Remaining in compliance is hardly the sole reason to sweat picking the right appraisal management company (AMC).
When appropriately selected, these businesses go above and beyond to save your bank or lending institution valuable time, money and better-suited resources — all while obtaining the most qualified, comprehensive and unbiased property appraisals possible.
However, how to choose an AMC has become a somewhat convoluted process. In recent years, the leap in lending regulations and stricter attention placed on mortgage practices has rendered it difficult, if not impossible, for most banks to perform compliant and effective in-house appraisals.
While these regulations have led to more transparency and trust in the mortgage lending industry — and unquestionably benefited the general public — it has not come without a cost. As resources get tied up and personnel bottlenecked, it's community banks and credit unions that are most often hurt.
For these institutions and their larger real-estate finance cousins, picking the right AMC and knowing what to look for in them is growing more and more consequential.
We're reviewing the key metrics banks and lenders should use to know how to choose an appraisal management company, evaluating reputation, customer service, real estate experience, fees, pricing and more. All to ensure deciding on an AMC does what it should do — unburden inefficiencies and make your small banking services the best they can be.
1. Access Customer Service
Good customer service helps grow your customer base. Great customer service keeps that base returning to you, mentally and emotionally investing time and time again because you're helping them solve their problems.
Appraisal management companies are no different. And this time, your bank isn't curating problem-solving — you are the one who needs something solved.
A new partnership with a mortgage appraisal expert begins with their customer service operations. Start your process of picking the right AMC by putting yourself fundamentally in this problem-solving mindset. Customer service in today's world is rapidly evolving, and you can't have streamlined, cost-effective and confident appraisal management if you're continually navigating a minefield of customer-service surprises — or if you find yourself a cog in a robotic, routine process.
Are They Automated or Human?
Does the AMC offer live customer support? When you give them a call, are most messages automated? How long does it take for you to reach a real human being, and throughout your screening interactions, do you have a go-to human touchpoint for questions and concerns?
Many consumers have come to expect real-time, instant-gratification customer service available around the clock. While you probably don't need this degree of customer service for real-estate finance, you certainly don't want to feel like you're fighting for attention. Look for companies that fundamentally check these "human" boxes. Interpersonal insight should always supersede automatic routine.
Are They Transparent?
How transparent are you finding the overall communications from the AMC? This begins with the look and resources on their website and extends through all your interactions. What kinds of information do they house online concerning general industry knowledge alongside their own business practices? Does this information read as honest, thorough and up-to-date?
Past the early screening stage, consider their communication policies. How frequently do they reach out to you, either by phone or email, about changes or updates in services? Are their billing communications clear and organized, without continuous unexpected or misleading itemization? Do they give you real insights into their own internal processes and personnel so you know exactly how they operate?
Do They Treat You Like Part of the Team?
How warm and productive do you find your interactions with the AMC? Do you leave conversations with the sense you're just part of an everyday script, or that you were genuinely cared for?
What's more, are AMC representatives honest when they don't have the immediate answer to one of your questions? Many businesses think this shows ineptitude or a lack of professionalism, but in reality, it can court greater trust and transparency during customer-service interactions. Again, do you have an actual, dedicated person to turn to for individual consultation, or do you talk to someone new every time?
2. Examine Their Industry Experience
Experience can mean many things to many people. For banks and lending institutions in the market for an appraisal management partner, you'll want to assess a few vital experiential metrics early in your search: property type experience, years of practice and property-specific regulatory knowledge.
How to grade an AMC's experience revolves around these three measures. You'll get a holistic view of the types of professional appraisals you not only need in your community but those you can trust. You'll then be able to tailor your oversight accordingly, knowing you have a go-to management company on-hand reflective of your clients' needs. Through this, you'll also get a keen sense of what that business is about alongside how serious they view their practice.
Property Type Experience
Mortgaged properties tend to fall into one of four real estate categories:
- Residential Properties: By far the most common mortgage appraisal type seen in community-focused banks, residential properties include new and pre-owned homes, plus vacation units, condominiums, duplexes, townhouses, co-ops and more live-in properties. Most appraisal management companies have concentrated experience in these residential properties.
- Commercial Properties: Interestingly enough, apartments are considered commercial properties, since they function to produce income for their owners. Following this principle, other commercial real estate includes shopping centers, small and large offices, strip malls, food industry facilities, hospitals and more.
- Industrial Properties: Warehouses and manufacturing tend to fall into its own category, as these properties include their own unique zoning, infrastructure, sales and legal proceedings. The scale and expense of these properties additionally mean they often require insider knowledge and specialty appraisals.
- Land or Agriculture Properties: From vacant lots to farm plots, land property is the final major real estate category. Certain geographic areas will have a more extensive selection of appraisal management companies that service this sector. Depending on the lot type, you might require various land-broker clauses and transactions that vetted AMCs should be knowledgeable on.
How to find an AMC with commercial experience is a different process than one dedicated to residential or land properties, and vice versa. Each of these property types innately involves its own laws and regulations, on top of regulatory bodies that fundamentally oversee them.
Therefore, finding an AMC that specializes in one or two real-estate property types can greatly benefit your operations — but only if your customer base tends to lean heavily towards that property type.
However, don't get bogged down by depth at the expense of breadth. Plenty of reputable appraisal management companies have deep experience and extensive networks across two or three real estate categories, making them safe bets for comprehensive appraising services down the road.
Years of Practice
How many years has the AMC been in business? Have they transitioned property specialties over the course of their existence, or conversely, broadened their range of real-estate management services and expertise?
Even more importantly, how many clients has the AMC served — and how similar are those clients to you? This is a huge element to explore with each of the AMCs you're vetting, as it gives a prime indication of how they attract and treat clients with pain points near-identical to yours.
While numbers don't tell you everything, they are an undeniable measure on how to grade an AMC's experience. As a bank or lender, you understand the power of numbers and quantitative data. You also understand balancing past data with future projections, all of which gets narrowed down with experience.
Regulatory and Compliance Experience
Judging an AMC's compliance expertise can be tricky. The best way to begin doing so is through your in-person or over-the-phone consultations, where you can ask in-depth, compliance-related questions to gauge the AMC's regulatory expertise. You can also explore if these businesses have full or part-time staff dedicated exclusively to compliance oversight and reviews.
Do not hesitate to probe the knowledgeability of the AMC on past federal and state regulations. Those related to banking, lending, the housing market, commercial real estate and more are fair game. How familiar is the AMC with trends seen during the 2008 recession and its subsequent recovery, as well as today's market leanings?
Look out in particular for companies that display clear insight on any of the following significant real estate, appraisal and mortgage industry regulations:
- Dodd-Frank Act
- The Equal Credit Opportunity Act (ECOA)
- 2010 Interagency Appraisal and Evaluation Guidelines (IAG)
- Freddie Mac Bulletin 2010-23 New Guide Exhibit 35
- Fannie Mae Announcement SEL-2010-14
- Home Valuation Code of Conduct (HVCC) or the October 2010 Sunset
- Federal Reserve Board Interim Final Rule
- HUD FHA Mortgagee Letter 2009-28
3. Research Services Offered
The next phase in picking the right AMC deals with researching their complete range of services.
While intuitive, appraisal management servicing is often influenced by other variables, such as the company's geographic reach, their appraiser network, appraiser experience levels, property type specialties and more. Once you have a keen sense of these elements, you can begin to understand the true nature of their services offered.
Are Services Related to Your Business Needs?
The regulatory guidelines for mortgage appraisals stem beyond far beyond crunching accurate values. They even go beyond checking local and federal requirements, with services needing to hit a series of qualitative and quantitative measures to fully deliver on the part of the consumer.
When deciding on an AMC, consider the real-estate market your banking or credit union's community base most often needs alongside what your business doesn't have the in-house resources for. These could include:
- Comprehensive audits of your current appraisals' work, ensuring it meets USPAP standards.
- Additional computer or human auditing review, for complete value analyzation quality control and justification.
- Compliance checks, to ease the mind in today's all-imperative, stricter regulatory compliance field.
- Residential, commercial, industrial or land appraisals, completing the spectrum of mortgage appraisal markets your consumers demand.
Are Services Rendered Through a Trustworthy Network?
The best AMCs see their role as bolstering a complete and transparent end value for all involved parties. They are mediators as much as they are managers, without ever losing sight of the relationship innate in this process. Therefore, it makes sense that relationships should come first for your AMC.
Does the AMC work with types of appraisers you know and readily trust? Are these appraisers nearby or sprinkled far and wide? Does each appraiser have a relevant professional background, communicate well and deliver consistent work? In choosing your AMC, trustworthy and reliable interpersonal relationships will be critical to the seamless execution of compliant appraisals.
4. Understand AMC Fee Policies and How They Pay Appraisers
Finally, customary and reasonable (C&R) AMC fees and payment processes round out the metrics you should look for in picking a service.
Mandated by the 2010 Dodd-Frank Act, customary and reasonable AMC fees mean appraisal fees must be disclosed on the final loan estimate. What's more, it is the lender now responsible for compensating appraisers at rates that are appropriate for their geographic market, or otherwise, face penalties.
While they do not necessarily mandate what these fees are, there is a growing network of independent and nonprofit organizations who survey fee ranges, and fees must be based on objective metrics like third-party information and government agency fee schedules, alongside other payment best practices.
AMC Pay and Fees
Research the gamut of fees, schedules and payment processes for each AMC. Ask upfront to be walked through their payment process and typical contract indexed items — if they use contracts — as well as for documentation that provides all this in writing. Know beforehand if the AMC offers prorated C&R fees as part of its final package. Or perhaps they take a more case-by-case approach, "shopping" your standard residential or commercial assignment for every order they receive.
Neither option is innately superior. Both come with associated pros and cons. Only you can determine what's more comfortable and cost-effective for your final appraisal operations.
How does the AMC choose the appraisers within their network? How many do they usually have available, and are they proficient across the different real-estate categories to tailor to your specific lender needs? How much higher do appraiser fees and pay climb with more specialized projects? What is the AMC's overall track record amongst appraisers?
Also, how simple is it to reach a network appraiser directly, and will all documents or files be brokered through the AMC? Many appraisers have personal preferences to this question, but AMCs should be able to give you a thorough answer to any relevant communication process questions within their network. Or you could look into the appraiser-AMC experience directly through AMC testimonials and reviews.
Experienced and Trustworthy Appraisal Management Company with Community Focus, Nationwide Reach
SAMCO Appraisal Management Company takes a human approach to all its work with community banks and credit unions. We understand these institutions have enough on their plates without having to tie up internal staff in managing appraisals and maintaining precise industry compliance.
You can be confident with what to look for in an AMC by assessing customer service, experience, service packages and payments and fees. Yet the surest way to see if an AMC is right for you is to reach out directly.
SAMCO has the credibility, experience and industry reputation to back up its range of real-estate appraisal services. See for yourself what our small bank and community credit union clients have to say, or ask about our contract-free appraisal management. We focus on you so you can focus on your community.