Bringing Fairness to Appraisals: Moving Toward Transparent, Flexible Appraisal Solutions
Since 2012, I’ve had the pleasure of working closely with lenders and appraisers, providing me with a front-row seat to the ongoing debate about appraisal fees and working with AMCs (Appraisal Management Companies). Appraisers are increasingly bringing the conversation about these fees to the forefront, pushing for more transparency and fairness. On social media, blogs, and forums, they have started gathering and sharing pricing information highlighting the fee split on their completed appraisals. This reveals just how much of the borrower’s funds are being spent on each party. This growing movement is re-igniting the conversations on the true impact of fee structures and the decisions of the mortgage industry.
A lender's decision goes beyond just a business preference – it can significantly impact service quality, turnaround times, and a company's long-term success. Through countless conversations and experiences, I've witnessed firsthand how financial transparency and fair compensation not only benefit appraisers but also drive better results for lenders. Despite this, it’s surprising how often I meet someone who believes that using an AMC is the only way that appraisals can be ordered. In reality, alternatives like self-managing platforms, have existed since the creation of Dodd-Frank. Many lenders wanted to both stay compliant to the new regulations, but also maintain strong ties to their local markets by utilizing their local appraisers. These platforms take a different approach by allowing appraisers to work directly with the lenders, removing excess participation and frustrations. As one appraiser recently shared with me,
"I wish more lenders would utilize platforms, instead of AMCs. I receive better quality appraisals, at reasonable fees for the market, and can deliver better quality reports with less intervention."
In truth, it’s not about choosing between the AMC model and a direct-to-appraiser approach. I work with clients daily that work directly with appraisers and also use AMCs in their business. It’s about allowing lenders to access and utilize an open market of appraisal providers and solutions. Allow the different parties to compete on value, price, and service. This flexibility allows the lenders, and their borrowers, options to select the best appraisal solution for each situation and create an opportunity to receive the best possible price.
The need for this flexibility comes as CFPB seeks submissions from the industry (Request for Information Regarding Fees Imposed in Residential Mortgage Transactions [Docket No. CFPB-2024-0021]). They highlight concerns over settlement costs, including appraisal fees and payments to appraisal management companies. As noted in their summary:
Settlement services are the next largest component of loan costs. These include fees for title insurance, the preparation and notarization of the documents, and the physical processing of the settlement, as well as other fees. Appraisal fees and related valuation fees, including payments to appraisal management companies, also contribute to the total loan costs. Many of the fees are charged to cover the lenders' costs associated with closing a loan.
The CFPB are asking important questions that the industry needs to address: “How are fees currently set? Who profits from the various fees? Who benefits from the service provided? What leverage or oversight do lenders have over third-party costs that are passed onto the consumer?” and “Would lenders be more effective at negotiating closing costs than consumers? Are there reports or evidence that are relevant to the topic?”
As scrutiny increases, it’s more important than ever for lenders to evaluate their appraisal management strategies. The choice between appraisal suppliers is not a one-size-fits-all decision, but rather an opportunity to embrace flexibility and optimize outcomes. By opening the market to allow for more clarity in vendors can ensure that lenders are delivering value to their clients, staying competitive, and maintaining control over fees and service quality. It’s now time for the lenders to take a proactive stance in shaping the future of appraisal management. Let’s continue to push for solutions that bring transparency, efficiency, and quality to the appraisal process and keep moving the entire industry forward.
About the Author:
Kristin Butler, is the Director of Client Services at a leading provider of software solutions for the mortgage industry. With over 15 years of experience in mortgage support services including home inspection, appraisal software, and client management, Kristin brings a wealth of knowledge and experience to her role. Kristin’s mission is to help clients achieve their business goals through high-quality software solutions and unmatched customer service. Passionate about creating user-friendly processes, building customer loyalty, and fostering innovation in mortgage lending, Kristin continues to shape meaningful improvements across the industry.
