What do Appraisal Management Companies (AMCs) really do?

In order to adhere to all of the regulatory requirements as well as provide appraisal services that are in compliance with industry guidelines, an AMC must perform a wide variety of functions in an exceptional manner.

To start, the AMC must have a robust vendor management department that vets appraisers for possible approval in every area they service. Once appraisers are approved, the AMC must manage them throughout the order life cycle. The AMC must provide real-time status each day on all open orders and help ensure those reports are delivered to the client on or before the due date. It is necessary for the AMC to perform quality control functions, which often leads to multiple kick-backs of the appraisal to ensure the report meets all applicable industry guidelines. Leaders among the industry use certified residential or certified general appraisers to perform this service. Among the many core competencies a quality control analyst must possess is the ability to communicate with authoring appraisers in a professional, respectful, and effective manner. Personnel within the organization must also be available for post submission support (rebuttals) from the client and be able to maintain a complete “paper trail” of all correspondence relating to that order.

In addition, the AMC must employ a full-time staff of IT and compliance personnel, management for each department, account executives, procurement and review teams. The AMC is also required to be registered in many of the states they do business in (soon to be all 50) as well as pay taxes in some states on revenue that appraisers receive.

The AMC assumes responsibility (liability) for every completed order long after the report is submitted to the client. Many clients require the AMC to carry insurance above and beyond standard errors and omission insurance. Additionally, some clients require the AMC to have redundant systems and facilities to ensure their appraisal orders will always be processed even during inclement weather or other challenges that can often put business on hold. Annual audits of the AMC are also becoming a more common business practice.

In order to have the ability to afford this entire infrastructure; a steady flow of business is necessary, which requires consistent marketing and business development efforts. The AMC must be financially healthy in order to pay vendors on time (or have the ability to attract clients, as many now require audited financial statements as part of the onboarding process). The aforementioned infrastructure is an expensive business model; however, for best-in-class AMCs that operate efficiently, effectively, and profitably, it remains a rewarding industry with lots of growth potential. Of the 500+ companies identifying themselves as AMCs today, only a small fraction of them truly possess all of the infrastructure described herein; therefore, it remains important for lenders to practice intense due diligence throughout the entire onboarding process.