Go Ahead, Just Ask…

Escrow Accounts Used in Real Estate Transactions... Why Not AMCs?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.

VaCAP Board
VaCAP Board

VaCAP Board

Coalition of individual appraisers working together to unite, promote and protect the collective interests of all appraisal professionals in Virginia; to promote needed changes in laws, rules, regulations, policies and standards affecting all appraisers in Virginia; to observe and report the actions of regulatory, legislative, oversight, and standards-setting entities of the Commonwealth.

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10 Responses

  1. David Wimpelberg on Facebook David Wimpelberg on Facebook says:

    There should be escrow accounts for AMCs, and I suspect this will occur in the long term. Abuse always invites regulation.

  2. Avatar Seneca says:

    Escrow Accounts? I’ll add it to the appraisal industry wish list. 

  3. Avatar Raymond says:

    the amc business model has to end.

  4. Avatar Don Clark says:

    In my opinion, there is absolutely no need for AMC’s. Lenders have the right and ability to have a seperate department within their organization to do what they should be doing anyway. When Dodd-Frank was first published i lost a credit union account worth over $10,000 a year to me. That same credit union has the capability and does manage VA Loan applications, deals with assigned VA Fee Panel Appraisers, reviews and approves VA loans by having a staff SAR(Staff Appraisal Reviewer) review, question, correspond with the appraiser through the entire process. the only thing they do not have to do is hire and assign the appraiser. That could easily be accomplished if the CU really wanted to do so. Having a list of approved appraisers could be done by a seasoned appraiser as their staff appraisaer/assignment coordinator. All lenders could do that. it would save time, customers & clients money. Same is true for most lenders. No one really wants or needs an AMC. They “make work” where none is needed by stupid, meaningless requirements that no one benefits by.



  5. Avatar Raymond says:

    lenders are using the AMCs because, so they can claim they have improve the appraisal process, in terms of quality and appraiser independence, etc.  Quite laughable. We all know quality has not improved and appraisers are more dependent than independent. AMCs are just a smoke screen.   

  6. Avatar Ronald Keeler says:

    The answer to all of this is simple. Request payment up front. I do, I get turned down 3 out of 5 times, but I’d rather be paid for 2 jobs than remain unpaid for 5 jobs.  I still get enough work to keep me busy.  I never liked amc’s very much and did as little with them as I could. When I do take an assignment it is on my terms, not theirs. My suggestion to all of you, is diversify. Quit relying on mortgage finance appraisal work for the bulk of your income.

  7. Baggins Baggins says:

    Mandated licensing for all appraisal order distribution workers, amc, direct, or otherwise.  If it goes through federal insurance, mandated licenses for individual distribution workers.

    Do you have fixed costs, and how much do you bill the lender for this order.  Even ‘direct’ distributors are charging consumers hundreds more than is paid to appraisers.  Variable fee billing based on contingency arrangements regarding sourcing others fees lower to earn more yourself, would be a violation of both the management and ethics rules if such an action was initiated by a licensed person.  This problem is so widespread, good luck finding any mortgage lending client that has not by this time, stuck their hand in the appraisal fee cookie jar.  If it’s out of escrow, it’s fair game for anyone to dip into, it’s not regulated money.  If the volume gets high they just dip in more, and hire another distribution worker. If volume gets lean they cut the appraisers fee down to recapture some operational income.

  8. Retired Appraiser Retired Appraiser says:

    Someone should write a book about the role that appraisers played in replenishing banks after they were driven to the brink of bankruptcy in 2009. Let’s face it folks…appraisers have poured BILLIONS into the coffers of banks since the 2009 feejacking took place.

    Side Note: I was pleased to see Franken forced from office recently because of the role he played in HVCC.

    • Avatar Jack Of All Trades says:

      Amen to that Retired ! Clint Eastwood said it best when he stated: “Dying ain’t much of a living boy”.

  9. Avatar Certresidential says:

    It’s amazing how states with AMC regulations pick and choose which requirements need to be established to acquire a license to do business within a state. Where, in what law does it preclude proof of an AMC escrow accounts to safeguard a borrowers appraisal fee? Isn’t public trust supposed to be one of the first and foremost reasons for AMC regulations? How does the state regulator explain to a Lenders Borrower that they allowed a Borrowers fee, allocated to pay a creditor (Appraiser) to be squandered or reallocated to pay AMC employee salaries, marketing expenses, or fund a privately owned AMC owners new business venture after bankruptcy and/or a company dissolution? These are questions Appraisers, Lenders and Borrowers should be demanding answers too. Because it’s historically obvious many AMCs cannot be entrusted with a Borrower’s funds


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Go Ahead, Just Ask…

by VaCAP Board time to read: 3 min