Top 5 Mistakes Smart Lenders Make when Selecting an AMC

Have you Made any of these Mistakes When Selecting your Appraisal Management Companies?


5. Does your AMC have a policy in place to assist with corrections, mistakes, and/or considerations? If so what are they?

Request a copy of the policy and any forms available to get a look into what the process is like. Appraisers are not perfect and mistakes can and will happen. A great AMC will have an efficient process in place allowing appraisers to receive requests for corrections or additional considerations. (remember the appraiser does have final say if the requests is valid and may or may not take them into consideration), either way it is a necessary component to the appraisal process.

4. Compliance.

Make sure your AMC is fully compliant. Ask questions regarding this issue. In todays ever changing climate you need to make sure that the AMCs you are using are in compliance with not only HUD, Fannie and Freddie, but you need to make sure they are in compliance with the new Frank Dodd wall street reform act, GLB ACT, New State Licensing Requirements, UAD, even though most provisions have "sunset" HVCC.

Does your AMC have a process in place to review the appraisal work submitted by appraisers? Having a great review process or Pre-Underwriting standards checklist is a must. This will drastically cut down on corrections and or revisions; increasing turn times, lock rate fall out, and overall efficiency.

3. Insurance?

Yes, every appraiser will have their own E&O policy and the same goes for the AMC, however, does the AMC offer additional coverage in the event of losses due to appraisal related deficiencies? Unless you have been in a cave for the last 5 years every time you pick up a paper or turn on the news investors are making lenders buy back performing or non-performing loans due to appraisal related deficiencies. A loss of this sort can put many brokers or correspondents right out of business. Having the right coverage in todays market is a must. Always make sure your AMC has coverage that protects you in these circumstances.

2. Qualified Appraiser Pannel: Who is on your appraiser pannel?

Most institutions that sign up with AMCs never ask the question on how AMCs are adding appraiser the their pannel. A great AMC will look for professional licensed appraisers that specialize in specific geographic locations. Experience plays a major roll in quality appraisal work, is the pannel made up of new appraisers with less than 5 years experience? How far is the AMC willing to send an appraiser to appraise a property? These are just some of the questions lenders need to be asking about AMCs.

1. cheapest cost to an appraisal

In search of the "Lowest Cost Provider", the number one mistake smart lenders make when choosing an AMC is they want the cheapest cost to an appraisal. Fundamentally, this is one of the largest unspoken issues in the appraisal industry. Institutions want the work to be done for the lowest possible amount and when they do business with AMCs that encourage this business model you will end up with a panel of appraisers that are not being paid properly. Most common practices for these AMCs are called "Broadcasting" or "Bidding" practices, in which the most desperate of appraisers win the orders. 

On the other hand, a "Full Fee" AMC will guarantee appraisers are paid their full fee which results in quality appraisal reports that have a higher likelihood of being delivered on time. 

In the long run, you get what you pay for.

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