How to avoid AMC

16 Pages·2012·0.25 MB·English

VOLUME 20 • ISSUE 9 • September 2012
www.appraisaltoday.com
problems
How to avoid AMC (and other client) collection
Collections are a real hassle. The billings from a client? Why do Some appraisers lost lots of money
best way to handle them is to appraisers accept all clients without when AppraisalLoft shut down.
avoid them. checking them out? Why don't Why? Fear and greed and, for
The recent shut down of appraisers contact clients soon after a some, too much dependency on one
AppraiserLoft is a warning for billing is past due? or a few clients.
appraisers. Not every AMC is credit- Fear- they won't get another
worthy. This is a wake-up call for appraisal order from the client, or Pre-screen yourAMC clients - don’t
take work from anyone before you
appraisers who were used to COD they will never get another appraisal
check out the company
payments for mortgage broker order from anyone.
When you receive a call from
appraisals. Few had any experience Greed - want to make as much
someone you don’t know or haven’t
with extending credit. money as possible (or at least bill out
worked for recently, google their
Today, the primary issue is decid- as much as possible).
name. You may be surprised at what
ing who is a good credit risk. Every
shows up!! Go to www.deadbeatlist-
time you send in a report before you Wheneveryou don’t collect up
ings.com ($50 per year fee) to check
are paid, it is a risk. front, you are extending credit.
When you apply for a credit them out, or do a search at
If you’ve only done COD
account with almost any business, www.appraisersforum.com. The
appraisals, it was a great ride while it
they will ask you to fill out a form information is posted by appraisers.
lasted. Now we are returning to the
listing your other accounts, bank Here are a few sample comments
old days before mortgage brokers
information, and possibly permission from appraisers:
and COD, when you had to invoice
to run a credit check on you. But few • 12 attempts (6 invoices, 6 calls) to
clients and wait for them to pay.
appraisal firms do anything. collect, promises of payment, but no
Some appraisers do lots of work for
The choice is yours. results as of yet
free every year. Others have had 100
• Took them to Small Claims Court.
percent collection for 10 or more
Don’t ever, everput all youreggs in They didn't show up. Ruling in my
years.In my appraisal business I
one (ora few) (AMC) basket favor. Still can't collect!
have lost less than $2,500 over 26
Don’t ever rely on one client for a • Paid on only 11 of 20, tried work-
years, without spending much time
large part of your billings. Why? ing with, no response.
on collections or resorting to a letter
Clients come and go, for all types of
• This company has disappeared into
service or small claims court. I am
reasons.
very, very picky about who I take
work from. INTHISISSUE
AMC (and otherclient) collection - the longeryou wait to start, less likely payment .Page 4
The primary source of problems Lenderliability forunpaid appraisal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 9
fearand greed Check yourstate’s AMC regs and laws - fee payment time req.and/orsurety bondsPage 11
Demand letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 14
Why do appraisers keep accepting
orders even after they have past due
September 2012–©Appraisal Today–PAGE 1
thin air! If you know anything about Many AMCs already tell you when months (or more) to pay are moni-
them, please e-mail me! you will get paid. But not all. Most tored on a twice a month basis to be
non-AMCs don’t have any written sure your invoice didn't "get lost." A
What is yourrisk tolerance for policies. discount is offered for early payment,
payment? Every appraisal company has a as well as late payment charges to
In my appraisal business, I can
credit policy. Is yours "pay me when motivate them to pay you quickly.
hardly stand the idea of doing an
you get around to it"? If you don't - Private individuals are never billed,
appraisal for free, so I am very picky
have a credit policy, that's what some and must pay in advance or on deliv-
about extending credit. Whenever I
of your clients will use. ery.
extend credit to a new client, I worry
Some possibilities are: • New clients are always put on the
way too much about whether or not I
• No billings. All appraisals must be "watch list" to be monitored for any
will be paid. In other words, I am
paid in advance or at the time of payment problems. Their accounts
risk-averse on extending credit.
delivery. (The good old days of mort- receivable are tracked on a weekly
So what does that mean? I lose
gage broker COD). That’s my basis.
work to appraisers who will extend
requirement for private clients.
credit, but I sleep much better at Collection laws are strict for con- How do you communicate your
night. credit policy?
sumer debt, but not business debt.
The more credit you extend, the The key to success is communica-
• Half up front, half at the time of
higher the likelihood of uncollected tion with your clients. Verbally at the
delivery (what I do for larger billings,
billings or of lots of hassles collect- time of ordering, and on your invoic-
$1,000 and up).
ing past due billings. The client that es. If they don’t like my credit terms,
• Payment within two (or one) weeks
owes you money is using your I don’t accept the assignment.
of receiving the appraisal and
money to conduct their business. Do you always, always, always
invoice.
On the other hand, the more credit have your credit terms on your
• Payment within 30 days.
you extend, the higher your billings. invoices? If not, your terms are "Pay
• Payment within 45 or 60 days.
Only you can decide. me when you get around to it."
Of course, just as you have your
We all want to get paid ASAP.
credit policies, your clients have their
Know yourclients’payment Some appraisers believe they
own payment policies. Telling a
patterns "should" be paid within 1 to 2 weeks
major bank that you require payment
Some clients pay within 2 weeks.
after delivering the appraisal and are
in 2 weeks won't do much good if
Others can take 90 days or more.
very upset when clients take two to
their corporate policy is to pay in 6 to
Government clients tend to be very
three months to pay. Of course, the
8 weeks. You need to always ask
late.
same appraisers probably don't pay
about their payment terms.
If you don’t want to work for late their bills within a week of receiving
Most appraisal firms have several
payers, even if they always pay and them.
credit policies, depending on the
are no hassle clients, don’t take any
Did they tell their clients their
client. Here are some possibilities:
work from them. Find other clients
requirements and that otherwise, they
• AAAclients, that always pay within
who pay fast or require pre-payment,
will not accept the assignment-
60-90 days and seldom are a problem
at the door.
Probably not. If the client is a mid- to
appraisal-wise, are allowed a 90-day
large-size company, did they ask their
What are yourAMC’s payment term with no discounts or late pay-
payment terms before accepting the
terms? ment fees.
assignment? Probably not. Did they
Check your AMC contract or what- • Regular clients who pay late, or pay
include their payment terms on their
ever they have in writing. If you on an irregular basis, but are other-
invoices? Probably not.
don’t like it, for example, payment in wise not a problem, are given 30 days
In my business, I am very strict
90 days, don’t take work from them. to pay with late fees and/or a dis-
with private individuals and attor-
count if paid within two weeks.
neys. I make my payment terms very
What are yourcredit policies? • Problem clients who always want a
clear at the initial phone call. I
What is your approach to your risk
fast turnaround, hassle about values,
require payment in advance for all
of extending credit to clients?
ask stupid questions, and are late pay-
appraisals up to $500. Over $500 I
ers are put on the "almost off the
will only allow 50% up front and
approved client list."
50% upon completion. Do I lose
• Government clients who take over 3
work? Yes. Do I sleep better at night?
PAGE 2–©Appraisal Today–September 2012
Yes. Which AMCs are low risk? a good example of risk that change.
Since I am strict on how long a AMCs affiliated with major They had been in business for many
client takes to pay, as long as it is lenders, such as RELS, are a very years and were a relatively good
within 90 days, I take a one-time trial low credit risk. AMCs affiliated with AMC to work for. But they are a
assignment from a new client to see much larger companies, such as LSI, small company which was a HUD
how quickly they pay, as I specify are also low risk. contractor for many years. They lost
payment within 30 days on my Which of your AMCs are affiliated a major contract and have very bad
invoices. or owned by large companies? cash flow problems now.
Did you regularly google JVI to
AMC cash flow problems - Which AMCs are more risky than find out about the problems when
especially small AMCs the big AMCs above? they first started? If not, make a com-
Some AMCs have significant pay- All the smaller AMCs are risky.
mitment to keep close watch on all
ment problems and others are never a The highest risk is new AMCs that
your AMCs.
problem. You certainly don’t want to are on a high growth ramp up, such
Be sure to regularly google the
work for an AMC who doesn’t pay as AppraiserLoft, as they are most
names of these types of clients to see
you until they have been paid. likely to have cash flow problems.
if appraisers are posting collection
Think of AMCs as appraisal firms. If the AMC is small and privately
problems.
You have an appraisal company. Do held, only take a few assignments (or
you ever run short on cash if you use none) before checking them out or What about small AMCs - local and
other independent contractors seeing if they pay. regional?
appraisers? Or did you work for one Many months after the first post- Keep a very close watch on how
when you were a trainee? Appraisal ings about Appraiserloft, many long it takes for you to get paid.
labor is the major cost for appraisal appraisers were still accepting Don’t run up large unpaid billings.
firms. assignments. They have only them- Go by their office or call on the
selves to blame for this. phone. If the person you normally
AMCs are not very profitable - Which of your AMCs fit into this speak with is gone, check closer.
beware
category? If no one answers the phone for a
Appraisers think AMCs make lots
while, or there are a lot of empty
of money. But, they are just like
What AMCs are poorcredit risks? desks, it may be too late.
appraisal firms, with the same signif- Check out all your AMC clients
icant ups and downs. (and other lending clients that are not Where to get more information
Compare the typical AMC with the banks). Do they have a large number Some research ideas:
typical large appraisal company. of clients, or only work for a few • Go to your AMCs’web sites. See
AMCs have lots more administrative banks as an outsourced appraisal what you can find out.
people. They have much less control ordering department. If they lose • Google them.
over their appraisers. They don’t their contract with that one client,
• Sign up for
know them personally, like you do they will probably be out of business
www.deadbeatlistings.com
when they work for an appraisal soon.
• Go to www.appraisersforum.com
company.
and search for the company.
AMCs are in some ways worse When does risk change foran
• Sign up for
than appraisal firms. They battle with AMC?
www.deadbeatlistings.com
their competitor AMCs, mostly about The current problems with JVI are
• Run a Dun and Bradstreet report.
fees. Sound familiar? AMCs use
Prices are from $13 to $39 per report.
broadcast orders and fee shopping
Google Dun and Bradstreet report for
among appraisers.
the link.
When business is way down for an
AMC, who gets paid. The first to get
paid are the employees or the IRS
shuts down the company. Rent,
phone, data, etc. have to be paid or
the AMC can’t make it. Appraisers
are way down the list.
September 2012–©Appraisal Today–PAGE 3
AMC (and other clients) collection - the longer you wait to
take action, the less likely you will get paid
In the severe appraisal recession in Collection efforts - timing is
appraisal requirements, particularly
the mid-1990s, when lots of small critical!!
those that are standard appraisal prac-
lending companies and mortgage Waiting no longer than 90-120
tices. For example, the client requests
brokers were going out of business, I days is recommended for the legal
a discussion of each comparable
had 100% collected billings. I had remedies below. The longest recom-
selected. Or, MLS printouts, or the
my office assistant call of them daily. mended wait time is 4-6 months.
reason for not using them.
He also faxed the invoices. First - contact AMC after your
We want them to pay us before payment is due( per contract or your
You may lose the client if you go to
they pay anyone else. There is only invoice). Don’t wait very long to do legal remedies.
one way to do this. Keep contacting this. See the tips below on what to First, decide whether or not you
them. do. want the client. If you file with your
Note: I sent a request to my free Legal remedies: state appraisal board, send demand
email newsletter subscribers for com- Second - If your state has laws or letters, go to small claims court, etc.
ments. Some of them are below as regulations regarding non-payment of your risk of losing the client goes
“Advice from an appraiser” or other fees or AMC surety bonds, contact way up.
titles. Some of the appraisers wanted your state. See the included article on
to be anonymous, so their names are state AMC regulations Be sure you get paid first, before
not listed. Others did not reply to my Third - Send demand letters to the everyone else!!
request for approval to use their AMC/Lender. In collections the SQUEAKY
names, so their names are not includ- Fourth - Small claims court. WHEELGETS THE GREASE. Call,
ed. Fifth - lawsuit against AMC - a last write, email, fax every day. Don’t
resort. Can be expensive. wait. Do it now!!
The Two Primary Rules of In the last lender implode in the
Collections What is the latest recommended mid-1990s I had 100% collection of
Every appraisal business has col- time to take collection action? billings. How did I do it? My assis-
lection problems, unless you get I strongly recommend startng as tant phoned and faxed every day. My
every payment up front, in cash or soon as possible, to greatly increase invoices were paid first.
money order. your chance of collecting.
The two primary rules of collec- The latest recommended time to Collection Steps:
tion are: start is 6-9 montht. You can still try
FIRST- Check yourcontract with
1. The squeaky wheel gets the after that, but the success rate goes
the AMC orany document specify-
grease. With problem clients, phone way down.
ing theirpayment terms
every day, send duplicate invoices
If the AMC states they pay within
and letters, use a collection agency, What if you want to keep the client?
90 days, start collection efforts on the
etc. Use standard business methods of
90th day after you have sent your
2. The longeryou wait to start col- calling, emailing, etc. These are stan-
appraisal and invoice.
lection efforts the less likely you dard business practices.
If you want to be paid sooner, don’t
will be able to collect. Statistically, I DO NOTrecommend being rude.
take any new work from the AMC.
for all businesses, 80 percent of Be business-like in your contacts.
DO NOTWAITTO STARTCOL-
accounts are collectible within 4 DO NOTaccept more work from the
LECTION EFFORTS.
months. After 4 months past due, on client if they are not paying in a rea-
If the AMC does not state its pay-
average, only 20 percent are col- sonable length of time.
ment terms, use your invoice
lectible.
Your invoice sent with the appraisal
Counterlawsuit is a risk in using
the legal remedies above is the most important document.
Counterlawsuits are a possibility What does it say?
when using any legal remedy. Start collection efforts the day after
Be sure you have conformed to their you specified payment. For example,
PAGE 4–©Appraisal Today–September 2012
you require 30 days payment. Call two, and some more. have to work for each assignment,
them on day 31 after sending the The accounts payable clerk who putting in the 15 to 20 hours of work
appraisal and the invoice. handles appraiser payments is the first per appraisal, so I am on top of col-
No payment terms on your person to contact when your payment lections. Also, not being the apprais-
invoice? You have learned your les- is delayed. He or she can tell you er, kind of makes it easier "arms
son. From now on, it is on every what is needed, the deadline for length" you might say,.It’s not like the
invoice. receiving approved invoices, etc. appraiser is having to call and get into
One way to help keep your invoices a big fight with the lender.
SECOND - Accounts payable clerks from becoming lost is to print them My recommendation would be to
- the payment disbursers out in a different colored paper. appraiser's that are solo, have some-
In most larger companies, such as
one else do it for you, your accoun-
AMCs, accounts payable clerks Letterto Lenderaccounts payable - tant, pay a college kid to help out in
process payments of invoices. They - advice from an appraiser administrative duties.
don't want their desks clogged up If I'm having a problem collecting
I had an AMC we never worked for
with invoices that can't be paid from an AMC, I send the invoice
before not pay us, sitting on my desk.
because there are approvals missing. directly to the bank that originated the
The bill was hitting the 90 day mark. I
Typically, checks are written once order "Attention Accounts Payable".
sent them an email listing the steps I
a week for those invoices that are I include a letter explaining my would be taking on certain dates if
approved and are due. efforts to collect the invoice including payment were not received within 5
Be sure you know what informa- dates and who I talked to. I've always days.
tion the client wants included on an been paid within 10 days. It appears
I told them in the email I would be
invoice and how many copies are the banks don't like the concept of the
submitting their name and broker
required. AMC's not paying the appraiser.
number to The OREAas well as the
After all, the bank has paid the AMC
DRE and file an official compliant
Why is payment delayed? for your appraisal.
with both agencies. In addition, I was
Possiblities include:
Remember, the banks don't know sending a certified letter to the owner
1. The person who received your anything about their selected AMC of the subject property explaining to
invoice has lost it, misplaced it, or except what the AMC tells them. As them we were putting a lien on their
failed to send it to accounts payable appraisers we can let the banks see property and the reason why we were
for payment. the AMC's like we do. placing the lein on the property.
2. Your invoice has no payment
Well, needless to say, we received full
terms and goes to the bottom of the
THIRD - Call every day, fax, email, payment within 3 days of my email.
pile. Be sure your payment terms are
and be polite, but very persistent. In the past, I basically used the
prominent on your invoices.
See below. "lien" trick which usually got us paid
3. Your invoice was received after
promptly. I had a recent example. A
the cut-off time for payment the next
FOURTH - Contact state appraisal La Jolla broker ordered an appraisal
time checks are written.
board(if AMCs are required to pay and would not pay the bill. I
within a certain period. Or get surety researched the broker online, it took 5
How can you speed up payment?
bond info and send. minutes on the DRE site to find out he
1. If your invoice has a discount,
See the article on State Boards in this had several complaints against his
and the company always wants to
newsletter. license. I simply related the facts to
take them, it will be at the top of the
him in again another email and told
pile.
Good collections advice from a long him I wanted payment within 72
2. Make sure the invoice has all the
time appraisal office manager hours. I received in a Fed Ex package
necessary information on it, such as I am well versed in this subject. You
full payment the next day.
a reference number, purchase order could say it has always been a pet
Over the years, my experience has
number, borrower's name, depart- project of mine. I manage my hus-
been you have to TAKE the time to
ment name, person's name, your tax band's appraisal practice (26 years
stay on top of collections. I have a
ID number or whatever the client now ) and with a bookkeeping back-
shelf adjacent to my desk, with a wire
requires. Include a copy of the work ground I have gotten pretty good at
rack I color code my collections and
order. collections.
each company gets a color and every-
3. Send the number of invoices the I don’t especially like collections,
time I look up I see the collection
client wants. Some want one, some but I get pretty mad at how hard we
folders ,(it reminds me to take the 5
September 2012–©Appraisal Today–PAGE 5
minutes and do it). have appraisal ordering and accounts emotional, and are more likely to fol-
It takes 5 minutes everyday to payable far removed from each other. low through. Offering a percent of
work the file. I seldom have more the money collected is a great moti-
than 1 open past due file these days. What about a lawsuit? vator for billings that are way past
I simply shoot an email and COPY Abig minus in a lawsuit is being due.
yourself, I take my copy of the counter-sued by the other party. Plus If you are a "one person" office,
email, put it in the file for reference, the cost and hassle. Not recommend- you'll have to do it yourself, which
then I file the email ELECTRONI- ed for a few unpaid standard residen- means you may procrastinate or get
CALLYin a file for that particular tial appraisals. into shouting matches. You may be
company. The next time I have to One idea is that multiple appraisers able to get a spouse or adult relative
send them an email I forward the with unpaid bills by one client could to make the calls.
original email and type on the top see a lawyer and then might have
SECOND NOTICE, and then start better luck pursuing a "group" claim How and when to make collection
giving them time lines. for collection against a lender? if, phone calls
say, the claims of the appraisers in Remember Rule Number 1, The
It gives me the paper trail I need,
one state collectively got above Squeaky Wheel Gets the Grease.
and if a company orders an appraisal
around $75k. Your first call should be to find out if
say a year later, I look them up to see
if there any any details of a collec- Alawyer could then take those there is additional information the
tion problem. claims and put them in one suit or client needs, such as a taxpayer ID
closely related suits. number or a copy of the invoice.
Many thanks to Jeannie Fitzgerald
When to call? Within a week after
Collecting from lenders - advice How do you monitoryouraccounts the payment was due, at the latest,
from an appraiser receivables? depending on the payment terms on
While the lender will say they paid Agood way for a small appraisal your invoice.
company is to keep the unpaid
the AMC, our position is that that is If that doesn't work, gradually
appraisal file on your desk so you see
not relevant to their responsibility to accelerate your calls in frequency and
it every day. The files are taken off
be sure we are paid for services ren- urgency until you are calling every
your desk when they are paid.
dered. day.
If you have a larger company with
We round that off with the clear There are many books on tech-
many billings, you can use software
statement that we will lodge com- niques to use when calling deadbeat
such as Quickbooks. But, this is
plaints with state and federal regula- clients. Get one of the books and
much less effective than the top of
tors and state a definite timeframe study it. Practice phone scripts.
the desk, in your face method.
(generally 30 days) for the submis-
sion of these complaints. 100% suc- I have used both Quickbooks and What about yourregularclients?
cess so far. the file on the desk method. In my Continuously monitoring all your
We made our demands through any current small appraisal company, my accounts receivable is very impor-
lender contact we had from the order assistant uses the “file on the desk” tant.
in question and our responses were method. All the unpaid appraisal files Keep on the lookout for warning
either payment or return call/contact are very visible and not in a file signs, such as:
from a processor for the transaction drawer. We can both see them every • They used to pay within 30 days.
which escalated to management deci- day, multiple times. Now it is 60 days or longer.
sion to pay the fee. When I had a larger company, my • You read about an upcoming merg-
Editor’s comment: The lender is assistant ran the accounts receivable er in the newspaper.
legally liable to pay the appraisal fee. report at least once a week. • Their phone number has been dis-
connected.
Who does yourcollections?
Refuse to send appraisal Any client can develop payment
Monitoring your accounts receiv-
One very effective method is to problems for lots of reasons. Some
able doesn't do any good if no one
refuse to complete and send an reasons are:
follows up on late payers.
appraisal (or several appraisals) until • The clerk in the appraisal depart-
you are paid for your past due Having someone other than the ment who processes invoices is on a
invoices. This can be very effective. owner of your appraisal firm make long vacation or is sick.
the calls often works better than the
This often doesn't cut you off from • Your lender client is gobbled up by
owner. They are less likely to be
new work as the larger AMCs can another rapidly expanding bank.
PAGE 6–©Appraisal Today–September 2012
Merging their accounting systems is who then purchases the receivables, The appraiser should always make
a nightmare. less a discount. This allows you to copies of the checks they receive
• Your long-term client goes into have money in your pocket in a few from anyone so if they have to go to
bankruptcy. days instead of a few weeks. Small Claims Court, they know what
• The person who approves payments Treasure Valley Factors then does bank and the bank account number.
quits. all the invoicing and collections on Small Claims Court is quick & fast.
• They switch to a new accounting the invoices that are factored. If they get a judgment, they can file a
system. Financing accounts receivable Supplemental Proceeding, provide the
• They develop financial problems enables our clients to spend more bank name and account # and the
and decide to postpone paying bills time developing and growing their Court will "freeze" that bank account-
for as long as possible. business and less time doing paper- at which time the debtor will pay very
work and collection calls. quickly to get their account released.
Using a collection service orletter The more accounts a business takes
service Going to small claims court to a particular small claims court, the
Apre-collection letter service is an Do this within 120 days. It doesn't more likely they are to win.
inexpensive way to help your collec- matter if the AMC or lender are out
tions. They send a series of letters, of state. This is very easy to do and FBI - advice from an appraiser
usually one to five, and must be used is often "consumer friendly". You are I seldom work with AMC's, but on
early, usually between three and six going up against the Big Lender or occasion I do find it necessary. But
months past due. Many appraisers the AMC. Don't be intimidated. the only time I found it necessary to
use them. Ask around in your local You've called, faxed, bullied, and force a payment, I just explained the
appraisal network for referrals. you're finally fed up. The deadbeat FBI has a very simple form online to
Collection services are used for just won't pay. Many appraisers are fill out for victims of wire fraud. I had
your deadbeat clients, who, after let- intimidated by small claims court, my payment in 3 days!
ters, calls, and faxes still haven't but every appraiser I have spoken Thanks to appraiser Mike
paid. These services aren't cheap, but with who used it said it was not real- Williamson!!
something is better than nothing. ly that much of a hassle.
They are the experts on lame If your claim is within the limit for Bank merger- advice from an
excuses from deadbeats. To select a small claims in your state, do it. appraiser
collection service, check with other Contact your small claims court for This story is from a local bank that
companies who have used them. the necessary paperwork and proce- got swallowed up by a bigger fish.
Don't just go by price. dures. Watch small claims court on When I first started my appraisal
Court TVto see what it is like, or practice they were my first customer
Using an accounts receivable spend an hour or two at your local and I could give them great service in
factoring service to speed up getting small claims court. a time when things were very busy
paid and everyone was experiencing slow
Often, you can send an employee
These companies take a relatively turn times. Everything was going
if you don't have time to appear.
small percent of your fee and pay great. I had to put on additional
Of course, you still have to collect
you in full. They are responsible for appraisers to cover the growing busi-
the money after you get a judgment.
collecting. You do this soon after ness. It was not unusual to get 1 or 2
See the reference at the end of this
billing the client. It is not for long orders a day from this one bank alone.
article for two excellent books on
past due billings. They paid twice a month.
small claims court by Nolo Press.
Appraisers have used Treasure Then the merger. Work kept coming
Valley Factors, www.treasurevalley- Small claims against lender- advice in for about six months. Then there
factors.com, which has had a booth from an appraiser was a management shake-up. Work
at several national conferences. File a small claims suit at your kept coming in, but the money
Here’s a quote from their web site: local court. Sometimes the lender stopped flowing. 3 months and no
Factoring is all about cash flow. will pay upon notice of the suit! payments. My requests to the head of
Factoring is selling your accounts Thanks to appraiser Ken the mortgage department did not
receivable to get paid immediately MacDonough SRA! prove fruitful.
for the work you have done. You I knew a director of the bank before
would send your documentation and Small claims - keep copies of all the merger. He couldn't do anything
invoices to Treasure Valley Factors checks - advice from an appraiser anymore, but he did know the right
September 2012–©Appraisal Today–PAGE 7
people to get in touch with. Things fall. ing to collect from them (the borrow-
went right to the top and the next day Another rule of mine (since I came er).
I had a conference call with the CEO from a larger appraisal company who Rather, state that you will soon be
& CFO. 2 days later I got a check for lost tens of thousands of dollars from taking legal action against the lender
over $10,000 and another call from non-payments), was "I am not a in small claims court and you want
the CFO. If I had any future prob- credit company" and until an AMC to inform them (the borrower) that
lems to call him directly. established good credit with me, I they may be contacted to provide tes-
The head of the mortgage depart- only allowed 2 non-paid orders open timony in the trial.
ment didn't like it because he had at a time. Just like a maximum on a I close with an apology for taking
"egg on his face." They kept sending charge card. It has worked well for their time, but I thought they should
me business, but it was obvious it me since being on my own for the be apprised ahead of time that their
was slowing down while everyone past 5 years. appearance in court may be neces-
else was going great guns. But, alas, I have only not been paid for 1 sary. This usually gets me a check in
3 months later I was calling the CFO appraisal in 5 years and it was a per- 24 to 48 hours.
again. I collected a $6,000 check, but sonal assignment in which I was too Thanks to David L. Phillips, SRA
never received another order from trusting...never again! I never let an for this tip!!
this bank. (Later they started using an appraisal go until the check has
AMC.) cleared the bank on personal assign- What if you just can't collect the
ments! billing?
AMC "payment issue list" - advice Thanks to appraiser Torrey You've tried everything and even
from an appraiser got a judgment in small claims court,
Meyer!!
I joined a website group 3+ years but they still haven't paid.
ago: DeadbeatListings.com. Any Mechanics lien All appraisal businesses have
problems appraisers were having Check your state laws. Mechanics uncollected billings, at one time or
with AMC were logged there so it liens are not allowed by appraisers in another. Just chalk it up to a lesson
was a good reference point. I made a most states. learned about when your shouldn't
lot of decisions to accept or decline Some states allow appraisers to extend credit.
based on this information.
record a mechanics lien against the
I also have a "payment issue list" property. Unfortunately, not many Where to get more information
taped on my wall with the names and homeowners care about this until Most information on collections is
problems I have had with an AMC. they sell or refi their homes, but it about collecting from consumers. My
I have declined orders from these may get you payment. favorite book on collections for busi-
AMCs and I tell them exactly why... I don’t recommend this as the ness to business credit is “The Check
payments in a timely manner are homeowner has already paid for the Is NOTIn The Mail”, written by
important to all of us. We need cash appraisal. It is typically used for con- Leonard Sklar. The book is not in
flow. tractor work that was done and not print, but used copies are available at
Additionally, I have notes on paid for. www.amazon.com. Or check at your
AMC’s who typically pay only every However, some appraisers have local library.
60-90 days so I know at the time of been paid when they threatened an Nolo Press has two good books on
the request whether or not I can AMC that they were going to do this. Small Claims: Everybody's Guide to
afford to wait that amount of time. Several appraisers mentioned this Small Claims Court, National
Now with the big shortage of in their emails to me, even though Edition and a version of the same
appraisers, AMC's need to know we their state does not allow appraisers book for California. To order, go to
are talking to each other. We are to file the liens. www.nolo.com or call 800-846-9445.
making decisions on accepting or They are also available in some book
declining orders based on many fac- Letterto borrower- advice from an stores.
tors and a big factor for us is timely appraiser
payments. Write a letter to the borrower in
My state does have laws regarding very official language and advise
payment (Illinois), but at this point, them that the lender they use has not
the board said they are not enforcing paid for the appraisal.
the payment issue until sometime this Make it clear that you are not try-
PAGE 8–©Appraisal Today–September 2012
Lender Liability for Unpaid Appraisal Fees
Source: Interview with pay appraisers a violation of Dodd- party, like an AMC, money that must
Frank's customary and reasonable in part be used to pay subcontractors.
Peter Christensen
fee requirement? Paying zero cer- Afew such vendor management con-
www.appraiserlawblog.com
tainly seems like less than C&R.) tracts go so far as to require vendor
managers to segregate funds for sub-
Lenders can be liable for unpaid b. AMC as the Lender's "Agent". contractor payments and then give
appraisal fees, even when it was the Interrelated with the fact that it is the party in the lender's position the
"AMC's job" to pay the appraiser. the lender who, in most appraisal sit- right to audit those funds. Provisions
As a last resort, appraisers can pur- uations, does and must engage an like these give the lender more assur-
sue collection of unpaid fees from appraiser, is the AMC's role as the ance that it won't be left with a bunch
lenders. lender's agent. Per Peter, an AMC is of unpaid, unhappy, unruly subcon-
generally is viewed for legal purpos- tractors and alleviate some of the risk
When considering the potential lia- es as an "agent" of the lender for the that the lender will be forced to pay
bility that a lender may have for purposes of ordering and paying for for services twice (once when the
appraisal fees left unpaid by an appraisals on the lender's behalf. lender pays the AMC who loses the
AMC, Peter says there are two key The legal effect of this conclusion is money, and a second time when the
inter-related legal issues to focus on: that as a matter of general legal prin- lender pays the appraisers).
ciple in most states, when the AMC
The above conclusions about the
a. Lender as "Client" fails to pay an appraiser for an lender's status of being the actual
Both in Terms of USPAPand appraisal done for the lender, it is party who engages/contracts for the
Contract. Assuming the appraisal for the same thing as the lender itself appraiser's services and the AMC
which the appraiser has not been failing to pay the appraiser - and it being the lender's agent for that pur-
paid by the AMC was prepared for doesn't matter if the lender already pose finds support in general princi-
the lender's use, the lender is the paid the AMC and the AMC simply ples of business law without having
appraiser's "client" and the beneficia- didn't pass the money on. In other to resort to any specific appraisal
ry of the appraiser's services. This words, a lender's outsourcing of laws or regulations. However, the
will be true in a USPAP-sense (if the appraisal management functions to conclusions are amply supported by
appraiser correctly has identified the an AMC generally (this will depend laws and regulations governing
lender as the client on the report) and some on state law) will not "out- appraisals - and these laws and regu-
also, and more importantly for poten- source" the lender's liability for pay- lations can serve as background sup-
tial fee liability purposes, in a gener- ing the appraiser for the appraisal. porting appraisers' demands for pay-
al legal sense. The AMC's function So again, the lender remains liable ment of unpaid appraisal fees.
was to engage the appraiser on for the unpaid appraisals fees.
behalf of the lender to perform the Most lenders are quite aware of Here are some examples:
appraisal. So, whether the lender is the above issues as they relate to
hiring or "engaging" that appraiser appraisal ordering and potential lia- 1. The Federal Interagency
directly or doing it through an AMC, bility for unpaid fees. That is why in Appraisal and Evaluation
it is still the lender itself who is some contracts between lenders and Guidelines
engaging the appraiser's services and AMCs, the lenders will impose (http://www.fdic.gov/news/news/fina
who is thus ultimately responsible requirements on the AMC spelling ncial/2010/fil10082a.pdf)
for payment to the appraiser. (As a out that the AMC must pay appraiser state: "An institution or its agent
parallel to the lender's liability for subcontractors who perform must directly select and engage
unpaid fees, there is the fact that a appraisals or other subcontractors appraisers. The only exception to this
lender also cannot avoid liability for within a certain time period - e.g., requirement is that the Agencies'
appraiser independence or customary within 20 or 30 days of the AMC's appraisal regulations allow an institu-
and reasonable fee issues under receipt of the appraiser's report. tion to use an appraisal prepared for
Dodd-Frank merely by hiring an This is a very common type of another financial services institution
AMC or someone else to handle requirement in any kind of vendor provided certain conditions are met."
appraisal ordering functions - which management contract where one Appendix D of the Guidelines then
leads to the question: "Is failure to party, like a lender, is paying another goes on to address what an agent is
September 2012–©Appraisal Today–PAGE 9
and offers the following: 3. Additional support forthe will likely mean the end of any rela-
"Agent - The Agencies' appraisal conclusions can be found in many tionship with the AMC. Peter also
regulations do not specifically define state AMC lawswhich typically advises that before taking drastic
the term 'agent.' However, the term is define AMCs or appraisal manage- action like pursuing payment direct-
generally intended to refer to one ment as involving a lender/client ly from the lender or filing any kind
who undertakes to transact business "authorizing" the AMC to contract of court action, the appraiser should
or to manage business affairs for for the performance of appraisals by do a careful self-assessment. Read
another." panel appraisers on behalf of the the contractor agreement with the
That appendix also clarifies that lender/client. AMC. What does it say about pay-
the client is the party who engages ment? Did you agree in the contrac-
the appraiser "by employment or So how is all of this relevant to tor agreement that your only source
contract" and that it is the lender who appraisers trying to collect unpaid of payment would be the AMC? Is
is the client: appraisal fees? the appraisal itself up to par? Was
"Client - According to USPAP, the there a legitimate reason for the
party or parties who engage(s) an When the appraiser has reached the AMC not to pay? Did you fulfill
appraiser by employment or contract end of trying to collect from the the scope of work promised? Was
for a specific appraisal assignment. AMC itself, and has perhaps tried to the appraisal rejected based on quali-
For the purposes of these Guidelines, collect on the bond (if there is one), ty problems? Has the lender suf-
the appraiser should be aware that the appraiser might then pull the rip fered some kind of loss on the prop-
the client is the regulated institution." cord on a demand letter to the lender erty already which might result in
(Appropriately, the Guidelines also for payment. Ademand letter seek- the lender suing you for negligence?
advise that a lender "should use cau- ing those fees can intersperse some These kinds of issues need to be
tion if it engages a third party to of the above grounds for why it is the considered before any appraiser
administer any part of its appraisal lender's obligation to pay, even if the takes an aggressive collection stand -
and evaluation function.") lender is saying "we already paid the otherwise, the result may be a law-
AMC." Now, if the lender didn't pay suit or counterclaim against the
2. The FDIC's appraisal regula- the AMC either, of course, that's appraiser.
tions implementing FIRREAfor going to make the appraiser's collec-
federally-related transactions also tion case that much stronger.
make clear the lender's and AMC's Sending a demand to the lender's
positions. Section 323.5 of those legal and appraisal departments,
regulations (link) confirms that if a copied to the AMC, should probably
lender is using a fee appraiser (as be the tool of last resort but it's defi-
opposed to an in-house staff apprais- nitely a powerful one. If an AMC
er), it is the lender or its "agent" who wants to stay in business, it needs to
must engage the appraiser on the have the lender's confidence in the its
lender's behalf. This is what that sec- financial responsibility, and lenders
tion says: lose faith quickly in a vendor when
"(b) Fee appraisers. (1) If an they are hearing that the vendor is
appraisal is prepared by a fee not paying subcontractors. They also
appraiser, the appraiser shall be don't like the hassle of demands from
engaged directly by the regulated unpaid subcontractors - getting away
institution or its agent, and have no from those hassles is one part of why
direct or indirect interest, financial they use vendor managers. So, if the
or otherwise, in the property or AMC is still in business, the demand
transaction." to the lender may very well cause
prompt payment from the AMC. If
not, the appraiser can keep pressing
the lender to pay directly or even file
a collection action.
As always with these kinds of
more drastic actions, the appraiser
needs to recognize that the actions
PAGE 10–©Appraisal Today–September 2012