Appraisal Management Company (AMC)

A company that works independently as a middleman between real estate appraisers and lenders

What is an Appraisal Management Company (AMC)?

An Appraisal Management Company (AMC) is a company that works independently as a middleman between real estate appraisers and lenders. In other words, they are a management company that will act on behalf of appraisal users. AMCs include a group of licensed or certified appraisers.

 

Appraisal Management Company

 

The appraisers are assigned lender requests. All communication between them is completed through the asset management company. Therefore, AMCs obtain a sense of oversight on the appraisers and lenders.

in addition, AMCs are in charge of handling any related administration and communication tasks between the parties involved throughout the appraisal process. Additionally, AMCs will also screen appraisers and ensure work is distributed appropriately, and regulations are followed.

Appraisal management companies came into existence several decades ago; however, they only increased in popularity and become more common after the 2008 Global Financial Crisis. Before AMCs existed, lenders needed to go directly to appraisers to get an estimate of the value of a property. It resulted in some negative situations, such as collusion and bias. Since their increased popularity, the intertwining of AMCs in the process has allowed for a more facilitated system.

 

Summary

  • Asset management companies (AMCs) act as an independent middleman between lenders and appraisals in real estate.
  • AMCs ensure procedures, regulations, and compliance are followed.
  • AMCs take on administrative and operational tasks for the appraisers.

 

Appraisal Management Company Roles

  • Asset management companies will interview and screen appraisers to ensure they are the best candidates for their company. It includes the requirement of proper licensing depending upon which state the company is located in.
  • AMCs will assign work to the appropriate appraiser depending on the situation.
  • They work as a median between the appraisers and lenders to aid the flow of communication and can help when conflict arises.
  • AMCs provide quality control by ensuring compliance among their appraisers. They ensure the assessments made by the appraisers comply with regulations. It is imperative that the appraiser’s opinion complies with industry standards and is, therefore, based on facts with no outside influence.
  • Once the appraisal is completed, AMCs will deliver the report to the lenders and collect the fees associated. After receiving the payment, they distribute appropriate amounts to their appraisers.

 

Why are Appraisal Management Companies Important?

Appraisal management companies are important for several reasons, including:

 

1. Independent

Firstly, since AMCs are an independent company in the situation, they can help with reducing any fraud situations or potential losses. To be explained further, it can reduce fraud because it separates the lending and appraisal process while providing an outsider’s opinion.

AMCs are important for removing forms of risk and possible collusions during the appraisal period. it is vital to the borrower that will be purchasing the property. Moreover, it can reduce costs in the long run as AMCs can become quite efficient in their service in comparison to a company taking on both the lending and appraising.

 

2. Prevents overpaying

AMCs help prevent borrowers from overpaying for their property because they can acquire appropriate appraisals without any bias. They can protect the consumer by offering a service without any bias. They can be important for appraisers because they can provide them with work but also handle administrative tasks for them so they can focus on the actual task of appraising.

 

3. Qualified and compliant

AMCs are important for borrowers and lenders because they can provide peace of mind since they ensure the appraisers possess proper qualifications and follow regulations.

 

Practical Example

You decide to purchase a home. You work with your bank, the lender, to find the best house suited for you based on your financial standing. The lender will hire and work with an appraisal management company to ensure that the property you’re interested in is appraised accurately.

The AMC hired will assign the job to one of their appraisers. Once the property’s been appropriately appraised, they will provide the report to your bank, and fees are collected. Based on the appraisal, you can decide if you’d like to purchase the home.

 

More Resources

CFI is the official provider of the global Certified Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

  • Administrative Service Only (ASO)
  • Appraisal Costs
  • Mortgage Servicing Rights (MSR)
  • Transaction Costs

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