Feature Stories
Paradigm shift: The appraiser point of view on Dodd-Frank
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Feature Stories
Wednesday, June 6, 2012
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For many appraisers, the shift from working directly with lenders to working with third-party management companies happened almost overnight. With the introduction of the Dodd-Frank Act, appraiser business models and day-to-day responsibilities and requirements changed dramatically. David Eck, certified appraiser, who works selectively with Appraisal Logistics, among a few other appraisal management companies, walks us through this change, the benefits he has seen and the current business environment of appraising properties.
Valuation Review: How do you think the legislation requiring appraisal independence affected the business of appraising properties and closing loans?
David Eck: The industry was challenged with improving a flawed system, and I think the Dodd-Frank Act has gone a long way toward pushing it where it needs to go.
If handled appropriately by both appraisers and appraisal management companies, there are huge benefits to this legislation that shouldn’t be ignored by appraisers, AMCs or lenders. It is crucial for all parties to address the Dodd-Frank Act holistically in order to achieve true compliance and business stability. Ignoring the reasonable and customary fee provision, for example, will ultimately decrease the quality of the appraisal report and the strength of the lender’s loan portfolio.
VR: What is the reality of working with an appraisal management company?
Eck: The way the Dodd-Frank Act has been designed, appraisers should benefit, and many do, from working with an appraisal management company. For example, qualified and experienced appraisers can gain exposure to a broader range of lenders with the potential of being put into that lender’s appraiser rotation — with the AMC’s recommendation. The emphasis on quality and experience cannot be stressed enough. A good appraisal management company will encourage reasonable and customary fees, full disclosure and 100 percent transparency — essentially, treat the appraiser like a client.
VR: What advice would you give to a new appraiser when partnering with an appraisal management company?
Eck: Experienced appraisers know to select an appraisal management partner that operates with the client in mind. There can be a large administrative burden on an appraiser as a result of working with an unqualified AMC, as well as the challenge of obtaining an appropriate fee. Striking a balance between being paid an acceptable fee and delivering a quality report in a timely fashion should be an appraiser’s top priority. Choosing the right partner can have a huge impact on the success of an appraiser’s business. Don’t sacrifice price for quality.
VR: What do you anticipate for the remainder or 2012?
Eck: So many changes were made in regulatory requirements recently; lenders will need help navigating that moving target. Appraisal management companies inherit that responsibility. There is a quality control issue that is slowly being addressed, which is pushing the industry to a much better environment for appraisers, lenders and AMCs. This trend of quality over quantity and experience over cost-reduction supports a healthy lending environment long term and will encourage the progression toward true compliance and independence.
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