Outraged Appraisers Owed Money by AMCs!
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“I am owed $20,000”. “I am owed $2000”. “I am owed $500”. “I am owed $1500”. These are just some of the quotes pulled from various groups, message boards and forums from appraisers all over the country that are owed money for the appraisal services they provided. Services they provided for a Lender, Mortgage Company or Bank through an Appraisal Management Company or AMC as they are known.
What’s an Appraisal Management Company you ask? Well for those that do not know, AMCs have been around a long time. Appraisal management companies (AMCs) are business entities that administer networks of independent appraisers to fulfill real estate appraisal assignments as Agents of lenders. However, it wasn’t until the financial crash of 2008 that they became a permanent fixture in the real estate process due to the HVCC (Home Valuation Code of Conduct now known as DODD FRANK). They were installed as the “Middle Man” between appraisers and lenders to help insure Appraiser Independence and manage the appraisal ordering process. Overnight many of these AMCs were formed and began entering into contracts with the lenders to perform the duties of managing the appraisal process as Agents of the Lenders. Notice how Agents is in bold? I’ll explain shortly.
So now that we have that out of the way let’s get into the real issue here. Appraisers are being left unpaid by Appraisal Management Companies and it’s an outrageous, painful and terrible result of poor legislations and regulations. I will compare this to the recent government shutdown. The outrage of federal workers not getting paid. The outrage of them not being able to pay bills. The outrage of how could this happen. It’s nice to see all the outrage over this, but where is the outrage over appraisers being owed money and not being able to pay their bills? Exactly. There is none because no one knows about it. Let me give you some insight and maybe you too will have some outrage.
First let’s go back in time.
In 2011, an AMC named AppraiserLoft closed its doors unannounced owing appraisers Millions. The scramble began by appraisers to get their monies owed. Some appraisers were successful but most were not. In this case, lenders were collecting the fees from the borrower and passing them along to AppraiserLoft to pay the appraiser. But over time that didn’t happen and the doors closed leaving appraisers not paid for their time and services.
In 2012, an AMC named JVI Solutions closed its doors owing appraisers thousands of dollars. Once again, appraisers scrambled to get their monies owed. However, only some were able to do so. In this case, lenders were also collecting the fees from the borrower and passing them along to JVI Solutions to pay the appraiser. Some appraisers sued the lenders that used JVI and one in particular won his case (no update on if he actually received the monies owed). Many others were left without any payment ever being made.
In 2013, an AMC named Evaluation Solutions filed bankruptcy thus leaving appraisers without payments. JP Morgan Chase was the largest client of Evaluation Solutions and through a court’s decision in Florida the AMC and the bank were absolved of all payments and liabilities to appraisers. Once again, borrowers paid the appraisal fees to the Lender but the AMC failed to make those payments to appraisers.
In 2018, an AMC named CoesterVMS goes silent and leaves appraisers unpaid. Per numerous articles, web searches & message boards, appraisers are owed thousands of dollars, and hoping to get paid. These sources state that CoesterVMS stopped responding to appraisers, was paying them late, owed payments from over 6 months, and apparently is now out of business. Once again, appraisers are scrambling to get paid. Many have called the lenders that used CoesterVMS. Some lenders have paid up. However, most have not. These lenders state they already paid the AMC for the appraisals and are not responsible for any further payments. These predicaments occur as often now as in the past.
There are a couple other AMCS that have ceased business between 2011 to now. Some have tried to settle with pennies on the dollar and some have just disappeared. As inconceivable as it may sound, some just rename themselves and continue to not pay appraisers.
Now let me explain this. Most states have AMC laws and regulate them. Many require an AMC to carry a Surety Bond in order to do business in that state. Some don’t. So referring back, one AMC had a surety bond in North Carolina that was for $25,000. When it was announced that the AMC had canceled the surety bond, appraisers flocked to file against that bond for payments. Within a day or so the bond was exceeded. Yes $25,000 was exceeded in one state. Imagine the filings in other states since the company operated in all 50 states plus Puerto Rico.
So a question comes to mind. If these AMCs are doing this much business and handling this much money, then why are they only required to carry a $25,000 bond? A million seems more reasonable.
This brings me back to the beginning and the word Agent. As an independent appraiser I work for myself. I am considered an independent contractor. According to the laws and regulations, an AMC works as an Agent of the lender. If they are acting as an Agent, (they have a signed agreement), how come the lender is not ultimately responsible for making sure the appraiser, that their Agent obtained, is paid properly and on time? Think about this for a minute. The borrower paid the lender who passed that payment to the AMC to pay the appraiser. However, no payment was made. Who would you hold accountable?
If the lender takes payment from the borrower, and then passes it along to the AMC for the appraisal, then shouldn’t the lender who hired this Agent make sure it is conducting its business in accordance with the signed agreement? I would think so. I’d like to know if my agents were doing things correctly representing me.
Now what can be done here? I have a couple thoughts:
- The laws need to be redone to make all parties (lenders/AMCS) responsible for paying the appraiser, and in the event the AMC goes under, the lender takes full responsibility.
- As discussed earlier a larger Surety Bond of at least $1,000,000 should be required.
- Lenders pay the Appraiser their fee for the report and pay the AMC they hire a separate fee. Separate checks or transactions.
- Escrow Accounts: money is collected by the lender and put into an escrow account OR if the AMCs do collect money, they take their fee and put the rest in escrow.
- Do not let AMCs handle the appraisal fees. They should have nothing to do with collecting or paying appraisal fees.
- Go back to the days when the actual borrower paid the appraiser at the door for the appraisal service. With technology today, the appraiser can be paid quickly via many different payment options without having a 3rd party commingle in the process.
Enough is Enough. It’s time to change the way appraisers are paid for their services. With all the talk of technology, and changing the way appraisals are performed, one would think with said technology appraisers can be paid properly. It’s time to make changes and that time is NOW!