver the final product directly to the lender. The AMC, therefore, acts as a needed buffer between the user of the report and the appraiser that actually performs the appraisal.
Second, there is the appraisal management technology platform. Many AMCs offer a technology platform that interfaces with the lender's system, providing lenders with immediate access to the status of their appraisals.
The AMC saves time and money for the lender by managing essential documentation. Not only are invoices and payments kept on file, but all paperwork related to the valuation aspect of the loan is typically maintained and managed by the AMC. This saves lenders a great deal of time and resources. Also, most AMCs offer multiple formats for appraisal report delivery, allowing appraisers to deliver reports in the client's requested format and enabling them to meet the client's specific needs in a timely manner.
Third, there is the appraisal quality-control aspect. Not only do AMCs enter orders and assign appraisals, but they also take the time to provide quality-control services, ensuring that their service level meets the highest standards. AMCs often perform both administrative and technical reviews on each appraisal submitted by their panel members.
As part of their regular processes, AMCs confirm that all appraisal reports are in compliance with all state, federal and Uniform Standards of Professional Appraisal Practice regulations, as well as all Fannie Mae standards and all client-specific guidelines. For lenders, this is perhaps the most essential service that AMCs provide.Â
Within the trade
Lenders are not the only ones that work with AMCs – independent appraisers also work with them.
For starters, the AMC helps to eliminate business and administrative duties. When working with a high-quality AMC, accounts receivables duties are virtually eliminated for the independent appraiser. A high-quality AMC will also guarantee payment to members of their panel. With this consideration covered, appraisers can focus on their work, which ultimately benefits both the lender and the client.
AMCs also eliminate many of the administrative and business tasks for independent appraisers. Much of the cumbersome paperwork and time-consuming administrative duties independent appraisers would be responsible for on their own becomes the responsibility of the AMC. This allows the appraiser more time to increase the quality of the appraisal they are creating. Sales and marketing efforts and additional administrative tasks can all be handled by the AMC. Independent appraisers can also use the tracking systems provided by AMCs to produce high-quality appraisal reports in a timely manner.
Second, there is greater quality control on the appraisal work product. An AMC's staff is hired to provide quality-control reviews for all work performed by independent appraisers. This ensures that all service levels meet acceptable standards.
Rather than working alone, in a limited area, the independent appraiser has the ability to bounce ideas and questions off the expert staff available at quality AMCs. This provides a great deal of value to the independent appraiser. Â
By working with an AMC, independent appraisers receive access to a variety of lenders without having to be on several fee panels. Further, appraisers can avoid the hassle of a multitude of conflicting requirements from different companies, as well as numerous phone calls from mortgage brokers and underwriters. AMCs are equipped to handle the entire life cycle of the order, including order entry, assigning, tracking, delivering, reviewing and collecting payments for appraisals in a timely manner. This frees up the independent appraisers to focus on getting their jobs done.
Due to increased regulations, AMCs will be implementing more and more best practices and investing in enhanced IT security, which will also benefit the independent appraiser working with the AMC. It is also another avenue for independent appraisers to earn income and work with lenders that they may not have worked with independently.Â
Of course, it can go both ways. Successful AMCs know that their viability is dependent upon strong, lasting business partnerships with a network of experienced independent appraisers. Ultimately, it becomes a win-win scenario.
George K. Demopulos is president and chief corporate appraiser of Lincoln Appraisal & Settlement Services, headquartered in Providence, R.I. He can be reached at (401) 831-3500.
