For most of us, the term Appraisal Management Company (AMC) only became part of lexicon via the Dodd Frank Act. While bankers and appraisers alike may differ with Dodd Frank, it is what we have for now and it is the law of the land. Among the many regulatory mandates required of the legislation, a portion of it dealt with how banks and AMCs must handle appraisals for federal transactions. To say the least, recent Dodd Frank legislation has caused more regulation and with it more compliance expense for banks than has been experienced any time in history. While larger banks such as Bank of America and Wells Fargo are well equipped to handle such mandates, small to mid-size institutions frequently struggle financially to meet these new regulatory demands.
Historically most banks have managed the appraisal process in house, without significant regulatory intervention. This has offered the bank control over the process and has been reasonably efficient from a cost standpoint. Dodd Frank has changed all of that by imposing additional layers of regulatory management, while making it difficult for the bank to pass along all of the cost of the appraisal to their customer. Special lines must now be drawn between loan production and appraisal administration in order to assure appraiser independence. New regulations exclude many people within the bank from engaging in the appraisal process while requiring entirely new positions in some cases.
AMCs are now able to offer a solution to this problem by offering appraiser independence, while controlling the cost of each transaction. Banks may obtain appraisals for one fee which covers all costs of administration and insures regulatory compliance. This permits banks to greatly reduce overhead, insure compliance and to charge 100% of the cost of obtaining an appraisal to the client. Many AMCs are now offering commercial and specialty property appraisals as part of their service, making them even more attractive to small and mid-sized banks. Some AMCs permit the lender to use existing bank appraisers for their panel and to establish policies for their appraisals consistent with past bank policy.
AMCs typically have client friendly platforms making the appraisal ordering function very simple and economical. Tech savvy AMCs have platforms capable of broadcasting appraisal requests directly to the appraiser, thereby permitting the efficient procurement of the appraisal from the best appraiser for a particular property. The better AMCs also offer an appraisal review service which further helps to reduce the bank’s compliance burden. Appraisal reviews by certified appraisers typically accompany each appraisal to the bank assuring that all appraisals have been vetted for quality.
Those decisions makers within small to mid-sized banks looking to reduce appraisal costs and to simplify their collateral evaluation process, and whom are not already using an AMC, may want to consider affiliating with one in order to maximize efficiency.
Charlie Elliott, MAI, ASA, SRA, a Certified General Appraiser is the founder and CEO of ELLIOTT & Company Appraisers. Elliott & Company is an Appraisal Management Company specializing in complex title claim valuations for the title insurance industry. Mr. Elliott is not an attorney and nothing contained herein should be construed as a legal opinion or legal advice. All statements and opinions contained herein are those developed by Mr. Elliott given his three decades of education, training and experience as a complex property appraiser. He can be reached by telephone at 336-854-3073.