The Hidden Costs of Appraisal Management Companies: How Sacramento Homebuyers Are Paying the Price
The real estate appraisal industry has seen significant changes over the years, and one of the biggest disruptions has been the rise of Appraisal Management Companies (AMCs). While these companies were originally introduced to provide a buffer between lenders and appraisers after the 2008 financial crisis, their role has become increasingly controversial. Today, law firm Morgan & Morgan is investigating whether AMCs are unfairly inflating the cost of appraisals, leaving both consumers and appraisers shortchanged.
How AMCs Impact Appraisal Fees
Recent findings by the Appraisal Regulation Compliance Council (ARCC) reveal that AMCs are taking an alarmingly large portion of the total appraisal fee. Their research found that AMCs, on average, claim 65% of the appraisal fee, with some extreme cases reaching as high as 84%. This means that when a Sacramento homebuyer pays $600 for an appraisal, the appraiser may only receive a fraction of that amount—despite being the one actually performing the inspection, analysis, and valuation.
For consumers, this lack of transparency means they may not realize how much of their appraisal fee is going toward middlemen rather than the licensed professionals conducting the work. Typically, closing documents list the fee as a single amount, without breaking down how much goes to the AMC versus the appraiser. This opacity has fueled frustration among both appraisers and homebuyers.
The Effect on Sacramento’s Appraisal Industry
Here in Sacramento, where the housing market remains competitive, fair and accurate appraisals are crucial. Yet, many local appraisers—myself included—have seen firsthand how AMC fee structures are negatively affecting the profession. The high cut taken by AMCs reduces the earnings for appraisers, making it harder for professionals to sustain their businesses. This has led to fewer people entering the field and an overall decline in the number of active appraisers in the Sacramento region, including in Placer, Sutter, and Yolo counties.
For homebuyers and sellers, this means longer wait times for appraisals, increased costs, and potentially lower-quality valuations as experienced appraisers leave the industry due to unsustainable earnings. When local expertise is undervalued, the quality of home valuations suffers, which can lead to inaccurate property pricing and unnecessary financial strain on buyers and sellers alike.
The Need for Transparency and Reform
The appraisal industry plays a critical role in the homebuying process, yet current AMC practices often leave consumers and appraisers at a disadvantage. The investigation by Morgan & Morgan underscores the urgency of reform. There is a growing call within the industry—especially from independent Sacramento-based appraisers like those at Sactown Appraisals—to push for clearer fee disclosures, fairer compensation for appraisers, and more accountability for AMCs.
If you’ve recently purchased a home in Sacramento and feel like you may have been overcharged for an appraisal, or if you’re an appraiser struggling under AMC fee structures, now is the time to speak up. By advocating for better regulation and increased transparency, we can work toward an appraisal system that fairly serves homebuyers, appraisers, and the real estate industry as a whole.
At Sactown Appraisals, we believe in providing high-quality, fair, and transparent appraisal services. If you have questions about appraisal fees, AMC practices, or the state of the industry in Sacramento, feel free to reach out—we’re always happy to help!