Show Me the Money

Even as appraisers and AMCs it is interesting to me how short our memories can be when times are good.  Until early 2018, the housing market had been on a continual increase since its rebound after the previous historical downturn of 2007-2008. Now we are looking at about seven months of downward trajectory in home sales, as the home inventory continues to climb.

During the past several months the number of AMCs has begun to dwindle as many have joined forces in mergers or buy-outs.  Other AMCs have tightened their belts as lenders have merged or consolidated and are using the opportunity to cull through the poorest performing AMC.  They streamline utilizing a more select group of AMCs that have the best performance and the highest quality. These AMCs are typically on top of their game and have the best strategies. These are the AMCs that appraisers enjoy working with. They understand the value of a quality appraiser, and they understand the partnership necessary to maintain the quality appraisers.

Then there are those AMCs that are among the bottom. They wind up getting the worst end of the deal, and struggle to stay in business. The already thin profit margin of the AMC can easily turn to a borrow-now, pay-later scenario. Appraisers often see this first as payments for invoices come more slowly, and the appraiser’s accounts receivable climbs higher and higher. Then one day there is a notice in an email, much like the one some appraisers received last week from a certain AMC, that indicate your AMC is no longer in business. Of course, your first reaction is, ”How much do they owe me, and how do I get my money?”

I’ve read the appraisal blogs that explain how some appraisers have tried to collect their fees. Some of the explanations range from a pretty interesting idea to flat out illegal. Let me assure you that when you do an internet search of how to make a bomb, you will get noticed by a whole different group of people that you don’t want to mess with. Although you may feel that way, keep it in your dreams… not as a business strategy.

In light of the current market conditions, I have received numerous questions around this topic from both appraisers as well as the many ethical AMCs who’s reputation also gets tarnished by these unscrupulous companies. Here are a few examples of these questions:

  • It’s not like it was after the last downturn. Don’t we have protections in place now for us (appraisers) to get paid by the AMC?
  • “…by law, doesn’t the lender have to pay me if the AMC hasn’t? “
  • “My state has an AMC Bond in place, so won’t appraisers in my state get paid with the bond?  If so, how do I go about getting the fee
  • “Can I go to the owner, CEO, or president’s office or home to get my money?
  • “I heard my state’s bond won’t cover my fees. That is not right, is it?
  • My state doesn’t have a bond requirement, so am I out all my money?
  • Can I just call the borrower and get my money from them? At least I can threaten them with a lean on their house, right?

The evidence is very clear that many appraisers have a horrible time recognizing trouble before it hits them. Instead, many tend to wake up and panic when they realize they are heading down a bad path.  There is no outline regarding what steps are available, and what proper steps should take place in order to ensure they are not sitting ducks atop a mound of accounts receivable. 

It all starts now.  Not just on recovering fees that are owed, but also in making sure you, as an appraiser are not going to be left holding the bag with little work, fewer appraisal orders, and escalating accounts receivable.

This housing market downturn is much different than the last, with different conditions. But it is the same fluctuating housing market, and there will be another downturn after the recovery of this one.  You have to prepare for that and make choices with your eyes open.  Unfortunately, many do not seem to be doing that. “Wait-and-see” is not a strategy.  That is just another way to say, “I’ll wait until it’s broke before I fix it.”

Join me in an upcoming webinar, “Show Me the Moneyon December 4th at 2:00 p.m. EST and discuss these, among many other questions regarding this complicated issue. Receive helpful documents and advice to assure you get PAID!

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About Crispin Bennett

Crispin Bennett
As Chief Operating Officer at Allterra Group Crispin is a seasoned and trusted leader in the valuation profession. His long time career within the industry has created a unique perspective based on his diverse background in Governance, Risk Management and Appraisal. A member of the CRN since the early 2000's, Crispin has served as Chief Appraiser for one of the largest AMCs in the nation, Chief Collateral Office for several large banks, and Chief Valuation Officer for Finance. Crispin has authored numerous articles and bulletins, and is a prominent instructor as well as a frequent contributor to industry groups, government agencies, and policymakers.

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