Lenders order real estate valuation services on properties throughappraisal management companies (AMCs). The real estate valuations are performed on properties with the intention of extending loans to borrowers. Lenders or banks, depending on their size, can work with multiple AMCs at a time.
These banks establish an impartial committee of members outside of their mortgage loan department to choose which AMC to work with. AMCs manage the appraisal valuation process as well as employ a team of appraisers to execute these appraisals. Once the appraisal report is ready, the AMC delivers it to the lender to further assess the property’s value.
Beginning with the financial crisis of 2008, government-sponsored companies, such as Freddie Mac and Fannie Mae, along with the Federal Housing Finance Agency (FHFA) laid the foundation for the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Truth in Lending Act. These are the federal regulations that seek to limit direct contact between borrowers, lenders, and appraisers. This creation of appraiser independence requirements instituted by the US federal government protects appraisers from being influenced by a lender who may want to inflate property values for greater financial gain. It is believed that this is one of the problems that contributed to the Great Recession.
Mortgage loan officers, mortgage brokers, and the home buyer are not permitted to select the appraiser that will analyze the property. A real estate agent may suggest a lending institution to the home buyer, but they cannot suggest appraisers. Along with lenders, these groups also have a vested financial interest in the appraisal and the transaction of the property. They could attempt to influence the appraiser to assign a higher value to the property in question.
Using an AMC reduces the risk of a conflict of interest that could otherwise take place. When this system is properly upheld, a neutral AMC will choose an appraiser with accurate geographical knowledge of the property’s market to deliver a fair, unbiased appraisal.
A large part of the AMC’s role is to cultivate and manage a collection of state-qualified or state-licensed appraisers to generate appraisals for lenders. Once the AMC receives an appraisal request from the lender, an appraiser is assigned to appraise the real estate property. To maintain neutrality, the appraiser is never put in direct contact with the lending institution. The AMC handles the back-and-forth communications between the appraiser and the lender.
The appraiser then works with the real estate agent to schedule a time to visit the property. Once the appraisal report is ready, the real estate agent and the appraiser discuss the different comparable properties they used in valuing the property. That’s largely the extent of the real estate agent’s interactions with the appraiser. The appraiser’s assessment of the property is required to satisfy the guidelines of the Uniform Standards of Professional Appraisal Practice (USPAP). The AMC may legally assist the appraiser if any issues arise.
With certified appraisers in all 50 states, AmeriMac is ready and willing to assist with any kind of property valuation your situation requires. Contact us today for a fast, accurate, and compliant appraisal.