Hard-To-Secure Appraisals
By Charlie W. Elliott Jr., MAI, SRA

Most lenders do not need any direction when it comes to securing an appraisal on a cookie-cutter property local to their office. In today’s ever-changing mortgage market, however, many lenders are finding it necessary to make loans over a broad geographic area and on many different kinds of properties. Some examples that I deal with on a daily basis are as follows:

• “We need an appraisal on a triplex in California, and our office is in Florida;”

• “How can I get an appraisal on a waterfront property located in Mobile, Ala., under contract for $1.2 million?

• We are located up here in Chicago, and the owner’s primary residence is in Dallas. On this jumbo loan, the underwriter is requiring two appraisals and is requiring that the appraisers hold SRA designations;” and

• “My customer has five properties located in four different states, and he is refinancing all of them with me. I don’t want to run all over the place to get this done.”

The list could go on and on, as can be imagined. The range of possibilities is only limited to the number of different products offered by lenders in today’s mortgage climate, multiplied by the locations in which they are offered. In the past, this was less of an issue since most originators were tied directly to a single lender, who, in all likelihood, had a narrow product offering. As in many other fields, today’s market is different … very different. Most mortgage originators represent multiple lenders, each of whom have a broad menu of services available inn most, if not all, states.

Where do we turn in the selection of a vendor to secure the appraisal for such transactions? Some appraisers are very specialized. They do not cross the river because it is a different market or because the local Multiple Listing Service does not cover the area across the bridge. While there is no single answer to this dilemma, a few options and ideas are suggested that may provide a solution.

First is the question of the types of service needed. Will an individual appraiser be best or would an appraisal management company (AMC) best serve your needs?

Books could be written on the pros and cons of appraisers versus AMCs. There is a general assumption out there that independent appraisers are cheaper, more accessible, and that they provide the most personal service. There is also an assumption that the AMC is a one-stop vendor that can solve all problems without the client’s involvement. These assumptions can be far from the truth given the proper set of circumstances.

Just because an independent appraiser does not split fees with an appraisal company or AMC does not mean that his or her prices are reasonable. Some of the highest prices charged for appraisals can come from the independent appraiser working from home, expecting to hit a home run a few times per month and not wanting to do a lot of work. Some independent appraisers are almost impossible to reach on short notice, and some of these are the same people who charge the most. They should be avoided.

The mere fact that a company calls itself an AMC does not mean that it manages appraisals very well. There are AMCs that make themselves hard to find for contact and that use automated-order-entry systems as their sole customer-relations contact. There is nothing more frustrating than to have a problem, dial a phone number for help and find yourself in a maze of automated phone-answering messages and directions. Some AMCs simply do not make customer communication a priority. They should be avoided, also.

With all of this negative commentary, you may get the idea that I do not have confidence in the appraisal profession, my own profession. That’s not so. I have an extraordinary degree of confidence in some independent appraisers as well as certain AMCs. It is just that there are many rotten apples in both barrels, and it’s important to look around to find the good ones. This is not accomplished without some effort and experience. Word of mouth can be invaluable here, when experience is shallow. When a good vendor is found, it is important to hold on to it and nurture the relationship.

AMCs usually work well because they can provide almost any appraisal product in almost any location. It is harder with independent appraisers due to their general lack of scope. Perhaps this is one reason why I lean toward the appraisal management companies when making recommendations to a client seeking specialized service over a broad geographic area. Please note that I do not rule out the independent appraiser, provided he or she is able to deliver the goods. It is just that most lenders have an ongoing need for a broad array of services and, increasingly, these needs are geographically broad.

My suggestion to most brokers trying to seek hard-to-secure appraisals is that it is generally best to find a good AMC and stick with it. Loyalty begets the best service and a known quantity is better than an unknown quantity. Good AMCs will be able to serve the entire country and will have contacts with the best appraisers since they specialize in this field of endeavor. Not to say that there will be exceptions, but day in and day out, my money goes with the established and proven AMC. Yes, the AMC will have overhead to cover, and this will be reflected in the fee charged. In turn, the fee reflects additional experience and service, and permits the lender to also specialize by investing resources into making more loans.

Oh, and one more thing: When selecting an AMC, make sure that a real live person answers the phone.