Friday, December 31, 2010

AMC Surety Bonds

Update: more current information about AMC bonds is in a newer post here.  
LIA Administrators & Insurance Services is qualified to sell all types of licensing and surety bonds in all 50 states.  Appraisal management companies, and even some true appraisal firms ensnared by AMC regulation, are currently required to carry surety bonds in eight of the 20 states that have enacted AMC registration laws as of this date.  The following states require AMCs to have bonds:

  • Arizona ($20,000)
  • Arkansas ($20,000)
  • Georgia ($20,000)
  • Missouri ($20,000)
  • New Mexico ($25,000)
  • Oregon ($25,000)
  • Tennessee ($20,000 7/1/11)
  • Washington ($25,000 1/1/12)

What’s the purpose of an AMC's surety bond? The surety bond is essentially a financial guaranty by the surety company -- the insurance company -- that it will pay amounts owed by the AMC stemming from obligations under a state’s AMC law, but only up to the total amount of the bond.  In most states, an AMC surety bond provides that protection to both the state and to consumers – this means, for example, that if a consumer can show that an AMC’s violation of one of its statutory obligations caused the consumer a monetary loss, the consumer can potentially make a claim against the AMC’s bond.  If the AMC doesn’t pay what is adjudged to be due to the consumer, then the surety company must pay it, up to the amount of the bond.  In a few states, individual appraisers may even be able to make claims against an AMC's bond for issues such as improper panel management or unpaid fees (on the other hand, several states' AMC laws expressly exclude unpaid fees as being covered by the bond).

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Tuesday, December 28, 2010

Violating CoStar's Terms of Use and Copyrights Results in $803,280 Judgment Against Appraiser (and Some Broader Lessons for All)

Many commercial real estate appraisers are familiar with CoStar Realty Information.  It's an expensive source of commercial real estate sales, lease and property data.  Like many sources of such data these days, CoStar's information is sold and accessed via an internet-based subscription service using IDs and passwords, and access to the service is granted pursuant to terms of use that are agreed to online.  As is the case with many of these types of agreements (and I'd put AMC contractor agreements in this category), many people don't read the terms or sometimes just don't understand them.  Most people just click through the terms when signing up without giving them much attention.  Here's an obvious piece of advice: "I didn't read the agreement" -- whether it's in paper or online -- is usually not a good defense, especially in the context of a commercial service that costs hundreds or thousands of dollars per month.  In any event, even if people don't read the terms, most people do understand that using a loaned password or giving a third party access to a password for an expensive subscription service is wrong.  And, in this particular case CoStar Realty Information, Inc. v. Mark Field d/b/a Alliance Valuation Group, et al., a federal court came to the same conclusion last week and awarded damages of more than $800,000 against a commercial appraiser who both used CoStar data without proper permission and provided CoStar passwords to other parties, again without  permission.

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Are You Thinking About Suing A Real Estate Appraiser?

"Can I sue an appraiser?" "Should I sue the appraiser?"  As a lawyer working exclusively in the field of valuation liability and regulation, I've seen hundreds of cases filed against real estate appraisers by borrowers and property owners, variously claiming that an appraisal for a loan was either too high or too low or made some other kind of error.  Borrowers and other parties thinking about suing an appraiser should know the following:

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Tuesday, December 21, 2010

11 Predictions for AMC Liability Risks in 2011

We are looking forward to another challenging year in the business of insuring and defending claims in the appraisal industry.  Based on recently filed cases, threatened litigation and emerging issues, these are LIA Administrators & Insurance Services' predictions for the biggest liability risks that we expect for appraisal management companies in 2011:

  1. Several AMCs will be sued by the FDIC.  Hundreds of appraisers are currently involved in lawsuits or threatened with litigation by the FDIC relating to appraisals performed for failed lenders, principally for loans made from 2005 to early 2008.  Attorneys for the FDIC are presently evaluating claims against AMCs which delivered appraisals during that time period.  This threat will last well beyond 2011 because, under federal law per the FDIC's interpretation, the statutes of limitation for its claims as receiver of a failed financial institution are extended by 3 years for tort claims and 6 years for contract claims, running from the date of its appointment as receiver.

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