Saturday, April 16, 2011

Workers: Low pay imperils industry

Recently implemented federal reforms to boost pay for home appraisers have not fixed the problem, according to a group of Phoenix-area appraisers who said low pay was destroying their profession.

The Dodd-Frank Wall Street Reform and Consumer Protection Act approved by Congress and signed into law in July contains several provisions intended to ensure that home appraisals are impartial, thorough and accurate.

Appraisers were hoping the new measure would correct problems they began to experience in May 2009, when a set of rules known as the Home Valuation Code of Conduct was adopted by the profession.

In a recent survey by the Arizona Association of Real Estate Appraisers, an overwhelming majority of members said they used to earn $350 to $375 per job. Lately they've been earning about half that amount, they said.

Aris Abakuks, an independent, board-certified appraiser based in Gilbert, said it had been difficult for local appraisers to earn a living since the 2009 code of conduct took effect, because the group of intermediary companies put in place to assign appraisers to specific jobs has not been paying them enough.

The largest intermediaries, known as appraisal-management companies, are owned by the major mortgage lenders such as Bank of America and Wells Fargo.

Appraisers who demand more pay risk being dropped from the management company's eligibility list, which one local appraiser described as the equivalent of being blacklisted.

"It's basically controlled by the larger lenders," Abakuks said. "They can just pay whatever they want."

Abakuks said he was dropped from one of the major management companies' list because he refused to perform extra work for no pay on an appraisal he had completed and received payment for already.

Abakuks would not specify which company had barred him from working, but he and others said the practice was common.

The new measure to prohibit unfair pay, which took effect April 1, states that "lenders and their agents shall compensate fee appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised."

It goes on to explain that a "fee appraiser" is any licensed, board-certified appraiser who charges a fee for his or her services.

Some appraisers, but not all, say the 2009 code of conduct has devastated their profession and reduced the quality of home appraisals.

Others say it was necessary, because bribery and collusion had been rampant in the appraisal business and contributed to the hyperinflation of home prices in the middle of the previous decade.

It essentially put a wall between appraisers and mortgage brokers by inserting a middle man into the process. In most cases, appraisers are no longer allowed to speak directly with brokers.

The problem, opponents of the code say, is that some management companies keep too big a chunk of the appraisal fee to run their own operations.

Joanna Conde, a board-certified residential appraiser who heads the statewide Arizona Association of Real Estate Appraisers, and other trade group members said overworked appraisers who need to maintain a high volume of business are more likely to cut corners, miss deadlines and make mistakes.

Nearly every major bank owns an appraisal-management company, which is set up to assign an appraiser from a pool of available candidates each time a home needs to be appraised for a mortgage-loan purchase or refinancing.

Some of the major mortgage lenders, including Bank of America and Wells Fargo, also own appraisal-management companies.

An appraisal is required only if the buyer is taking out a loan. It gives the lender a basis for deciding how much to lend.

Arizona lawmakers recently approved a new law that will force management companies to meet higher standards of conduct and disclose their fees to consumers.

It also will require the state's nearly 200 management firms to register and pay a license fee of $2,500 every two years, Conde said.

Most appraisers and even some management firms supported Senate Bill 1351, which also requires background checks on appraisal-management company owners, forces companies to reveal hidden fees to consumers, and makes them comply with rules for lenders and appraisers.

It also would allow appraisers to file complaints.

However, the new state law is still being implemented and might not take effect until this summer, Conde said.

Meanwhile, several local appraisers said management firms still underpay them and make unreasonable demands, such as expecting them to do follow-up work or drive long distances for no additional compensation.

Even appraisers with steady work are having a difficult time paying the bills, Abakuks said. As a result, many veterans are leaving the profession, and virtually no young people are entering it.

"The problem is going to come five to 10 years from now when there aren't enough appraisers," he said.

by J. Craig Anderson The Arizona Republic Apr. 16, 2011 12:00 AM

Workers: Low pay imperils industry

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