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Association News, Government AffairsBill would regulate Appraisal Management Companies
The battle to regulate Appraisal Management Companies (AMCs) continues in Pennsylvania following the introduction of House Bill 2334 (Stevenson, R-Mercer) last month.
Michelle Bradley, chair of PAR’s AMC Task Force, said the primary component of the bill would require every AMC to be registered with the State Board of Certified Real Estate Appraisers.
“AMCs are the only piece of the real estate puzzle that is not regulated,” Bradley, an appraiser with Czekalski Real Estate, Natrona Heights, said. “When the Home Valuation Code of Conduct (HVCC) was introduced, we didn’t even have a good definition of what an AMC is. As a result of the HVCC, much of the appraisal work is being funneled to AMCs and NAR has urged each state to push for legislation that clearly defines them.”
Bradley said eight states have passed legislation to regulate AMCs, while 16 others have legislation pending.
“At this point, AMCs are unregulated entities and are operating with no oversight or accountability,” she said. “Subjecting AMCs to registration requirements will provide the appraisal board with the authority to implement rules on AMCs. Ultimately, this will protect consumers as many have seen higher appraisal fees since the HVCC was enacted.”
Other key points of the legislation include:
- Implements a registration and renewal fee of $1,000
- Implements a $20,000 bond to secure the faithful performance
- Requires all appraisal reviews to be conducted by a certified or licensed appraiser
- Requires AMCs to adopt Uniform Standards of Professional Appraisal Practice (USPAP) record-keeping rules
- Prohibits improper influence through intimidation, coercion, extortion, bribery, blackmail, threat of nonpayment or threat of exclusion from future appraisal work.
“This last point is important because in the past unscrupulous lenders have called appraisers and asked them to appraise a property at a specific value or face losing future business,” Bradley said.
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Kim Shindle is the Manager of Media Relations at the Pennsylvania Association of Realtors®. |
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As noted in the above response, the out-of-area appraiser usage is becoming a problem for buyers and sellers. These appraisers are simply not in touch with differences within in area that absolutely affect home values, both higher or lower. It also seems that the unintended consequences of the appraisal process changes are the higher cost to consumer and the order/review process (with ridiculous delays and reviews with no common sense or real estate knowledge). Although one can understand the extreme reaction to the past problems The “pendulum” needs to swing back to become more even-keeled and sensible. Hopefully this bill addresses all of these issues.
There should also be a time limit set for turn-around (not just on the report) as we are seeing two weeks between the time the order is placed before the appraiser is actually contracted by the AMC, then some person with no license or formal training is reviewing the report based on a standard model the AMC company has set forth. If the report does not meet their model they then request changes to make the model work and in most cases it takes away from the appraisers intent and possible value. The AMC’s are also using appraisers from outside the area that are not familiar with the market and the local area and/or trends. Because of this we have seen prices in both directions either too high or too low for the area which defeats the purpose of the appraisal. There is also the price factor a typical appraisal has seen and increase in price by at least $125 sometime more. This is pushed off to the consumer (why are the consumers the ones being punished for the banks bad behavior in the past?) The AMC fees should be a flat rate that the lenders pay for the AMC yearly service the fees should not reduce the appraisers normal fee nor should it raise the consumers cost. In the rush to “fix” the mortgage crises this new requirement has created a whole new monster causing even more problems.