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Published by OREP, E&O Insurance Experts | Dec. 7, 2011 | Vol. 238

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According to Chitwood, the argument that a client must pay when an AMC does not is pretty clear under FIRREA and Supplemental Standards.

Success Collecting AMC Debt from Lender
By David Brauner, Editor

One appraisal company at least has collected monies owed by the now defunct appraisal management company (AMC) AppraiserLoft. How did they do it? They did it by citing chapter and verse of FIRREA.

C. Brent Chitwood, office administrator for Phoenix Real Estate Appraisal in Irmo, South Carolina, says he was able to get a mortgage company to reimburse his appraisal firm for monies unpaid by AppraiserLoft after pointing out that FIRREA requires contracts be with licensed real estate appraisers.

FIRREA, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, targets appraisal reform and includes the establishment of appraiser licensing.    

“Initially, the mortgage company told us they would not reimburse us because they had paid AppraiserLoft for the appraisal and that our contract was with AppraiserLoft, not with them. Therefore, they said they were not liable for payment,” Chitwood says. “Our attorney confirmed, however, what we believed. That according to FIRREA, the contract must be with a licensed real estate appraiser and AppaiserLoft is not such an entity.”

According to Chitwood, the argument that a client must pay when an AMC does not is pretty clear under FIRREA and Supplemental Standards.

This is from the correspondence Chitwood sent to the mortgage company: “The issue of responsibility for payment appears to be in question. We are providing you with our research to assist you in understanding our position in this matter and the legal precedence that we will use to pursue collection.

(1) You are required under FDIC Rules and Regulations Minimum Appraisal Standards 323.4 to use a State Licensed Appraiser for this loan.

(2) As state licensed appraisers we are required to identify the client and the intended user by USPAP, the Uniform Standards of Professional Appraisal Practice. This was done by obtaining that information from your agent. The client (you) is documented in the client section of the appraisal that is part of your files.

(3) You are required by law and rule to contract with a state licensed appraiser either directly or through an agent. See 323.5 (b). You may not contract with a party that is not a state licensed appraiser or its DBA. So AppraiserLoft, a regulated AMC, is either your agent or you have violated this provision.

(4) According to The Appraisal Foundation, USPAP Client Issue #93, payment by a party other than the client: the act of the borrower or any other entity paying the appraiser does not make them the client under USPAP. Therefore your position that payment from the borrower to your agent somehow changes the Vendor/Client relationship is refuted.

(5) The transaction took place between Phoenix Real Estate & Appraisal, Inc. as the appraiser legal entity and xxxx Mortgage as the client. AppraiserLoft acted as your agent to order, review and assure compliance with your specific requirements.

(6) You received our product and utilized it to conduct your lending business. You received an invoice stating our (the Vendor) name and address, Your (the Client) name and address, a description of the product, and the amount due. An Invoice is a legal demand for payment.”

After hearing the argument, the mortgage company promptly paid Phoenix the monies owed ($300). “It worked for us and I’d like to see it work for the whole bunch of others who lost money working for AppraiserLoft,” Chitwood says.

Click here to read about another appraiser who isn't taking no for an answer when it comes to fees owed.

Click here for FIRREA Sections 323.4 & 323.5.

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 16 years. He can be contacted at or (888) 347-5273. Calif. Insurance Lic. #0C89873.  

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