Go Ahead, Just Ask…
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If AMCs used escrow accounts, no appraiser would ever go unpaid.
Go Ahead, Just Ask…
There is a lot of talk going on about AMCs that are in serious financial trouble. We have heard from many appraisers about past due payments and have heard some very concerning situations where AMCs owe appraisers millions of dollars in unpaid invoices for appraisal services. We have heard stories of AMC credit lines being cut off and demand notices being issued by the bank. There are also discussions of several AMCs shutting their doors in the coming weeks.
We all know how rumors spread and get exaggerated, none the less, there is usually some truth behind the rumors. This should be concerning to every appraiser and a red flag to pay attention to your receivables. Many AMCs are searching for new appraisers to complete orders. This is most likely because their existing appraisal panel has cut them off; either for unpaid outstanding invoices, low fees, or just too many headaches. Regardless of the reason, you should be cautious moving forward.
Go ahead, just ask the AMC for a copy of their financial statements. Go ahead, just ask an AMC for references. Go ahead, just ask for a Dunn and Bradstreet number and credit report. Go ahead, perform the necessary due diligence every other business performs when granting credit. Even if you have been doing business with an AMC for a while, it is perfectly acceptable to ask for updated financial information. Banks, credit card companies and other financial institutions ask all the time and do not hesitate to cut off credit lines or reduce the amount of available credit. No appraiser is obligated to grant credit to anyone. This is a courtesy to the AMC, not a right.
If you are not comfortable with granting an AMC credit, it is a perfectly acceptable business practice to offer terms of Cash On Delivery (COD). This concept of no cash, no delivery is very effective ensuring you will be paid for the service you perform.
Most states have AMC requirements for licensing that include a surety bond. In Virginia, the bond is $100,000. Will the $100,000 bond be sufficient if the AMC owes appraisers, oh let’s say $3.9 million? Probably not! Recently there was an AMC, TCV Valuations, that offered appraisers $0.25 on the $1.00. Needless to say, the bond of the AMC was cancelled.
There may be a better way…
We are speculating here as we really do not have any first-hand information on how AMCs operate, but history leads us to believe AMCs do not use an escrow account to hold borrowers funds to pay the appraiser. If AMCs used escrow accounts, no appraiser would ever go unpaid.
Lenders who accept money from the borrowers to cover third party expenses like credit reports and appraisals, deposit the borrower’s money into an escrow account. Real Estate agents deposit the purchaser’s earnest money deposit into an escrow account. Attorneys deposit funds for dispersment to the sellers, title company, lien holders and anyone other person or entity named on the settlement statement into an escrow account. These professionals understand those funds do not belong to them and must be kept separate from their own.
Why are AMCs not using escrow accounts? The funds they receive from the borrower or lender are for appraisal services. They were paid up front by the borrower and do not belong to the AMC. Every other participant of a real estate transaction uses an escrow account, why not the AMC? If the AMC should close their doors, these funds could not be used for any other purpose. Escrow accounts are not assets of a business as these funds do not belong to the AMC. Would an escrow account ensure appraisers are not left with unpaid invoices? Would this not eliminate any reason an AMC could or does not pay on time?
Go ahead; just ask your Attorney General about AMCs and the use of escrow accounts. Go ahead, just ask your state regulatory boards to audit the AMCs and ensure escrow accounts are being used by AMCs to protect the consumer’s payment for appraisal services. Go ahead; just ask your State Legislature to require escrow accounts by AMCs.
Go ahead, just ask.