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Coester AMC Out of Business, Appraisers Unpaid
By Isaac Peck, Editor
Coester VMS (Coester), one of the largest appraisal management companies nationwide, has gone out of business. The company’s Google Maps listing shows it as permanently closed, its website has been taken down and HousingWire even posted a screenshot from Facebook showing the office furniture being sold off as part of an “office relocation.”
The company’s demise was swift. Its financial difficulties began in Fall 2018, with appraisers reporting that they had not been paid for their appraisals performed in the early summer. Then in November 2018, a letter began circulating that FVC Bank, one of Coester’s creditors, had frozen the company’s $700,000 line of credit. The barely legible letter posted around social media also suggests that FVC Bank had a contractual right to Coester’s accounts receivables, which would mean that even if the bank paid Coester for the appraisals being performed, appraisers who continued working for Coester would not be first in line to get paid.
From statements made by Brian Coester, the company’s founder and Chief Executive Officer in an interview with HousingWire in late November, FVC Bank appears to have sent this letter to all of the company’s clients, notifying them of the Bank’s claim on Coester’s accounts receivables as well as to Coester’s frozen line of credit, a move which Coester indicated was “a disaster” and which cut the AMC’s business by two-thirds almost immediately.
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Directly after the letter from FVC Bank became public, Coester issued the following statement: “Due to financial difficulties all payments on orders completed prior to 11/15/2018 cannot be paid at this time, our BK [bankruptcy] attorneys will be in contact with all creditors. Coester can guarantee payment next day on all orders completed on or after 11/16/2018. We apologize for any inconvenience.”
In the days that followed, Dave Towne, an appraiser from Washington, asked his readers the following via his email newsletter: “Does it make any logical sense to continue to do business with a company who cannot pay prior appraisal fees but promises to pay current fees the ‘next day?’”
During this time, Coester kept in close contact with the press, attempting to put a positive spin on his company’s troubles, telling HousingWire: “We are not out of business” and “we’re getting back to normal,” while also telling Valuation Review, “It’s business as usual here” and “you can work with us with confidence” as recently as early December 2018.
Contrary to these positive statements, things did not get better for Coester. Many appraisers on social media and online forums reported refusing to work for the company, and with Coester having lost two-thirds of its clients overnight due to FVC Bank contacting them, the writing was on the wall.
Appraisers who had worked for Coester quickly turned to filing claims against the AMC’s state surety bonds, desperate to get paid after waiting months. Thankfully for appraisers, many states now require AMCs to carry a surety bond as a condition of licensing, to pay appraiser creditors in the event of insolvency. This is a result of several AMCs going bankrupt in previous years with millions in unpaid appraisal fees due. Coester held such bonds in several states, but the bonds were quickly exhausted. In general, such bonds work on a first-come, first-serve basis, meaning that the appraisers who file first are the ones to be paid.
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Coester was a controversial figure in the appraisal industry, drawing ire and criticism from appraisers for, among other things, suing the Virginia Appraisal Board and for tweeting in 2013: “We pay the least and get the least qualified appraisers.”
Coester also was involved in a variety of other lawsuits in recent years, with Robert Scheer suing him for tortuous interference after Coester attempted to uphold an allegedly non-existent non-compete agreement with Scheer- when Scheer left Coester VMS and sought employment with a competitor AMC. Within the various briefs filed between Scheer and Coester was the allegation that Coester provided “fraudulent profit and loss statements to banks and lenders, committed fraud with regard to his personal taxes, and misused corporate funds.” Included in Scheer’s lawsuit against Coester was an allegation that Coester had set up an account called “BC OWES” that kept track of money Coester owed to Coester VMS, the corporate entity, in an amount exceeding $400,000. Mr. Coester denied these allegations
One type of behavior seen in past AMC bankruptcies is the executive management taking high salaries even as the AMC tips into bankruptcy and appraisers go unpaid. This was seen first with AppraisalLoft, a now defunct AMC from San Diego that left over $3 million in unpaid appraisal fees, and Evaluation Solutions/ES Appraisal Services, a large AMC that serviced Chase Bank before going bankrupt with over $11 million in unpaid appraisal, BPO and evaluation fees. In each of these highly publicized cases, the owners were taking salaries of $200,000, $250,000, $400,000, or more leading up to the AMCs’ bankruptcies.
While there is currently no public information regarding how many appraisers were left unpaid by Coester, nor the total dollar amount of unpaid appraiser fees being left behind, dozens of appraisers have taken to social media to report being out thousands of dollars. Some appraisers are posting on GlassDoor.com, a job listing and review site, with one indicating that they are owed $1,800 in appraisal fees.
As far as collecting unpaid fees, by now some appraisers are experts at it. The easiest way to collect an unpaid appraisal fee is to file a claim against an AMC’s surety bond in civil court, if the AMC has a surety bond in your state. With that option exhausted, many appraisers have found success going directly to the lender and explaining that the AMC was an agent of the lender, and consequently, the lender is still responsible for paying the appraiser under federal law (in many cases). Some appraisers have taken unresponsive lenders to small claims court and won. Still other appraisers have filed liens on properties they have appraised where their appraisal fees went unpaid. Much depends on the state laws of the appraiser in question, and how diligently the appraiser wants to pursue the lender and/or homeowner with lawsuits, liens, and regulatory complaints.
About the Author
Isaac Peck is the Editor of Working RE magazine and the Director of Marketing at OREP, a leading provider of E&O insurance for home inspectors, appraisers, and other real estate professionals in all 50 states and D.C. He received his master’s degree in accounting at San Diego State University. He can be contacted at email@example.com or (888) 347-5273.
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by Michael Ford, AGA, SCGREA, GAA, RAA, Realtor®
Coester had a reputation as a bad actor even before he sued VREAB. He was operating without a license in Virginia and that states AG chose to ignore it! (Wonder what would happen if all Virginia appraisers owed money sued that state for knowingly failing to enforce state AMC licensing laws?
ALL banks and other lenders that hired Coester VMS have an equal hand in the unpaid fees. IF ASC is correct and they see no air between an AMC and its hiring client, then those banks owe folks a lot of money. Congrats to those that recognized it and stepped up. As for the others, many of them are being separately sued by Pennsylvania for other frauds. Why is that no surprise?
“Coester was a controversial figure in the appraisal industry, drawing ire and criticism from appraisers for, among other things, suing the Virginia Appraisal Board and for tweeting in 2013: “We pay the least and get the least qualified appraisers.”
ALL lenders that continued to do business with Coester VMS after the above post should have every single loan originated that was appraised through Coester VMS audited-without exception.-
by Robert M. La Fond, IFAS
Over the many years (50+) that I have been an appraiser, I have seen many of my best appraisal organizations go out of business due directly to the AMC requirements. My own daughter lost her mortgage company and her as a direct result. I do not work with any AMCs and many of my fellow appraisers say the same. I would be willing to testify about this unfortunate result of government intervention to anyone who might have an interest in getting rid of this mess.-
by Crispin Bennett
A few things here with the article. First of all, I hate to see ANY American-based business go out, whether it is a restaurant, an appraisal office, or an AMC. If you research, the demise was over quite some time, not swift at all. There was plenty of warning in the media. One would have had to ignore the signs with eyes wide open.
As for the Surety Bonds, I recently held a webinar on this subject of getting paid in such a case, specifically because of the misunderstanding that appraisers have with them. There is a great deal of false security with these bonds. Many states bonds do not cover paying appraisers at all, while others will, but only after all state fees and penalties are paid… if any money is left. There are many things that need to be understood and considered in order to be paid in the unfortunate demise of an AMC. Filing claims against the property can have unintended consequences, even in states where it is legal.
My hope is that ALL appraisers are compensated completely.-
by JERRY A ALLEGRO
SO TYPICAL – I HAVE BEEN COMPLAINING FOR YEARS. – NOTHING HAPPENS NO ONE WILL LISTEN FROM THE GOVERNOR TO THE TALCB.- BEEN 28 MONTHS FILING WITH THE STATE OF TEXAS ON A FRAUDULENT AMC- CONSOLIDATED LENDERS RESOURCE- ADAM BELL (ALSO AN APPRAISER)- THEY TREAT ME LIKE CRAP. HES A FAILED POLITICIAN AND THEY CATER ONLY TO THE AMC. THEY KNOW DEAD TO RIGHTS HES CROOKED BUT ALLOW HIM TO BE LICENSED FOR A TITLE COMPANY ALSO. HE BURNED ME FOR ALMOST $10,000++AFTER HE SUED A MORTGAGE COMPANY IN FEDERAL COURT AND HE GOT PAID. STATE OF TEXAS WILL NOT PROSECUTE (THEY HAVE NO POWER IS THEIR EXCUSE) THEY PERSECUTE APPRAISERS AND REALTORS – BUT WILL NOT ACT WHEN DEADBEAT CROOKS LIKE THIS ARE CAUGHT DEAD TO RIGHTS BECAUSE THEY DONT WANT EGG ON THEIR FACE, THEY DONT GIVE A CRAP ABOUT WHETHER WE SURVIVE OR NOT. NO SURETY, NO SECURITY, JUST SCREW THE APPRAISER AND DONT CALL US. THE TALCB LEADER IS A JOKE AS WELL AS THE ENTIRE REAL ESTATE COMMISSION. POLITICAL HACKS AND TWO SETS OF RULES. ONE FOR US TO BE SCREWED BY AND THE OTHER TO BE WHITEWASHED. SCREW THIS INDUSTRY- CANT WAIT TO RETIRE.-
AMC’s are the worst thing that has ever happened to the residential appraisal industry. Totally unnecessary and they just suck money out of the pockets of appraisers. The Institute signed off on AMC’s. Thanks a lot for not watching out for the appraisal industry and letting weasels like this get their claws into our profession.-
I agree. Where is the AI ?? I wonder if they realize their existence-
rests on appraiser’s making a living wage?
Issac excellent article, to bad appraisers didn’t learn from the ES debacle, I did. Really sad what is happening to our profession and in spite of these companies going out of business owning appraisers millions of dollars, we are still forced to work with AMC’s.-