Real estate appraisers say they’re often barred from disclosing the size of surcharges charged by appraisal management companies. (iStock)

Are you getting fleeced on appraisal charges when you buy a house or refinance? Could you be paying as much as double what the appraiser is receiving for actually doing the work, with the excess going to an undisclosed third party?

Many appraisers say yes. And they’re eager to let consumers know that when the appraisal charge is $500 or $800 or $1,000, they’re frequently being paid just a fraction of that. The rest is going to an “appraisal management” company under contract by the lender to oversee the appraisal process. Management companies hire the appraiser, negotiate fees, review the appraisal and send it to the lender. Management companies often select appraisers willing to work for relatively low fees. In exchange, they make available to appraisers assignments that they might not otherwise receive.

Controversy arises when management companies add surcharges of 35 percent to 50 percent — or more — onto the final bill to the consumer. Federal rules do not require disclosure of the surcharges, nor do regulations in the majority of states. Appraisers say management companies often seek to hide the amount of their add-ons by prohibiting the appraisers from attaching company invoices to the report the consumer receives.

Worst of all, appraisers say, is when the consumer blames them for a high fee, unaware that much of it is going into a third party’s pocket.

Ryan Lundquist, an appraiser active in the Sacramento market, told me about a recent experience: The house he was asked to appraise had complicated features and was difficult to value, requiring a higher than typical fee — $800. Subsequently, he learned that the management company tacked on an extra $345 — a 43 percent surcharge — hitting the consumer with a $1,145 bill. After the homeowner complained, he learned that the management company said the $1,145 was solely Lundquist’s quote, not theirs, which was a lie.

“I was shocked,” Lundquist said in an interview. “It wasn’t honest, it wasn’t ethical,” and the borrower was being “gouged.” Forty-three percent extra “just seems too much for a middleman service.”

Lundquist described his experience in a blog post that drew dozens of responses from appraisers around the country, mainly critical of management companies’ add-ons to consumers’ bills.

“I got chewed out by the owner of the house,” wrote one. “Yes, I charged $700. But he [the owner] paid $1,700” — a $1,000 add-on. “Now that is an excessive fee.” Another complained that a management company had “hit [the homeowner’s] credit card three times” for the appraisal fee before the work was performed and then tacked on a 45 percent surcharge. The owner “yelled at me” for the rip-off, he said. The appraiser ultimately declined the assignment rather than work for the management company.

Richard Hagar, an appraiser in the Seattle area, told me in an email that “I’m still receiving fee ‘offers’ (from management companies) below $400, while the borrower is being charged $800.”

Carl Schneider, a Tulsa appraiser, said excessive markups are common but consumers usually “know nothing about it” because the appraiser is prohibited from revealing the actual fee.

“I resent forcibly being complicit in this fraud,” Schneider said in an interview. “Why can’t they be transparent?”

David Doering, a Jefferson City, Mo., appraiser and president of the National Association of Independent Fee Appraisers, told me that “we often don’t know what’s being charged to the consumer. We only hear about it when people are angry.”

I asked the executive director of the appraisal management companies’ national trade group, the Real Estate Valuation Advocacy Association, for comment about fee add-ons and efforts to conceal charges, but he declined to discuss pricing, noting that “I am not a party to any AMC [appraisal management company] contracts.”

Jeff Eisenshtadt, president and chief executive of Title Source, whose TSI Appraisal division is a major management company, told me, “There’s a tremendous amount of value” his industry brings to the table, but “we believe the consumer really should be focused on the bottom-line charge for the appraisal,” not the split between the appraiser and the management company. Consumers don’t care about the individual costs of “the pickles and onions and lettuce” that go into a hamburger, he said, nor should they when it comes to appraisals.

Maybe he’s right. But if you care about where your money is going when you pay for an appraisal, ask the lender or the appraiser. Who’s getting what? And why?

Ken Harney’s email address is kenharney@earthlink.net.