"WHY ARE FEES SO HIGH?"
by Mason Spurgeon, Certified General Real Estate Appraiser
Appraisers are constantly asked, “Why are your fees so high?” Appraisal fees always seem to be on the rise, but this is also the case for most goods and services. Many of the reasons for changing fees and prices come down to government regulations and the ever-relevant concept of supply and demand. Also, AMCs (appraisal management companies) play a huge role in the price increases.
Appraisal regulations have changed drastically over the past decade. Residential appraisals for properties being sold in the secondary market now require more forms and more information. Also, requirements have been added for UAD: Uniform Appraisal Dataset. These requirements are intended to keep appraisers from changing the condition or quality of sales to meet what they need to make a deal work or hit a predetermined number. These added requirements and regulations slow the appraiser down—and as we all know, time is money, and the consumer must pick up the tab.
The next factor that dictates the price of a good or service is supply and demand, and appraisal services are no different. Over the past decade, the requirements to become an appraiser have been made more rigorous, making it harder for new appraisers to become certified. This has continually diminished the number of appraisers, because appraisers are retiring faster than they are being replaced. According to the Appraisal Institute, almost 10,000 appraisers have been lost in the past five years (see chart below). With fewer appraisers to complete the work, the fees are sure to rise.
The last major factor to hit the consumer in the pocket book is the creation of AMCs. The AMCs were created to help keep the loan officer from communicating and influencing the appraiser. In theory, this sounds like a great idea, but all it did was place a middle man in the process who must be paid—and you guessed it, the consumer must pick up the tab again. The amounts paid to the appraiser are only a fraction of what the consumer pays for the appraisal because the AMC takes their cut off the top.
AMCs have become a thorn in the side of appraisers. They continuously call appraisers asking for the lowest price and the quickest completion time, yet they typically have little information about the property, which can hinder the appraisal from the very beginning. Then once the appraisal is complete, an email is generated to the appraiser from an automated checking system saying something about the report being incomplete or incorrect. The report is usually fine the way it is, but the automated system of the AMC cannot actually read the appraiser’s explanation for why he did what he did—and the appraiser still has to spend time explaining his report to the AMC. This, again, makes more work for the appraiser, requiring higher fees.
The overall theme is, “Time is Money,” and the more time an appraiser spends on a project, the more it will cost the consumer. Sometimes those higher costs have little to do with the property or customer, but are caused regulations, conditions in the appraisal industry, and the middle-men at the AMCs. In response, the consumer will naturally seek the cheapest appraiser possible. But if you choose a low-cost appraiser, the chances are you will get a low-quality appraisal. A good appraiser does not sacrifice quality for quantity. At Spurgeon Appraisals, you may not get the cheapest fee, but you will always get the best product and service available.
Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.
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