process adds at least a week onto the turnaround time. AMCs shop for the cheapest fee and that may take three to four days. Yet the industry is so concerned about turnaround time that they expect us to complete a credible report in 24 to 48 hours. “There has never been a shortage of appraisers,” added Miller. “There is only a shortage of appraisers willing and able to work for 50 per- cent of the market rate.” “There is anecdotal evidence of some AMCs taking 50 percent or more of the fee charged to the borrower,” says Gregoire, who has also been a past chairman of the National Association of Realtors Appraisal Committee. “Rarely is the borrower aware of the arrange- ment between the lender and the AMC. Even more rare are situations where the borrower is informed of the percentage of the ‘appraisal fee’ retained by the Appraisal Man- agement Company.”
praisers have done a good job protecting their territory. To quote the Cowardly Lion, “not nobody!” can provide an appraisal except an appraiser. “Not nohow!” The rules protecting apprais- ers have helped defend their turf against encroachments by other professions. The emerging problem is not that another profession will offer “appraisals” but that the mar- ket will accept substitutes. Last spring, federal regulators adopted a new appraisal threshold for commercial mortgages. “The final rule,” said the Federal Regis- ter notice, “increases the threshold level at or below which appraisals are not required for commercial real estate transactions from $250,000 to $500,000. “For commercial real estate trans- actions exempted from the apprais- al requirement as a result of the revised threshold,” said the notice, “regulated institutions must obtain an evaluation of the real property collateral that is consistent with safe and sound banking practices.” Under the higher threshold, gov-
AMC’s must be the most inefficient financial institution ever invented since all they actually do is order reports via software, verify our certifications, and claim they are a barrier between the appraiser and the bank. Trained appraisers are forced to work with 19-year-olds chewing gum who don’t really understand what we do."
JONATHON MILLER
HISTORICAL MEDIAN SALES PRICE BY QUARTER
ernment regulators estimated that almost 32 percent of all commer- cial transactions will be impacted by the new rule. However, seen
$300,000
THE COMMERCIAL MODEL So far it would seem that ap-
$250,000
2018 SALES PRICE COMPARISON
$200,000
MEDIAN SALES PRICE
MEDIAN AVM
$150,000
$100,000
Over $400K
$50,000
$-
Under $400K
another way, less than two percent of all commercial transactions by dollar value will be exempted by the new appraisal requirement. Of course, while the need for
appraisals declines under the new commercial standard, the demand for “evaluations” can be expected to increase. This is the opportunity for AVMs.
THE PUSH TO $400,000 In late 2018, government regula- tors proposed raising the residen- tial appraisal threshold to $400,000, up from $250,000, a figure estab-
-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
22 | think realty housing news report :: april / may 2019
thinkrealty . com / hnr | 23
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