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Published by OREP, E&O Insurance Experts | April 10, 2013 | Vol. 275

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Kentucky is the first state to create a fund intended to reimburse appraisers who have suffered financial harm by AMCs.

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Editor’s Note: Here are details on a new "recovery" fund designed for appraisers who are owed money by bankrupt AMCs. 

AMC "Recovery Fund" for Appraisers First of Its Kind
by David Brauner, Editor

More than one appraisal management company (AMC) has shuttered its doors owing millions of dollars to appraisers in unpaid fees- now one state is trying to do something about it by establishing a “recovery” fund to reimburse appraisers. Here’s how the fund works.

Kentucky is the first state to create a fund intended to reimburse appraisers who have suffered financial harm by AMCs.  According to Larry Disney, Executive Director of the Kentucky Real Estate Appraisers Board (KREAB), the new recovery fund is fair to all concerned- borrower, lender, appraiser and AMC.

House Bill 120 was signed into law by Kentucky Governor Steve Beshear last month. The fund is underwritten by an $800 per year surcharge on each AMC registered in the state. It has a cap of $300,000 that will be replenished if funds become depleted.

According to Disney, the bill requires the following conditions be met before an appraiser can request past due payment(s):

1.       The AMC must cease to be registered in Kentucky either voluntarily or involuntarily;

2.       The appraiser must receive a final judgment in a court of competent jurisdiction within the Commonwealth; and

3.       If no viable alternative for full restitution is available, as determined by the Board.     

According to Disney, if each of the above tests are met, the amount paid to the appraiser shall equal the actual amount of appraisal fees that are proven to be owed to the appraiser by the AMC, plus all reasonable and appropriate court costs associated with determining the final judgment. 



Consumer Protection
According to Disney, KREAB believes the recovery fund will assist in consumer protection.  Kentucky loan applicants pay lenders for a real property appraisal assignment in order to secure real property loans; lenders pay a third party AMC for managing the appraisal process; the Kentucky-registered AMC serves as the agent for the lender by selecting the appraiser and negotiating other contract terms; the appraiser completes the appraisal assignment and distributes a completed appraisal report and invoice via the AMC requirements.  Although the appraisal fee has been paid and distributed, the appraiser is left with attempting to collect the fee for the services performed under contract with a third party. “Therefore, it is the opinion of KREAB that the recovery fund provides an equitable and fair forum for due process for collecting fees that are rightfully owed to an appraiser, paid by a borrower, submitted by a lender to a third party,” Disney said.

What it Doesn’t Do
The recovery fund does not address instances of an AMC failing to pay for an appraisal that is prepared competently and ethically, in compliance with USPAP, or because of excessive turn time.  Those problems are addressed by administrative state regulations set by the Board, Disney says.

Was the bill tough to get support for passage?  “I will not say harder than any bill that passed the session, but I will say it took a lot of consistent and constant work, talking to legislators, making them aware of the federal requirements, the definitions, and other issues that every state agency faces or will face,” Disney says.  “I credit our success to having a great sponsor in the House and Senate, a strong advocate from the appraiser board members, and the Kentucky Association of Real Estate Appraisers, plus an alliance with all stake holders that we could find that might be impacted. We made sure these groups were aware of everything we were doing.”

“I want to give special thanks to Marvin Dever of the Kentucky Association of Real Estate Appraisers and Don Kelly, Executive Director of the Real Estate Valuation Advocacy Association (REVAA), for help in getting the bill language drafted and passed,” Disney said.

Find the bill at; Sidebar Information (left column).

Related stories (visit
- AMC Fails: Appraisers Stiffed Again (Current Issue)
- Success Collecting AMC Debt from Lender (Library, Volume 29)
- AMC Bad Debt - Lender Responsible? (Library, Volume 29)
- Lender paying Appraisers Stiffed by AppraisalLoft (Didn't Make It to Print)
- Wells Fargo Paying JVI Bad Debt (Didn't Make It to Print)

Richard Hagar's webinar Surviving AMCs: Get Paid and Protect Yourself, shows you six methods for increasing your chances of getting paid by AMCs and how to get paid when an AMC fails to pay or goes bankrupt. Click here to purchase the webinar which can be viewed at your convenience.

About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states. He has covered the appraisal profession for over 20 years. He can be contacted at or (888) 347-5273. Calif. Insurance Lic. #0C89873.


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