Posts tagged E&O

AMC Hidden Costs

Shouldering the Weight of AMC Hidden Costs


Thinning wallets and dwindling fees for work performed are nothing new for the appraisal community. Yet in their latest income-reducing move, AMCs have sparked an outcry by requiring appraisers to foot the bill for additional services. These charges are further cutting into appraisers’ fees, which already suffer from AMC management fee deductions.

Recently, FREA uncovered three hidden costs being introduced by AMCs – which of these have you experienced?

Technology Usage

An increasing tendency among AMCs is the passing of technology fees on to appraisers. When an AMC orders a home valuation, the appraiser must submit the report through the AMC’s authorized software. However, software providers, such as Mercury Network, charge a per-report transaction fee, which is billed to the vendor (i.e., appraiser) rather than the AMC. Essentially, in order to submit a completed work order as requested by an AMC, an appraiser must cough up anywhere from (more…)

Fight Back Blacklisting

The End Is/Must Be Near: Advancements in the Art of Blacklisting


If you are a real estate professional, please read this, especially if you fear your own business is being damaged by all of the new regulations designed to “help” the real estate industry recover.

Imagine you, a hardworking, law abiding taxpayer, are sitting at home one evening watching television when there is a knock at your door. Somewhat surprised by the late hour of the visit, you get up and open the door and three IRS agents barge into your home and declare, “We are from the IRS and we are here to help.” I think it’s safe to say you would be both shocked and concerned. If you are involved in residential real estate, what has happened to most of you since the market collapse began in 2007 is similar to this scenario. You see, most professionals working in residential real estate were doing the right thing all along so many of the knee-jerk decisions made after the market collapsed are about as useful and helpful as three IRS agents showing up on your doorstep in the middle of the night.

There’s TARP I, TARP II, HVCC, Dodd-Frank, CFPB, AMC, UAD, UCDP and AVM, and now there is something new called AQM. In typical government fashion, the medicine being administered may actually be killing the patient. In this case, the patient is the residential real estate market. Thanks to the power ($$$$) of lobbyists representing (more…)

Is There a Light at the End of the Tunnel for Appraisers

Blacklisting: Is there Light at the End of the Tunnel or Is It Just the Train Coming the Other Way?


In September of 2013, Joe Appraiser (not his real name) was notified by one of the big banks that he had been placed on ineligible status due to an incorrect review. Immediately, Joe contacted the bank regarding his placement on the “do not use” list believing this was all a simple mistake. In hopes of reversing his eligibility status, Joe submitted a detailed rebuttal where he provided a line-by-line response to each alleged deficiency in his appraisal report.

In part 1 of our series on blacklisting, we talked about the process Joe Appraiser went through to be reinstated using his FREA Professional membership benefits. After several months of back and forth emails, FREA was able to have Joe removed from the bank’s “do not use” list and reinstated. However, even winning comes at a cost. Joe’s fear of repercussions for even letting us tell his story made it necessary for him to remain anonymous. Plus, while he was on the blacklist, his business dropped by more than 30%.

The high cost of being blacklisted

Joe’s business suffered greatly just because he was blacklisted by a single big bank (more…)

Blacklisted appraiser ~ copyright

Blacklisted? How to Get Reinstated


When a lending institution loses confidence in an appraiser’s work, the bank or AMC will put them on a “do not use” list, also known as a blacklist.

In some cases, this means an appraiser has made a costly mistake. However, some banks are taking blacklisting to an extreme by treating appraisers as guilty until proven innocent without cause or reason why.

If unchallenged, this practice can be devastating because being blacklisted even once can have permanent detrimental effects on an appraiser’s career, income, and reputation.

By engaging in blacklisting lenders are trying to insulate themselves from future risks when doing business with Fannie Mae and Freddie Mac. However, there is no formal review process in place to ensure these “do not use” decisions are justified. In an attempt to prove accountability to these government-sponsored enterprises (GSEs) big banks in particular are demonstrating a repeated and ongoing lack of accountability to the appraisal profession. (more…)

Fake E&O

“Fake” Appraiser E&O Insurance and Shady Things from AMCs Too


For many appraisers and also some AMCs (appraisal management companies), the only reason they purchase professional liability insurance (E&O) is because a client requires them to show coverage in order to receive work.  The fact that some appraisers and AMCs only look at insurance as an “E&O ticket” leads to some unfortunate examples of fraud, which appraisers, firms, AMCs and clients should be aware of.

Before I get to the fakery, however, I’ll explain that our purpose in providing E&O, and also the reason that most of our insureds purchase it, is because E&O first serves the insured by providing a defense for covered professional negligence claims against the insured and, then, if legal damages are established or resolved against the insured, paying those damages for which the insured is liable.  A big part of the value in this equation is providing access to knowledgeable, experienced legal counsel in connection with appraisal claims.  In other words, E&O insurance exists for the primary benefit of the insured appraiser or AMC.

Outright “Fake” E&O

Nevertheless, the reality is that because (more…)

Difference betweeen employee & contractor [copyright]

What is the Difference Between an Employee, a Subcontractor, and an Independent Contractor?


In helping real estate professionals find the right professional liability (E&O) insurance policy, one of the most common issues we come across is whether someone you hire to help with your intermittent workload is an employee, a subcontractor, or an independent contractor.

The IRS perspective vs. the insurance perspective

This is often confusing because what you intended to do may not be what you actually end up doing. There are a number of reasons for this. First and foremost is the fact the IRS will view this question in a different way than the insurance industry will. So, even if you get solid tax advice about which is which and why, you may find your E&O provider looks at the same situation and reaches a different conclusion.

Next, an errors and omissions provider is not concerned with tax treatment or revenue sharing issues or even with whether someone does or does not share office space with you. E&O providers are only concerned about whether they might have to defend you and pay a loss on a claim even if someone other than you did most of the work on a project. Many people think this cannot happen if the person they give a project to has their own E&O policy (more…)

Appraisers warned about commenting on social network

What You Say Can and Will Be Used Against You


Does this sound familiar? If so, I hope it’s because you watch a lot of shows like Law & Oder on television and not for any other reason. If this doesn’t sound familiar, it is one part of the Miranda warning police must give to criminal suspects before questioning them. How does that apply to you? Well, it can have equally negative consequences in a civil case (insurance claim) also.

To see if you need to read any further, take this short quiz. If you answer “yes” to any one of these questions, you’d better read it all.

  1. Do you have your own LinkedIn page?
  2. Do you post any comments in a LinkedIn group related to your profession?
  3. Do you have a Facebook page or have you “liked” any pages related to your profession?
  4. Do you post any comments on Facebook related to your profession?
  5. Do you have a Twitter account?
  6. Do you ever tweet about your profession?
  7. Do you ever exchange emails about your profession with any friends? (more…)
Lawsuit against BPO FVL

Class Action Lawsuit Filed Against BPO and AMC Firms for Allegedly Unpaid Fees


On December 2, 2013, three law firms in Florida, Washington and Colorado teamed together to file a class action complaint on behalf of real estate agents and others allegedly owed unpaid fees for broker price opinions ordered by  The complaint also names three-related companies First Valuation, LLC, First Valuation Services, LLC, and First Valuation Technology, LLC as defendants on the basis that they are “alter egos” of and do not have true corporate separateness in their operation.  The lawsuit was filed in federal court in Colorado, where the defendants are based.

The named plaintiff in the lawsuit is Kathy Wornicki, a Florida real estate agent, who alleges that she is owed $880 for 29 (more…)

Subpoena appraisers - Image courtesy of Stuart Miles /

Subpoenas and Other Things That Go Bump in the Night


First, it is gratifying to know you are actually reading what we write and release. We know this is true because a little over a year ago, we received very few questions about subpoenas and today, after writing a little warning piece on the now infamous FDIC subpoenas being issued to appraisers by a private law firm, we get lots of questions. In fact, we get so many we decided to put together a short follow-up piece on different kinds of subpoenas and how to handle them. These are presented in ascending order of concern with the final one being the most dangerous. All are court orders and none of them can simply be ignored…unless you also want to learn about motions to compel and sanctions.

1. Fact witness subpoenas (aka subpoena ad testificandum):

This subpoena is issued to request you to appear as a fact witness at either a deposition or a trial. As long as you are only being asked to deliver testimony about factual issues, there is no reason to get your (more…)

Appraisers Sued Law - Image courtesy of Stuart Miles /

Navigators Sues More Appraisers to Deny Coverage under “Regulatory Claims” Exclusion


Last Thursday, November 14, Navigators Insurance Company sued two more appraisers to enforce “regulatory claims” exclusions in the E&O policies they purchased. These appraisers are in Nevada.  Like the appraiser sued by Navigators in Florida on November 6, the Nevada appraisers are being sued by the FDIC for professional negligence in cases filed about a year ago.  The objective of Navigators’ lawsuits is to seek court confirmation of Navigators’ legal position that there is no coverage under Navigators’ policy for damages awarded against the appraisers to the FDIC, which is demanding about $500,000 from each appraiser, or any coverage for attorneys’ fees and costs to defend the cases beyond $100,000.  The FDIC’s lawsuits against the Nevada appraisers are both scheduled to be ready for trial in December; as a result, the appraisers now each have two lawsuits they must defend: the FDIC’s case and Navigators’ case regarding the insurance coverage.  One of the latest lawsuits can be found at this link on  Accompanying the lawsuit as an exhibit is the appraiser’s E&O policy from the Navigators program with the exclusion.

Navigators’ lawsuits to deny the appraisers coverage again relate to (more…)

AMC background check

AMC Background Checks: Fair or Not?


“I was just asked by an AMC to get a background check. Do I have to comply?”

As risk management advisors for Appraisers and Inspectors, this is one of the questions we hear over and over again.
Let’s face it — appraisal fees are lower than ever before. Essentially, AMCs are asking you to do the same amount of work for less pay. In some cases, they’re even asking you to do more work. Does it make sense then that you have to get a background check in order to work for a specific AMC?

Unfortunately, the increased costs associated with getting a background check are not the only problem Appraisers face. Other concerns include identity theft, hassle, and fees that are simply unfair.

  • Identity Theft - Think about the information included in your background check — your name, address, date of birth, social security number — precisely the information needed for identity theft. The AMC, banks, loan officers and others will have access to this information. If that doesn’t scare you, (more…)
USPAP Confidentiality issue with FDIC lawsuit - Image courtesy of digitalart /

Federal Court Rules on USPAP Confidentiality Issue in FDIC Lawsuit Against Appraisers in Colorado


On September 5, 2013, in a professional negligence case against two Colorado appraisers by the FDIC, a federal court ruled on an issue concerning USPAP confidentiality.  It was a simple issue, but it’s one of the very few court decisions relating to USPAP’s poorly written confidentiality rule (this previous post here explains why the rule is poorly written).  This is the rule:

An appraiser must not disclose: (1) confidential information; or (2) assignment results to anyone other than: the client; persons specifically authorized by the client; state appraiser regulatory agencies; third parties as may be authorized by due process of law; or a duly authorized professional peer review committee …

The question for the court was: in response to a discovery demand in the case, did one of the defendant appraisers have to handover appraisals of the same property that were for different clients and unrelated to the loan at issue despite the confidentiality rule in USPAP?  The court’s answer was (more…)

Financial crisis - Image courtesy of renjith krishnan /

Liar, Liar…Pants on Fire


I recently read a summary of an interview of James Gorman, CEO of Morgan Stanley. When Gorman was asked about the chances of another financial crisis like the one we had 5 years ago occurring, he replied that “the probability of it happening again in our lifetime is as close to zero as I could imagine”. To this statement, my reply is quite simply “bull—-!”

Here are the reasons why another financial crisis can happen in the next few years.

1. Government and personal debt remain at unsustainable levels.

2. The US budget is still not balanced.

3. Due to 1 & 2, interest rates must go up. (more…)

Appraisal Management Company License Bonds - Image courtesy of  KROMKRATHOG /

Appraisal Management Company (AMC) License Bonds. Are They Working?


Current AMC Bond Requirements

Eighteen states now require AMCs to carry surety bonds to be properly registered to operate in those states.  The required bond amounts vary from $10,000 in New Mexico to $100,000 in Washington.  A list at the end of this post shows the required bond amounts in each state.

Are AMC Bonds Working?

The requirement for AMCs to carry bonds serves two purposes.  First, the bond assures that if an AMC fails to comply with its financial obligations under a state’s AMC law, there will be funds available up to the limit of the bond to pay those obligations.  The types of obligations covered by the bond will depend on the state’s AMC law.  In all states regulating AMCs, these obligations will include penalties owed (more…)
Appraisers E&O FDIC Exclusions - Image courtesy of Stuart Miles /

FDIC Exclusions in Appraiser E&O Policies


Many appraisers don’t know about or don’t understand the new FDIC and “regulatory agency” exclusions found in many appraiser E&O policies. Why is it relevant to know if your policy has an FDIC or regulatory agency exclusion of some sort? The main reason is because the FDIC sues appraisers for professional negligence — such lawsuits are discussed in prior posts: here and here.

How do you determine if a policy being offered to you contains an FDIC exclusion? First, no policy sold by LIA in its appraiser E&O program contains any FDIC or similar regulatory agency exclusion. If you are not purchasing E&O insurance in LIA’s program, what you need to look for are the common exclusions shown below. When they apply to a policy, these exclusions are usually added as endorsements, typically at the end of an appraiser’s policy.

Navigators Insurance Company

The following exclusion is applied as an endorsement to (more…)

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