Appraisers signing off catch-all certification…
When we crafted the language in the AMC Act back in 2011-2012, we followed what most every other state included insofar as indemnification was concerned.
(225 ILCS 459/165) Sec. 165. Prohibited activities.
(8) Requiring an appraiser to sign any sort of indemnification agreement that would require the appraiser to defend and hold harmless the appraisal management company or any of its agents, employees, or independent contractors for any liability, damage, losses, or claims arising out of the services performed by the appraisal management company or its agents, employees, or independent contractors and not the services performed by the appraiser.
Everyone seemed to understand what this meant.
Appraisers and AMCs correctly understood it to mean that an appraiser could not be required to take a liability hit for things that the AMC might do, that was beyond the control of the appraiser. Easy. Right? Most indemnification clauses in AMC contracts go something like this:
“Vendor (appraiser) will indemnify and defend the AMC, its subsidiaries, and affiliates and their respective officers, employees and directors, and hold them harmless from any and all claims, demands, liabilities, losses, costs and damages, including without limitation, court costs and reasonable attorney’s fees for: personal omissions, injury, property damage…arising out of the Vendor’s personal or personnel acts…”
The key to this language is holding the AMC harmless as to what the appraiser or the appraiser’s employee does. Meaning…if you knock over the homeowner’s priceless flower vase on an inspection…that’s on you. That’s fair. However, I still see appraisers signing off on similar catch-all certifications:
“I will adhere to the Dodd-Frank Act, Appraiser Independence Requirements (AIR), Uniform Standards of Professional Appraisal Practice and/or FNMA, FHLMC, FHA Appraisal Standards, existing on the effective date of the appraisal, as applicable. I will comply with all federal, state and local laws and regulations.”
First, the Dodd-Frank Act (DFA) is not another burden for appraisers. It is the responsibility of the AMC to comply; not the appraiser. Next, AIR is meant for AMC compliance; again, not for the appraiser.
There is absolutely no reason for AMCs to offer this in an attempt to offload their singular responsibilities onto an appraiser with this language, or anything like it. If AMCs want to attach a certification that they are in compliance with AIR…then they are free to do so. This is not something that an appraiser signs. Ever.
Next, AMCs are already under the singular obligation, by every state, to employ or contract with appraisers who adhere to USPAP.
In Illinois, AMCs, as a condition of registration must certify to four points.
(225 ILCS 459/40) Sec. 40. Qualifications for registration.
(a) The Department may issue a certification of registration to practice under this Act to any applicant who applies to the Department on forms provided by the Department, pays the required
non-refundable fee, and who provides the following:
(6) a certification that the applicant will utilize Illinois licensed appraisers to provide appraisal services within the State of Illinois;
(7) a certification that the applicant has a system in place utilizing a licensed Illinois appraiser to review the work of all employed and independent appraisers that are performing real estate appraisal services in Illinois for the appraisal management company on a periodic basis, except for a quality control review, to verify that the real estate appraisal assignments are being conducted in accordance with USPAP;
(8) a certification that the applicant maintains a detailed record of each service request that it receives and the independent appraiser that performs the real estate appraisal services for the appraisal management company;
(9) a certification that the employees of the appraisal management company working on behalf of the appraisal management company directly involved in providing appraisal management services, will be appropriately trained and familiar with the appraisal process to completely provide appraisal management services;
None of these can be waived or dumped on their panel in the form of an indemnification, which is exactly what that DFA/AIR appraiser certification language is trying to do.
AMCs need to remove that language, immediately. If not, they are in violation of Section 165.
To assure that AMCs are in compliance with this along with the four required certifications, we will be conducting an audit of their engagements and contracts beginning in October.
By Brian Weaver, Coordinator Editor of IllinoisAppraiser, Appraisal Management Company Coordinator for the Illinois Department of Financial and Professional Regulation (IDFPR)
Source Illinois Appraiser Newsletters – Volume 9, Issue 2 – October 2016