New CA Law Negative Effect for Appraisers

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John Pratt

Certified Real Estate Appraiser at Appraisal Services
Self-employed since 1999. Banking Industry for over 20 years: Real Estate Loan Officer, Commercial Loan Officer, Manager Loan Dept, Senior Loan Officer in charge of Lending. President & CEO of an Independent Bank in California. Chief Financial Officer of 2 startup firms in Silicon Valley which raised over $5,000.000 in startup venture capital. He also conducts meeting which are open to all appraisers on a monthly basis with an open format discussing anything related to the appraisal industry.
John Pratt

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New Law Effect on the Working Relationship Between Appraisers & AMCsSome of you appraiser in California may not realize there is a new law, AB-5, which goes into effect on 1/1/2020, less than 60 days from now that will have a significant effect on the working relationship between appraisers and AMCs. Most appraisers work as Independent Contractors when working with AMCs. However, this will most likely change under this new law, AB-5, as of the first of the year. Most engagement letters or other instructions from AMCs to appraisers are in conflict with this new law as it pertains to the use of Independent Contractors. Under most of these agreements the AMC will be required to treat all appraisers as Employees. I suspect that appraisers will see rush of new engagement letter/instructions from AMCs to appraisers within the next 30-45 days in an attempt for them to maintain the Independent Contractors status of the appraisers.

This is an opportunity for the appraisers to take back control of the appraisal process by taking the lead on this issue. Appraisers should draw up their own “Agreement to provide Appraisal Services” and provide it to the AMC/Lender at the time of acceptance of an assignment and the appraiser should refuse to accept or agree to any engagement agreement presented by the AMC/Lender. At the end of these comments I have provided an example of an “Agreement to provide Appraisal Services” that appraisers could use as a starting point for an agreement, please feel free to change or add to it.

I have talked to the Lobbyist for the Real Estate Association of California located in Sacramento and she has advised me that the Real Estate Industry (Real Estate Agent & Brokers) has been exempted from this law. She suggested that the appraisers contact Assembly person Lorena Gonzales from the San Diego area for assistance since she heads the Committee in the State Assembly that is responsible for this new law.

Contact Assembly Member Lorena Gonzalez
Capitol Office, Room 2114
P.O. Box 942849, Sacramento, CA 94249-0080; (916) 319-2080

District Office
1350 Front Street, Suite 6022, San Diego, CA 92101; (619) 338-8090

All appraisers in Lorena Gonzalez district should contact her and explain that the Real Estate Appraisers while not directly affected by the law, the AMCs are, and this will have very negative effect on the independence of the appraiser and their ability to continue to operate as an Independent Contractor.

Appraisers need to come together and unite to protect our industry, now is the time.

SAMPLE AGREEMENT FROM APPRAISERS
(This was not written by an attorney, you may want to contact an attorney to have them provide a more proper agreement)

Agreement to provide Appraisal Services

This office agrees to consider requests for appraisal services working with the client with the understanding of both parties that the arrangement meets the conditions of the State of California that the services provided are as an “Independent Contractor”. Individuals which may provide services under this agreement are not employees of the client. All parties to this agreement agree to hold each harmless from any claims of the other parties regarding disputes about Employee / Independent Contractors which may arise from the performance of services under this agreement.

Image credit flickr - David Goehring
John Pratt

John Pratt

Self-employed since 1999. Banking Industry for over 20 years: Real Estate Loan Officer, Commercial Loan Officer, Manager Loan Dept, Senior Loan Officer in charge of Lending. President & CEO of an Independent Bank in California. Chief Financial Officer of 2 startup firms in Silicon Valley which raised over $5,000.000 in startup venture capital. He also conducts meeting which are open to all appraisers on a monthly basis with an open format discussing anything related to the appraisal industry.

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3 Responses

  1. Avatar TruthBTold says:

    Thank you for this. I am just concerned that the AMC’s have already created enough staff appraisers who have never experienced independent freedom or free enterprise and will have the attitude of “what’s to take back”?

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  2. Avatar SB says:

    Callifornia based Corelogic is SQUARELY in the cross hairs with this.

    Any coincidence their stock price is down 20% since September 1st?
    Any coincidence they just hired a new Chief Legal Counselor.

    The AMC must be able to show that the appraiser business is providing its services directly to the AMC rather than to customers of the AMC – this might present a challenging argument because under appraisal standards the “client” of the appraiser is usually defined as a lender (when the appraisal assignment is for a loan).

    The AMC must be able to show that the appraiser business supplies all its own “tools” and “equipment” to perform the services (AMCs will need to consider whether any of their new cloud/software-based appraisal products cross this line).

    The AMC has the burden of satisfying all three parts of the ABC test:

    (A) that the worker is “free from the control and direction” of the hiring firm in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

    (B) that the worker performs work that is “outside the usual course” of the firm’s business; and

    (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

    To meet their burden under Part B, AMCs need to establish that the appraisal services by their contractor appraisers are not services performed “within the usual course” of the AMC’s business. If an AMC cannot meet this burden (and also satisfy the other two easier parts of the test), then its contractor appraisers may be reclassified as employees and be entitled to regular employees’ rights and benefits (such as overtime, break time, etc.) — unless the AMC can show that a specific exception in AB 5 applies.

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  3. As long as fees are cited by loan officers prior to the “hired” appraiser being given an opportunity to quote, then price fixing remains in effect. Setting the fee for compensation sure seems like an employer-employee relationship to me.

    Pretending that we can then ‘bid’ our own fees afterward, KNOWING no one at am AMC will change TRID quoted fees once made is misleading and deceptive. until we control our fees; control our collection of fees (FNMA refuses to permit this-in deference to ABA and MBA desire to keep clients locked in) and until we control reasonable turn around times, then for all intents and purposes we ARE employees!

    Whether we intended to be or want to be. I am not seeing exactly who Mr. Pratt’s suggested content is supposed to protect. I sure as hell am not waiving any recourse I may have agaisnt any AMC going into the future without knowing specifically what it is I am supposed to hold them harmless for!

    How does this benefit an appraiser?

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New CA Law Negative Effect for Appraisers

by John Pratt time to read: 2 min
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