Connecticut

By early 2009 an independent group of residential appraisers proposed a bill they hoped would stop detrimental AMC practices in Connecticut. As chair of Legislative Affairs for the Connecticut Chapter of AI, Ralph Biondi, Biondi and Rosengrant, Waterbury, CT, was called before legislators to testify about AMCs and appraisers’ concerns. “That first bill had troublesome language and never made it out of committee,” he recalls. “We realized we could do better.” “We” included representatives of the state’s AI chapter and associations representing Realtors and homebuilders. In October 2009, their representatives started work on a new proposal, based on AI’s model. They also scheduled meetings with the chair of the legislature’s Insurance and Real Estate Commission, Attorney General, Real Estate Appraisal Commission and Department of Consumer Protection. “Part of our job was to explain what AMCs are, and how HVCC changed the dynamics as one of its unintended consequences,” Biondi says.

A bill proposal was ready for submission in early 2010. Then, lobbyists for the banking and mortgage industries and AMC trade group TAVMA (Title Appraisal and Vendor Management Association) voiced objections. Over the next three months, stakeholders in the proposal negotiated a final version of a bill acceptable to all. “There was a lot of give and take, back and forth,” says Biondi. “The Appraisal Institute draft gave us a good model.”  

In April, their proposal was submitted to the Legislative Commissioners Office for a final vetting to ensure consistency with state statutes and finalize language of the bill. Once all involved signed off on that, the bill was approved by the Insurance and Real Estate Committee and passed in both state houses. Gov. M. Jodi Rell signed it in May 2010, effective the following October. “I now have a much better understanding how the legislative process works,” says Biondi. “We would not have succeeded without a professional lobbyist who could deal with the other groups’ lobbyists and work the bill through the process.”

He considers the bill, as adopted, a win for appraisers on many fronts. “The issue that did not make it is third party liability (hold harmless clauses),” he admits. With that, he sees many important gains: staff requirements include the appointment of a compliance manager licensed or certified in at least one state equal to Connecticut’s certified residential status to handle substantive appraisal review and revision; the fee breakdown between appraiser and AMC, which the banks fought, and defining the process for removal of an appraiser from the AMC roster.

Arizona

By mid-2009 Arizona appraisers were complaining about AMCs but had nowhere to turn. They learned there were no applicable laws on the books, no regulations to protect their interests. Sue Miller, SRA, Miller Pipher, Inc., Phoenix decided to try and change that. That fall, she asked appraisers to join what would become Coalition of Arizona Appraisers (COAA). “We emailed all the appraisers we could find, inviting them to join a non-profit organization specifically so we could make legislative changes on issues affecting us,” she recalls.
 

Once the group registered with the state and IRS, Miller solicited donations to support the effort. When COAA started work on its AMC legislation, it consulted bills already passed in Nevada, Utah, New Mexico and Washington and the AI model. Members reviewed and revised a first draft before final language was approved in September '09. Then, COAA hired a lobbyist to coordinate with the lobbyist for AI’s Phoenix chapter to guide the bill through the legislative process. In December, Senators Jay Tibbshraney and Barbara Leff, and Rep. Michele Reagan, agreed to sponsor the legislation. By then, it also carried endorsements from the Tucson Chapter of AI, Real Estate Appraisers of Southern Arizona, the Phoenix chapter of National Association of Independent Fee Appraisers, and Arizona’s Realtor and mortgage broker associations.

As soon as it was introduced in the legislature, representatives of national AMCs LSI and RELS stepped up to protect their interests. “They fought the bill very hard and fought every issue,” says Miller. “They wanted similar rules for all states and fought to water down the bills.” For several months, the sides haggled toward an acceptable bill. Appraisers’ concerns included educating AMC employees about the Uniform Standards of Professional Appraisal Practice; payment in a timely fashion; ensuring reviewers are geographically competent and that appraisers under contract be familiar with the area. COAA conceded one priority, the hold-harmless clauses AMCs want appraisers to sign. Theirs was the last bill read and passed on the final day of the legislative session in April l 2010. It required AMCs to start registering that July but regulations they will be subject to aren’t due until April 2011. “You need a lobbyist with a good track record and reputation who can open all the right doors and get things done,” Miller advises appraisers in states working on AMC legislation. “Have people at the helm of your group or coalition who are good teachers so they can educate lobbyists and legislators about what we do and why this legislation is so important to our profession.”

Miller expresses “disappointment” two items on the appraisers' want list that didn’t make it into the final bill: full disclosure of financial interests or relationships between AMCs and the financial institutions contracting their services and stipulation that appraisers cannot be required to sign third party liability (hold harmless) agreements. Gains include background checks and disclosure of AMC principals; posting of a surety bond as a requirement of registering with the state and full disclosure to consumers of the fee split between appraisers and AMCs. “We now have that they cannot prohibit the appraiser from disclosing our fee in our reports,” she says.

Washington State

“We started hearing from appraisers about AMCs the summer after HVCC took effect in May of 2009,” recalls Justin Slack, SRA, president of the Appraiser’s Coalition of Washington (ACOW). “They were calling us, the real estate commission and licensing board with complaints about fees, being asked to sign hold harmless agreements, even requests from AMCs for passwords to their forms software.”  That October, representatives of ACOW, its lobbyist, Washington’s Real Estate Appraisal Commission and Department of Financial Institutions, and two AMCs based there— Appraisal Management Services Northwest and American Reports Company— began work on a draft bill. “We wanted the local AMCs involved because we wanted a bill that would be acceptable to all parties,” Slack explains.

In December, Sen. Steve Conway introduced the bill. Representatives of national AMCs soon suggested a counter bill. In response to ACOW’s 17 page legislation, the AMC’s representatives floated a four-page alternative “completely gutting our bill,” according to Slack. “The legislators told us if we wanted something passed in 2010, we had to work together on a new bill, or they would have to take the time to study the issues. That could mean another two or three years before any bill.” From January through March, representatives of all concerned parties worked toward some consensus. Sticking points included fees— “We had to concede no fee language in the bill,” says Slack and demands that AMCs post a $100,000 surety bond when registering with the state. “The representatives of the national AMCs didn’t understand appraisers were concerned about getting paid by some of the smaller AMCs which had cropped up after HVCC,” he notes. As a compromise, they agreed on a $25,000 bond. “They ended up being good partners to work with, very professional and knowledgeable.” he says.           

In March, the revised bill was submitted, approved and signed, taking effect July 1, 2011, with mandatory licensing of AMCs beginning Jan 1, 2012. Work on the rules regulating AMCs is currently underway. “In the end this worked out pretty well,” says Slack. “When we first submitted our draft legislation, the AMCs came out with their guns blazing. It’s a perfect example how, through a process of negotiations and trying to work things out, you can achieve something acceptable for all involved. “It also showed our appraisers how, through a grass roots effort, and working with an effective lobbyist, we can protect our interests and get things done.”

According to Stan Sidor, ACOW president when the legislation passed, its adopted form addresses appraisers’ concerns on several key issues: requiring AMCs to post a bond when registering in Washington; disclosure of appraiser fees in appraisal reports; timely payment and that appraisers cannot be required to sign third party liability agreements. “AMCs (now) have to comply with some of the same USPAP standards as appraisers, such as record-keeping retention standards and use of certified/licensed appraisers who have state geographic and property competence to do reviews,” he says. “Otherwise AMCs are not appraisers and are not otherwise held to USPAP standards; but, they cannot force an appraiser to violate USPAP standards.”

Florida

Florida could have been an early leader in regulating AMCs. In January 2009, draft legislation was drawn up and submitted by a coalition representing several state AI chapters, the National Association of Fee Appraisers and the American Society of Appraisers. But, it failed to attract a sponsor. That setback resulted in the better bill introduced by Rep Matt Hudson and State Sen. Lee Constantine in the legislature’s 2010 session. “We worked to craft a bill focused on protecting the public from some unscrupulous practices, not just protecting appraisers,” says Frank Gregoire, IFA, RAA, and a past chairman of the Florida Real Estate Appraisal Board who helped spearhead the effort. “We started with the Appraisal Institute model legislation and massaged it a bit.”
 

Priorities in Florida included requiring that AMCs abide by the same ethical standards as appraisers; that AMC owners submit to criminal background checks and disclose any prior criminal convictions and that consumers be informed if a company contracting with an AMC has any financial interest in its business. “We were looking for legislation that would guarantee total transparency for all involved,” says Gregoire. While the legislation had merits, it was the active endorsement of the Florida Realtors Association, and the additional push given by its lobbyist, which proved instrumental in winning passage in the 2010 session. “We would not have been able to get this done without the help of the Florida Realtors,” says Joni Herndon, SRA, Real Property Analysis, Tampa, FL who worked with Gregoire on this campaign. “Once they gave their seal of approval, they allowed their lobbyist to work on our behalf. He knew who we should target, which legislators were appraiser or real estate friendly, who understood HVCC.”
 

That’s not to suggest this bill sailed down Easy Street. Proponents had to first convince sponsors why more regulation was needed, then negotiate an acceptable proposal with those protecting the interests of AMCs. “It was a real battle at times,” says Gregoire. And, an enduring battle: even after the bill passed both Florida houses in April 2010, opponents continued to lobby for a veto until Gov. Charlie Crist signed the bill last May 17. “One of the things we had to give up is the effective date agreeing not to implement the bill until July 2011,” says Gregoire. This winter members of the Florida Real Estate Appraisal Board were finalizing regulations the new law requires, including rules to guarantee the security of an appraiser’s signature on appraisal reports.
 

“You have to mount an effort on all fronts,” says Gregoire, outlining the strategy which brought meaningful AMC legislation in Florida. Even then, compromise remains an integral component of the legislative process. Although he relishes the win, Gregoire says he is not entirely pleased with the bill in its adopted form. “If I am disappointed in anything, it’s the fact the legislation is much more complicated than I hoped for,” he says. “In my opinion, the statute regulating real estate brokers, salespersons and real estate companies provided a workable model, and has been tested. My suggestion was to model the appraisal regulations on that so we did not reinvent the wheel. The FREAB (Florida Real Estate Appraisal Board) will have a lot of new ground to cover as a result of the law the legislature passed.”

Nevertheless, the bill brings real gains for appraisers: “The most significant feature of the Florida bill is that the registrant AMC must, at the time of application, file an irrevocable consent that suits and actions may be commenced against the appraisal management company in any county of the state in which a plaintiff having a cause of action or suit against the company resides,” Gregoire points out. “It’s nice to know that AMCs cannot hide just because they happen to be in another county or state.”

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About the Author

David Antoniak is a freelance journalist and author, with special emphasis on real estate, technology and business, based in Dowelltown, TN.