Appraisal/Evaluation management is a business method in which an individual or group administers a network of Licensed, Certified and General appraisers to fulfill real estate appraisal assignments, and qualified real estate professionals to fulfill evaluation assignments, on behalf of mortgage lending institutions. It involves recruiting, qualifying, verifying licensure, negotiating fee and service level expectations; administrative duties like order entry and assignment, tracking and status reports, pre-delivery quality control (USPAP and Appraisal Standards), and report delivery (generally electronic). In addition it involves ongoing quality control (a new major focus of federal regulators), accounts payable and receivable, market value dispute resolution, and record retention. In its essence, appraisal/evaluation management is the act of managing a panel of fee appraisers and real estate professionals, performing the administrative elements needed to process and review individual appraisal/evaluation assignments. Order in, order through, order checked, and order out!
Appraisal Management Focus
Qualifying the Appraiser
The focus of Appraisal/Evaluation Management is simple but also complex. An appraisal management company orders appraisals from real estate appraisers (Licensed, Certified, or General), and evaluations from real estate professionals on behalf of mortgage lending institutions. It’s much more than receiving an appraisal/evaluation request and forwarding it onto an appraiser/evaluator. Even though SAMCO only uses the community lender’s board approved appraisers, to be frank, some will not make the grade for quality, and additional appraisers will need to be added to the roster. SAMCO recruits needed appraisers, qualifying competence by reviewing sample appraisals, not just having license and E&O on file, but also checking with the appropriate state appraiser licensing board to ensure the appraiser has not had any violations or is under current investigation. SAMCO also has an ongoing grading system for quality and professionalism as mandated by the new 2010 Interagency Appraisal and Evaluation Guidelines. Then, on an annual basis, SAMCO submits those appraiser files (updated license, E&O, quality and professionalism score) to the community lender for board approval, again as required by banking regulations.
Order Management
Order management is what most people new to the appraisal/evaluation management concept believe is provided, and that only. But it’s much, much, more. Yes, the appraisal management company receives the appraisal/evaluation request from the client community lender, but then it must be assigned to an appraiser that can complete the assignment quickly (not having to heavy of a workload), correctly, and be geographically close. In addition, SAMCO looks at the quality and professionalism scores to assign the appraisal to the best appraisers available. Then that order is tracked on a 24 hour basis, making sure that the appraiser provides communication until the inspection date is set. If the inspection date is past the SAMCO required turn time of five days, then there must be an adequate explanation. With SAMCO appraisers are now monitored and are held accountable to turn time requirements. Of course the lenders processing staff has access to the Status Board which has all communication between the appraiser and SAMCO, but the loan officer staff has a ‘view only’ access to monitor progress. This assures the loan production staff that they are not left ‘in the dark’. They have full access to the progress of the appraisal process. Neither processing nor loan production are able to see what appraiser has been assigned to the appraisal, insuring that the firewall is there, as required by Federal Regulations.
Appraisal Review
QUALITY CONTROL is the most important service that is accomplished by the typical AMC. Before the completed appraisal is sent to the client, audits/reviews should be completed to ENSURE COMPLIANCE with the 2010 Interagency Appraisal and Evaluation Guidelines and the Federal Reserve Interim Final Rule (Dodd-Frank Act). These new requirements mandate that the appraisal meet USPAP and Appraisal Standards/Requirements. It’s not just improving the quality of the appraisal report, but also the Professionalism of the appraiser. SAMCO does this for you with an on-going grading system for both the appraisal and the appraiser. Automated computer audit systems cannot do this for you. SAMCO’s review is not one that just looks at whether a box has been checked, but the reasoning and proof that only an ‘eyes on’ process can provide.
Record Keeping
Most Appraisal Management Companies do keep electronic copies for the appraisal for some period of time. SAMCO keeps the appraisal and all communication involved with that particular project for five years. Archived copies are available at any time at the request of the Client community bank or credit union.
Accounting
An Appraisal Management Company generally pays the appraisal, after all, an AMC’s job is to manage the appraisal process, freeing up the community lenders staff for other jobs. There are a few AMC’s that have handed this back to their client, but not SAMCO. Each appraisal has an individual invoice that is sent with the appraisal and is part of that file. The total fee is broken down on that invoice, showing what the appraiser is being paid, and what SAMCO’s fee is separately. This is VERY important. Proof of compliance with the CFPB’s ‘customary and reasonable’ appraisal fee requirement should be the focus of every AMC. The end of the month invoice reflects the individual fees and the total. Many AMC’s wait and pay the appraiser after they are paid, sometimes as long as six to eight weeks, not SAMCO. We pay the appraiser within two weeks of completing the appraisal. That’s fair to them, and keeps your local appraiser happy.
Appraiser Education
When SAMCO reviews the appraisal/evaluation for quality, it may be sent back to the appraiser for corrections. In fact, the first three to four months of managing a new community lender client, over 80% of the appraisals fail the USPAP audit and must be returned to the appraiser. SAMCO works hard at educating the local appraiser what is required by USPAP and how to improve the overall quality of their analysis and reporting. Typically around 30% of the community lender appraisals fail a USPAP and Appraisal Standard review even after appraiser training. A newsletter is sent to appraisers updating them on quality and professionalism issues. The SAMCO staff is always available to answer questions by appraisers and help them tackle difficult projects.
Lowered Expenses (saving money)
The second reason, and ever more important one, is that the community bank or credit union saves money on every transaction. Community lenders cannot compete with the efficiencies that an appraisal management company offers as their overhead (labor) becomes higher. Appraisal management is not their focus. Have I mentioned that the community bank does not pay for appraisal management if it’s outsourced? That cost is passed onto the consumer at the closing. But it does come off the lenders bottom line if in-housed!
To Ensure Compliance
QUALITY CONTROL is the most important service that is accomplished by the typical AMC. Before the completed appraisal is sent to the client bank, audits/reviews should be completed to ENSURE COMPLIANCE with USPAP and Appraisal Standards/Requirements. It’s not just ensuring that the Estimate of Value is correct, but improving the quality of the appraisal by requiring the appraiser to PROVE the Estimate of Value. Discussing and showing the results of their comparable sale research and discussing their logic, all within the framework of the appraisers Uniform Standards and Professional Practices (USPAP). Today’s examiners want to be assured that the community bank and credit unions asset quality is correct.