Customary and Reasonable Appraisal Fees – The FTC Gets Involved

The actions of a state licensing Board that has a controlling number of its decision makers who are active market participants in the very industry the Board was created to regulate has made it back into national news.

Back in February 2015, the United State Supreme Court issued its verdict in the North Carolina State Board of Dental Examiners v. Federal Trade Commission case. Siding with the best interest of consumers, the Court ruled that the campaign waged by the North Carolina State Board of Dental Examiners against teeth whitening centers in North Carolina operated by non-dentists was anticompetitive and in violation of antitrust laws.

Recently a very similar complaint was filed that relates to customary and reasonable appraisal fees. On May 31, 2017 the Federal Trade Commission (FTC) filed a complaint against the Louisiana Real Estate Appraisers Board for “unreasonably restraining price competition for appraisal services in Louisiana” in a way that violates antitrust law.

The FTC maintains that Louisiana’s Real Estate Appraisers Board is fixing appraisal fees in a way that restricts competition in a way that prevents consumers of appraisal services from paying a price set by the market. The FTC, in a press release, alleges that the Louisiana Board

“limits the freedom of individual appraisers and their
customers to engage in bona fide negotiations to set
appraisal fees for real estate appraisals in Louisiana.”

The Louisiana Board issued a statement noting that the FTC “is just plain wrong” and that the FTC is seeking to punish the Louisiana Board for ensuring that Appraisal Management Companies (AMCs) pay “customary and reasonable” fees for home appraisals. The Board maintains that “these claims distort the reality of the Board’s conduct in an attempt to stitch together a conspiracy where none exists. We plan to vigorously contest these charges and defend the interests of Louisiana consumers while ensuring our state complies with federal appraisal independence regulations.”

While an administrative hearing is scheduled for January 30, 2018, the nationwide question is whether the current FTC’s action will impact the pending actions of other state Appraisal Boards that are considering the implementation of customary and reasonable appraisal fee rules.

North Carolina questions that remain are if and to what extent would these allegations impact the following:

Current NC appraisal fee law that was passed last summer?

NC Appraisal Board’s delay in making administrative rules to implement last year’s law?

NC Appraisal Board’s guidance on Customary and Reasonable Fees?

NC General Assembly’s consideration of House Bill 829 on “Customary and Reasonable Fees for Appraisers?”

  1. ken tackett

    does it all really matter?….aren’t we all going to be out of the residential appraisal business altogether within the next 5 years, since the AMCs and lenders are gathering all our appraisal data so they can tell congress that appraisers are no longer needed and that they can generate AVMs in order to justify their loans?…it’s completely clear they (AMCs and lenders) only tolerate us appraisers because they have to,,,for now….

  2. Bob Cash

    Looks like either way, we are screwed. Have our fees dictated or get in a price war with less experienced and less qualified appraisers.

  3. Austin M. Smith, Jr. MAI

    As a practicing appraiser I wholeheartedly support the NC Appraisal Board’s position regarding fees. The NCAB took action that ensures our clients (AMCs and others) make reasonable efforts when determining “customary and reasonable fees” while leaving the final decision on any one assignment or any fee agreement in the hands of the appraisers and their clients. This is not a USPAP or NCAB Rules decision, it’s a business decision that each appraiser should make. I lose work daily due to fees, but I also respect my peers’ decisions regarding what they will charge in order to continue their business and pay their bills. Finally, thanks, Mel, for staying on top of these issues in our trying times.

  4. John Cashatt

    I don’t think anyone can control fees. Currently I see (in my area) fees from $400 to $680 on various size houses. I am free to accept or decline, depending on how close is the subject property and the complexity of the assignment. Some AMCs and banks are generous with their “suggested fees.” Some are low and simply “throw out the hook” to see who will accept. If the house is a box and 6 blocks away, I bite the hook. It is simply supply and demand. Home builders would love to set prices per square foot in subdivisions. It is never going to happen. Again, it is supply and demand. The outcome will be interesting.


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