a la mode FHA-Appraisal Fee Study Misleading

PITTSBURGH, March 22 /PRNewswire/ -- The Title/Appraisal Vendor Management Association (TAVMA), the trade association that represents the nation's largest appraisal management companies (AMCs), said today that a new analysis that purportedly captures "reasonable and customary" appraisal fees in various markets is misleading since it intentionally excludes AMCs from its analysis, thereby omitting two-thirds of all of the appraisals done in the U.S.

The Appraisal Fee Reference™, released by a la mode Inc., a technology company with a large base of individual appraisers or smaller appraisal shops, is causing confusion in the industry. TAVMA said, "a la mode is clearly catering to its customer base and trying to suggest that the only fees that should be considered in making the determination as to what is 'reasonable and customary' should be fees paid directly from lenders to individual appraisers: this is like saying hardware prices are only determined by mom-and-pop hardware stores, and that Home Depot and Lowe's® don't exist."

The issue of reasonable and customary has taken on new importance in the mortgage industry since the Federal Housing Administration (FHA) changed the way appraisals must be ordered and required that appraisers' fees should be reasonable and customary.  

"The a la mode analysis attempts to redefine what is reasonable and customary using this analysis that cherry picks results and implies that a small sub-group of the industry should dictate industry-wide prices," Jeff Schurman, Executive Director of TAVMA.  "The FHA says 'reasonable and customary' should be defined by the entire marketplace."

"There is a strong argument to be made that AMCs, as the major provider of appraisal services in the country and the leading source of business for more than two-thirds of all independent appraisers, are in effect the standard for what is reasonable and customary," said Schurman.  "The a la mode analysis may be of some use to the decreasing number of non-AMC aligned appraisers who do boutique 'retail' business or non-mortgage work for attorneys handling estate and divorce cases, but it distorts what is happening in the market and what fees should prevail for FHA work."

In an interview published earlier in the year in Working RE, Lemar C. Wooley, Office of Public Affairs, HUD, addressed this issue, saying: "To a large degree, the [appraiser] fee is the result of a business decision, which may or may not be negotiated, between the appraiser and the client, whether the client is an individual lender, an AMC or some other party in need of appraisal services."

Two-thirds of appraisal volume is provided by AMCs, with TAVMA's 45 AMC members accounting for about 85 percent of this volume.  With volume at this level, it is logical that the prices that have been negotiated between appraisers and AMCs should be the dominant factor in estimating what is reasonable and customary in the industry.

About TAVMA

• TAVMA, the Title/Appraisal Vendor Management Association, is a non-profit professional organization that represents more than 75 companies including more than 45 of the largest Appraisal Management Companies (AMCs) with combined market share of 85 percent of the AMC market. TAVMA promotes the vendor management industry and presents its members' positions to government and media, protects its members' rights to do business without unfair and anticompetitive legislation and regulations and provides useful information about issues impacting the real estate settlement services industry. For more information about the organization, visit the website at www.tavma.org.  

SOURCE Title/Appraisal Vendor Management Association (TAVMA)