If you’re considering outsourcing the appraisal process to a third party Appraisal Management Company, consider the following before making your selection. Choosing the best appraisal management partner is an important decision.
Most appraisal management companies you speak with during your research process will proclaim their coverage to be nationwide coverage. If your footprint is a small territory, then this may be trivial to you. However, if you are doing business in a large area, you need to make sure the management company has more than sufficient coverage. As your business grows, your appraisal management company should be able to meet your needs for expansion with no time delays. You don’t want to outgrow your AMC during a transitional period. It’s important to ask questions about the appraiser on boarding process before you engage the AMC as a business partner:
1. Do you have a dedicated team for recruiting and maintaining your existing appraiser’s database?
2. What is the recruiting process?
3. How long does it take to approve an appraiser?
4. How do you manage license and/or E&O renewal periods to ensure your system is up to date?
This is one of the most important areas to go over with an appraisal management company. Our most important job as an AMC is to keep our clients compliant with all regulations. Removing the lenders / brokers from the selection process means that as we need to take certain steps in order to make sure compliance measures are met beginning with State registrations.
State Registrations – Each State has their own regulatory process in place governing the way appraisal management companies conduct business. This means that each company must pass this approval process in order to receive a registration number. The registration numbers are passed on to the appraiser for reporting purposes.
Each State’s criteria are different but usually include
• Fees paid to the Secretary of State on a one time or annual basis
• AMC ownership reporting
• Background checks
• Licensed Appraiser employment
• Testing Requirements
When researching AMC’s, you should request a copy of their state registration numbers showing they are able to conduct business in a compliant manner in the states you have coverage needs. As an Appraisal Management Company doing business in every state, the expense of the registrations can be monumental. The experienced and financially sound companies will have taken the necessary precautions to make sure the client, and the vendors are protected.
Appraiser Independence – Your selected appraisal management company should have processes and procedures built to ensure appraiser independence is taking place with every transaction to keep all parties compliant. Ask how this is done.
Built‐In Audit Trails ‐If your appraisal management company is using an effective program to manage their files, built‐in audit trails should be part of that package. This allows the lender/client to provide tracking on all files from beginning to end. The lender/client should be able to access and download the history of any file at any time.
Fees Paid to Licensed Vendors
By now, all appraisal management companies should be paying their appraisers customary and reasonable fees. This is also a compliance point for lenders to consider as the lender is ultimately responsible for ensuring these requirements are being met and carried out. Some questions you should certainly ask are:
1. What percentage of the fee do your appraisers make?
2. If an appraiser asks for a fee increase for an order, how do you handle this? Do you go back to the client asking for an increase?
3. Do you solicit your orders to multiple appraisers at one time allowing the lowest bidder to win the order?
4. How do you assign orders out to appraisers?
5. Do you allow appraisers to set their own fees during the approval process?
6. Do you evaluate your fees on a regular basis shifting them with supply and demand?
7. Do you require appraisers to physically ‘accept’ assignment agreeing to the terms of the order including fees paid?
The answers to these questions should not be confidential if they are truly paying reasonable and customary rates to the appraisers.
Quality Control/Review Process
Get specifics on how appraisals are reviewed within the appraisal management company’s review department. Appraisal reports should be reviewed looking for technical errors in addition to lender specific requirements. Some questions you may ask are:
1. What kind of quality control measures and review processes do you have in place to ensure that your reports are being delivered in compliance with all regulations and lender requirements?
2. Ask for a sample of their review process.
3. Are you checking against all regulatory, USPAP and GSE standards?
4. Is your review process automated, manual, or a combination of both?
5. Will you allow my company to submit specific requirements that your review department will check against.
6. Will you provide a compliance certificate with my completed appraisal?
7. Do you employ actively licensed appraisers within your company?
a. Do they attend USPAP and other various continuing education classes?
8. Are all members of the review department properly trained in USPAP by regularly taking the USPAP course?
Appraiser Panel Management
Vendor management should consist of various tasks from the time of approval down to coaching them properly when their performance has been less than acceptable. You will find that some companies use automated scoring as an effort to manage appraisers. These tools are beneficial. However, they should be used in conjunction with other items in order to make sure there is a personal touch in managing their vendor panel. Some questions you may want to consider:
1. Do you maintain solid working relationships with your appraisers through constant communication, steady workload, reasonable fees, timely payments, and realistic expectations?
2. How often do you pay your appraisers?
3. How difficult is it for an appraiser to reach someone within your accounting department should there be an accounting question?
4. Do you require communication from the appraiser when any change has occurred during the order process?
5. How do you hold appraisers accountable for their quality of work?
6. Have you ever reported an appraiser to their State board for violating USPAP and / or other regulatory agencies? (It’s an AMC’s duty and responsibility to properly report appraisers completing fraudulent work)
7. How do you terminate a relationship with an appraiser? (There are regulations for this item, also)
As an appraisal management company there are many choices for software providers. Among the most popular software platforms available to us are those that were created by former appraisers and/or lenders. Sometimes you will find an AMC with proprietary software. As a client of the AMC you will most likely receive a username and password to their software platform. You should consider asking the AMC to conduct a demo of their platform so you can see:
1. How user friendly is their software?
2. How knowledgeable is your sales rep of their software?
3. Is their platform customizable able to meet your organization’s needs?
4. Are there costs associated with my portal?
5. Are there costs passed on to the appraiser in order to become approved or to accept appraisal orders?
Your appraisal management company should be able to mimic your daily operations and integrate those needs within their platform. You should be able to select from a menu of customization options if the standard process doesn’t fit your needs.
One of the purposes of outsourcing to a vendor management company is to alleviate the burden of housing this department within your company allowing you to focus on your business. Compliance and quality should be at the forefront of your decision; however, sacrificing customer service and/or ease of use will make the transitional period difficult and strenuous for your people. Some technical questions you may want to consider asking include:
a. Integration – Are you currently integrated with any LOS (loan originating software)?
If not, do you have the ability to become integrated with another platform? This may not be a concern of yours; however, it is good to know in the case of expansion and will also give you an idea of the relationship between the AMC and the platform developers.
b. Report Delivery – What are my options for report delivery? Do I have access to my files outside of your business hours? Are you equipped to deliver appraisal reports to my LOS platform?
c. Billing/Payment Options – What options do you have for collecting payment? Can borrowers pay for their appraisals online? How is the link sent to the borrower? Can I trigger the link to be sent to the borrower?
d. Automated Reporting Features – What kind of reporting features can I expect? Are they useful in helping me manage my pipeline of appraisal requests?
e. User Access – are the communication requirements for each user within my organization customizable? Are there access levels I can set for each user?
f. Products – For specific products that we offer, can we add those to our portal as an option?
Selecting the right appraisal management partner should be a process that takes much thought and consideration. Gathering as much information about their procedures and how they protect you as a client is crucial. Appraisals are a big part of your business. The AMC you select needs to be on the same page as you are. They should not only be able to meet expectations, but also exceed them and grow along side of you. With improving technology and an ever changing industry, your AMC needs to be able to forecast and adapt with a constant focus on improving their processes. Your feedback is most important when working with your appraisal management vendor, as it plays a vital role in how they grow alongside of your team.
Lastly, taking care of clients is just important as taking care of vendors. Listen to what the vendors say about the AMC, as well as, your peers. The reputation of the appraisal management company you are interviewing should speak for itself.