The Future of the Appraisal Industry

Recent "Editor's Corner" posted on Valuation Review, www.valuationreview.com

(4/6/2007)

Earlier this week, Valuation Review reported that AMCO chairman and CEO Edward Davidson had signed a letter of intent to sell the Cleveland-based appraisal management company to a group led by Bob Rosing.

Rosing told us this week he couldn’t comment on the proposed transaction and AMCO officials declined additional comment until a difinative agreement is reached.

Rosing previosly served as served as president of SIRVA Relocation until July 2006, when he entered into a separation agreement with the company. He acted as a consultant until Dec. 31, 2006, when his separation from the company became final.

The pending sale of AMCO is a reminder of the ebb and flow of fortunes in the settlement services industry, and of the growth and demise of business models that may serve well for a time, only to fall away as demand for new delivery methods surfaces.

Earlier this week, I talked to Jeff Schurman, executive director of TAVMA. He had just heard the news when contacted by Valuation Review. While he said he couldn’t comment on the specific deal, he noted such moves aren’t surprising.

“More and more of the independent companies are being bought by the larger corporations,” he said. “There is a definite move in that direction.”

There are several factors at work that could be cutting into the market for some smaller AMCs.

The phenomenal growth of the subprime market in the last decade, and its ignominious fall from grace in the past 12-months has taken a toll on many of the business models that have surfaced in recent years.

Many large subprime originators use large centralized underwriting centers, which in turn have relied on national vendor management models to provide those centers with a multitude of settlement services, including valuation services.

Subprime represented a good growth business for vendor managers, who found themselves losing their core business to national lenders who took their vendor management in-house, or increasingly relied on automated bundles for their home equity lending.

What does this all mean for appraisers? The valuation industry is primed to reinvent itself over the next decade. What started out as a profession of one-man shops has largely evolved into a vast web of vendor management company-driven enterprises. It is destined to morph into something quite different again, as legislation forces lenders into a more arms length relationship with the appraisal profession.

Who will come out on top in the future? As always, the entrepreneurial spirit who can visualize the future before the rest of us get there will be the one to understand and carve the path to the next model that will best serve an industry that strives for national growth on a localized product.

Valuation Review was the first to report on the AMCO sale, giving you the latest news from the valuation industry. Stay tuned to Valuation Review as we go on a hunt for businesses that represent the wave of the future in the valuation world.

Homeowners surprised at assessments - IRR-Residential quoted as valuation experts

TRAVERSE CITY — The housing market is flat or in decline throughout Michigan, so Dorothy Roush wants to know how Garfield Township's assessor determined that her home's value jumped almost $12,000.
Then there's Ray Reamer of East Bay Township, who saw his assessment jump by $41,300.
Homeowners like Roush and Reamer began receiving assessment notices last week. Many were surprised to see both a hefty tax increase based on the rate of inflation and double-digit increases in their property assessments.
Home values in the Grand Traverse region were relatively stable in 2006, with variations anywhere from a five-percent reduction to a three-percent increase, though most were around zero, said Robert Reamer, president of IRR-Residential Veri-Tech Appraisal.
Figures from the Traverse Area Association of Realtors show average home prices dropped about 1.5 percent in 2006, while the state as a whole dropped about 2.3 percent.
But area property tax assessors can't use most of the sales information from 2006, according to state law.
Assessors use sales studies to determine a percentage increase or decrease in property values by neighborhood. State law sets the study period at two years, running from April 1, 2004, through March 31, 2006, for current figures.
Traverse City Assessor Deb Chavez said assessed values almost always lag behind sale prices. When home values shoot up the gap widens, and when they drop, assessments catch up.