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The Isolated Appraiser Theory

by Administrator on Mar 15, 2009 General Appraisal 2061 Views

With the HVCC (Home Valuation Code of Conduct) being implemented on May 1, 2009 residential real estate appraisers are about to enter a new business environment.  Gone are many of the neighborhood mortgage brokers with whom appraisers used to work.  Here are new AMCs (Appraisal Management Companies) that are gaining control over the supply side of the appraisal market, and of course most of these firms have their hand out for a portion of the appraisal fee.
The theory behind the implementation of the HVCC using AMCs is that once you isolate the appraiser from the influence of lending intuitions appraisers will no longer find themselves in situations where they are forced to "hit the numbers."  It is a simple minded solution to a problem that has not been solved since capitalism was conceived.
Do regulators really think that mortgage brokers or their new counterparts will give up on a real estate deal because one appraiser hired via an AMC does not opine a valuation high enough to make the deal happen? Let's get serious, mortgage brokers in the past were quick to identify appraisers who would make their deals happen. Fact is, the involvement of AMCs is unlikely to curb lender pressure to identify appraisers who will help get deals done.  For a few hundred dollars many will try a second or a third appraiser, just like they have done in the past.
Does anyone really believe that if you put an AMC in charge of ordering appraisal reports that they will be less likely to attempt to influence appraisers than financial institutions? There is a lot of money to be made closing real estate transactions and AMCs are not, and should not be expected to be, guardian angels with perfect moral compasses. Whoever thought that they would be was mistaken.
It is my opinion that the era of AMCs will come and go just like the era of financial institution owned appraisal service companies, but not until after we find that greed and influence have corrupted them in the same way that it has corrupted our financial system. If appraisers are responsible for forming unbiased appraisal opinions for real estate transactions, and suffer the consequences if they are biased or in error, then they should be the only parties involved in the transaction from an appraisal standpoint.
AMCs add nothing in a real estate transaction, but they will take a great deal away from appraisers. The most important question that anyone can ask is, will AMCs and their officers be held accountable if they are found to be more than simply unbiased transaction coordinators?
Update 2013: While AMC’s have struggled to keep a foothold in the appraisal business there are large financial rewards and many parties don’t want to step in and go back to a time when appraisals were ordered directly from appraisers.  So it appears that appraisers have been saddled with AMC’s as the “third party” in many appraisal situations.  It’s interesting that banks are still involved in the placement of commercial assignments I guess there is just too much to be lost by the bank if the appraisers are not kept under direct control.  
For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (, or you can also click on “Contact Us” on the home page of this site.

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