NEW LEGISLATION HAS BEEN CREATED THAT HAS CHANGED THE APPRAISAL BUSINESS. THE IDEA OF THIS LEGISLATION WAS TO CREATE A THIRD PARTY IN WHICH APPRAISAL ORDERS ARE MADE. THIS WAS TO KEEP THE LENDER FROM PUTTING PRESSURE ON THE APPRAISER FOR INFLATED VALUES, OVER LOOKING REPAIRS, ETC.
THIS SOUNDS GOOD BUT A GOOD REPUTABLE FIRM DID NOT SUCCUMB TO THIS PRESSURE AND DID NOT NEED THIS APPRAISAL MANAGEMENT COMPANY.
WHAT THIS HAS CREATED IS A WALL BETWEEN LENDERS AND APPRAISERS. ESSENTUALLY APPRAISER HAVE NO LENDER CLIENTS ANYMORE WITH OUR CLIENTS BEING THESE NEW APPRAISAL MANAGEMENT COMPANIES.(AMC)
THIS REALLY UNNEEDED RULE HAS CREATED NEW PROBLEMS FOR THE CONSUMER.
FIRST, THE APPRAISAL FEES WILL BE HIGHER DUE TO PAYING FOR AMC COMPANIES.
SECOND, THESE COMPANIES LOOK FOR THE CHEAPEST APPRAISER FOR THE AREA REGUARDLESS OF THEIR EXPERTISE, EXPERIENCE, AND REPUTATION. THIS KIND OF REMINDS ONE OF THE OLD JOKE ABOUT ASTRONAUTS THINKING THEY ARE BEING SHOT UP IN SPACE IN A CRAFT THAT WAS BUILT BY THE LOWEST BIDDER CONTRACTORS IN CONSTRUCTION AND MATERIALS.
THIRD THERE CAN BE NO COMMUNICATION BETWEEN THE LENDER AND THE APPRAISER. ALL COMMUNICATION HAS TO BE COMMUNICATED THROUGH THE AMC. THAT MEANS LONGER TIMES FOR APPRAISAL WORK, ADDENDUMS, SOMETIMES GAINING ACCESS TO THE PROPERTIES, ETC.
AS ONE CAN SEE THIS RULE IS FAR FROM BEING PERFECT ANY REALLY RESTRICTS A FREE BUSINESS ENTERPRISE AS I CAN NO LONGER HAVE LENDER CLIENTS THAT I HAVE WORKED WITH IN MY ALOMOST THIRTY YEARS OF BUSINESS. WHAT A SAD DAY, AND THIS RULE WILL LEAD TO MANY MORE PROBLEMS IN THE FUTURE.
INCLUDED IN THIS BLOG IS AN ARTICLE FROM THE APPRAISAL INSTITUTE NEWSLETTER ABOUT CHANGES AND A NEED TO CHANGE ON THE STATE AND LOCAL APPRAISAL RULES AND LEGISLATION.
Utah, Arkansas Governors Sign Nation’s First AMC Laws
Earlier this week, the governors of Utah and Arkansas signed the nation’s first laws that will bring appraisal management companies under the regulatory oversight of their state’s real estate appraiser boards. In addition to the registration requirements, the new Utah and Arkansas laws, which are effective on May 12, 2009 and January 1, 2010 respectively, require that AMCs have systems in place to verify that only licensed or certified appraisers are used. AMCs must also ensure that all appraisals comply with the industry’s Uniform Standards of Professional Appraisal Practice. Additional language is included in each law to ensure that appraisers are free from inappropriate influence and coercion from AMCs.
One element that is unique to the Arkansas law is a requirement that AMCs operating in Arkansas post a $20,000 surety bond with the board. Any party, including an appraiser that has a claim against an AMC, can bring suit to recover funds from the bond. The only exception is that a consumer’s claims takes precedence over all other claims. In lieu of a surety bond, an AMC can make a deposit of cash or securities.
In a letter to Gov. Jon Huntsman, the Appraisal Institute and other appraisal community organizations stated, “We congratulate the State of Utah for its leadership role in becoming the first state in the nation to enact requirements that appraisal management companies register with, and be regulated by, a state agency.” The appraisal organizations will also be writing to Gov. Beebe to thank him for his action on his state’s version of this important legislation.
According to the chief sponsor of the Utah law, Rep. Michael Morley, appraisal management companies may be inclined to hire the lowest-cost appraisers rather than the most appropriately qualified in order to boost profits. Rep. Morley added that appraisal management companies often hire inexperienced appraisers who are susceptible to pressure from lenders or mortgage brokers to come up with a predetermined valuation.
Utah State Rep. Jack Draxler, a member of the Appraisal Institute from North Logan, Utah added, “If we want the integrity of the process to go forward, if we want to prevent mortgage fraud, appraisal management companies should come under the same set of standards as the rest of the people operating in this very, very critical industry.”
To view the new Utah law in its entirety, visit http://le.utah.gov/~2009/htmdoc/hbillhtm/HB0152.htm, or to view the Arkansas law, visit www.arkleg.state.ar.us/assembly/2009/R/Acts/Act628.pdf.