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Proposed California AMC Legislation - SB 237

by Administrator on Mar 28, 2009 General Appraisal 1255 Views

While I'm not a fan of government regulation, SB 237 introduced by Senator Calderon in the California Senate appears to be a move in the right direction for the appraisal industry.  The Bill would require appraisal management companies or AMCs "to register with the Office of Real Estate Appraisers, and would subject those entities to the provisions of the Real Estate Appraisers’ Licensing and Certification Law." 

Appraisal management companies or AMC's have effectively become a substitute
"third-party" in the appraisal ordering process.  Many financial institutions have started using AMC's in an attempt to distance themselves from being accused of appraiser influence.  Unregulated AMC's could, however, become involved in any number of acts that could influence appraisers or bias appraisal results.  In my opinion, AMC's should be held to a high standard, and they should be willing to take responsibility for their actions.

I have seen a number of criminal suits filed against appraisers over the last several years for their involvement fabricating appraisal results.  At the same time I have heard of relatively few criminal suits filed against bank officers, their owned appraisal management firms and the government agencies who worked hard to get the results that they wanted from appraisers.  It is appropriate that AMC's are regulated like appraisers and not left to their own devices. 

The proposed Bill discusses a number of important issues.  It does not allow the threat or actual withholding of payments from appraisers, the threat or actual withholding of business from appraisers.  It does not allow promises of future business, promises of increased compensation, conditioning appraisal request based on a value conclusion or AMC's accepting payments for preferential treatment. 

There are, however, other ways for AMC's to subvert the system that have not been addressed in the California Bill.  Specifically, there is no provision in the proposed law that talks about preferential appraisal assignments.  It is not difficult for an AMC to begin to favor an appraiser or firm not because they are getting paid by them, or because they provide superior service, but because they are consistently requested by a financial institution or because they consistently bring in higher values.  If the proposed law does not address random assignment, then I would expect that you will see AMC's fall into the same hole that many Bank-owned appraisal management firms did. 

I would like to see a federal regulation like the one proposed in the California Senate.  An AMC regulation like the one proposed makes more sense to me at the federal level, but at least moves by individual states like this one in California will improve the current situation.

For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.   

Article source: http://www.appraisalarticles.com/General-Appraisal-Articles/586-Proposed-California-AMC-Legislation-SB-237.html

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