Appraisal management companies are the bane of a buyer’s existence. This is the biggest problem right now for a buyer who is getting a loan and will need to have their future home appraised. Here is exactly why this will be your biggest challenge, and I’ll tell you how to handle this issue.
Appraisal Management Companies Created
The mortgage debacle that was part of the real estate crash a decade ago gave politicians all the encouragement they needed to pass new laws restructuring how appraisers are hired. You may recall that the complaint was that a very small number of appraisers were in cahoots with a small number of real estate agents and they were committing fraud by over valuing homes. The best answer would have been to require enforcement of the laws against fraud, i.e. put the frauds in jail.
Instead, politicians completely restructured the entire mortgage and appraisal business in the United States, and they authorized new entities called “Appraisal Management Companies.” These companies are third party entities that appoint appraisers from a list they create. They charge appraisers a fee to be on their list, and they take part of the appraisers’ fees for each appraisal they do. Appraisers hate this new way to extort money from them. It’s another layer of bureaucracy and more fees that are simply passed on to buyers.
Appraisal Management Companies Debacle
I sold a beautiful home to buyers from California. Their mortgage broker is one of the best in the mortgage industry. He did everything promptly, but then we all waited for the appraisal management company to appoint an appraiser. And we waited. And we waited. Then we found out he had been appointed, and that he was supposed to be at the property and have his written report completed within two weeks.
So the appraiser didn’t show up when he was supposed to, and then he didn’t get his written report submitted on time. We had to extend the closing date–twice. That created challenges for the buyers and sellers who are both trying to schedule moving trucks and their own schedules.
Appraisers are so busy, they are demanding what they call “expedite fees,” just to get an appraisal done on time. These expedite fees are as much as $1,250 in addition to their appraisal fee, which can be $1,000.
When an appraiser doesn’t do his job in a timely fashion, there is no one to call. The appraisal management companies are unlisted in the phone books, have no published physical addresses, and we have no way to contact them to complain or to hold the appraisers accountable. Even the mortgage broker is prohibited from contacting the appraiser under the new laws and regulations.
What is the answer to the number one problem in the real estate industry today–dealing with appraisers and appraisal management companies? I have three recommendations.
- The most important priority is hiring an outstanding mortgage broker. A great mortgage broker will have the best network, use the best appraisal management companies, and has the experience to work through any challenges. [Read How to Find a Mortgage Broker]
- The next priority is make sure you’re working with a very good Realtor. A Realtor plays a bigger role than you might think when it comes to helping you connect with all the members of your “team” who will be involved in your real estate purchase. [How to Find a Sequim Real Estate Agent]
- Once having the right people and the right team, be patient (as best you can) and realize that there may be delays in the scheduled closing date that none of us can control. If you feel the need, call your Realtor and your mortgage broker to get updates and let them know your moving schedule, but if you’ve selected the best people, you need to trust them to get you across the finish line.
I’ve often said, “Somehow every real estate transaction gets to closing, even if the closing date was extended. Somehow we work through all the challenges, and sometimes there are many.” Despite these crazy appraisal management companies and appraisers who aren’t getting their work done promptly, you can get through the challenges.
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