What Is an AMC Appraisal and How Does It Work?
Learn about AMC appraisals, the essential system for independent property valuation, and how they function.
An appraisal management company (AMC) serves as an independent entity facilitating real estate valuation services for lenders. An AMC appraisal refers to a property valuation ordered and managed through one of these companies. Their emergence and widespread adoption reflect a significant shift in the real estate valuation industry, primarily driven by the need for enhanced independence in the appraisal process. AMCs streamline the appraisal workflow for lenders, connecting them with qualified appraisers while maintaining an arm’s-length transaction.
Understanding Appraisal Management Companies
An Appraisal Management Company (AMC) functions as an intermediary, connecting mortgage lenders with independent real estate appraisers. AMCs manage a network of state-licensed or state-certified appraisers, ensuring that lenders can efficiently obtain property valuations. Their primary functions include selecting appropriate appraisers, managing the appraisal order, and ensuring quality control of the final report. AMCs also handle administrative tasks such as appraiser credentialing, fee negotiation, and report delivery.
The widespread use of AMCs largely stems from the financial crisis of 2007-2008. Before this period, direct contact between lenders and appraisers was common, leading to concerns about potential influence on appraisal values. To address these concerns and promote appraiser independence, regulations were introduced that increased the demand for and reliance on AMCs.
The AMC Appraisal Process
The process of obtaining an appraisal through an AMC begins when a lender places an appraisal order with the company. The lender transmits the property details and specific appraisal requirements to the AMC.
Upon receiving an order, the AMC assigns it to a qualified, independent appraiser from its network. The selection process considers the appraiser’s qualifications, experience, geographic location, and current workload. This assignment process aims to prevent direct communication between the lender and the appraiser, safeguarding the appraiser’s independence. The assigned appraiser then conducts the on-site inspection of the property and performs the necessary valuation research, adhering to professional standards such as the Uniform Standards of Professional Appraisal Practice (USPAP).
After the appraiser completes the valuation and prepares the appraisal report, they submit it directly to the AMC. The AMC’s quality control team reviews the report for compliance with industry standards, regulatory requirements, and the lender’s specific guidelines. This review ensures accuracy and completeness. If any revisions are needed, the AMC communicates with the appraiser to address them. Once the report passes the quality review, the AMC delivers the finalized appraisal report to the lender.
Regulatory Oversight
Appraisal Management Companies operate under a framework of both federal and state regulations designed to ensure appraiser independence and protect consumers. The Dodd-Frank Act, enacted in 2010, codified appraiser independence requirements. This legislation aimed to prevent undue influence on appraisers.
The Dodd-Frank Act established minimum requirements for AMCs, which include state registration and supervision. These requirements mandate that AMCs register in the states where they operate. Regulations ensure that AMCs maintain a panel of qualified appraisers and adhere to ethical and professional standards, including the Uniform Standards of Professional Appraisal Practice (USPAP). This regulatory oversight promotes the integrity of the appraisal process by ensuring impartiality and competency, ultimately protecting both lenders and borrowers in real estate transactions.