Editor's Pick: One Appraiser's Solution to Getting Paid by Isaac Peck, Associate Editor
Here is one answer to “show me the money.”
The practice of appraisal management companies
(AMCs) slow paying appraisers or not paying at all continues to be a problem for
the industry- to the tune of millions of dollars in unpaid invoices as a result
of recent bankruptcies of three prominent AMCs. As
a result, appraisers are looking for ways to protect themselves and their
One appraiser has a solution that has worked for 20 years: she combines
commonsense screening techniques, before taking on a client, along with the
imposition of liens against deadbeat payers.
Property Liens Shelli Jones, an appraiser in Indiana, has been
appraising 20 years and says that she has only lost $50 to non-payment issues.
“When I bring on an AMC, they sign my agreement which lays out all my terms,
including payment items,” says Jones.
Jones says that in the aftershock of the HVCC, she
ran into payment issues for the first time when her lender clients began to hire
AMCs that failed to pay in a timely manner.In each case, Jones says she fought back with
liens on the properties she appraised.
“Like many appraisers, I ran into payment issues
with some notable AMCs who were slow to pay, or simply refused to pay for
appraisals that I delivered. I
would give them 30 days after I delivered the appraisal to pay my invoice and
then I would email them notification that a lien would be placed on the
homeowner’s property that was appraised,” Jones said. “I
also sent notification to the homeowner stating that because their lender hired
a company to handle the appraisal on their property and the appraiser fee was
not paid, a lien would be placed on their property for the amount of the fee
plus any late fees and filing fees.I gave them all 30 days to respond.”
Jones says the threat of a
lien wasn’t always enough to get paid, however. “Several times I actually had to
file the lien.I sent a certified letter letting them know
that a lien was filed with the county courthouse and that it would not be lifted
until my fee was paid, plus an extra 10 percent every 30 days for late fees,”
cases, the person who pays for the appraisal sometimes isn’t even the AMC.“When I would file a property lien, twice the
homeowner paid me, and a few times the lender paid me.One time only, did the AMC ever pay me,”
According to Jones, one lender that she was working
for wasn’t aware of the AMC non-payment issue and promptly demanded that the AMC
pay upon receipt of the lien warning.“Apparently, the lender wasn’t from this area
and they contacted the company to take care of it.They had no idea this was the kind of company
they were dealing with,” Jones says. Jones says she feels for the homeowners and that the
fact that she has to file these liens at all highlights the problems of AMCs who
think they can pay appraisers whenever they want. “What’s bad is that the
homeowner’s have paid for the appraisal; the lender collects that fee and I
think the lender ought to be responsible for who they hire.It’s a major problem. The homeowners are
usually livid, since they had to pay all those fees to the lender upfront,” says
Jones explains that in her state of
Indiana, it is very simple for an appraiser to file a lien on a property. “You
go to the county courthouse and you file something similar to a mechanic’s lien.
They can actually put a lien on your home.So if it is ever sold or refinanced the lien
would have to be settled,” Jones says.
Jones’s approach is not an option for all
appraisers, as the laws vary by state. “It’s allowed in my state, but it’d have
to be something that appraisers check on in their own state.In Indiana, they call them a mechanic’s lien.My appraisal service was performed at the
property, so it qualifies,” says Jones.
In her area, Jones sees a pattern of lenders taking
the appraisal ordering division back in-house, after AMCs failed to deliver on
quality or to pay appraisers in a timely manner.“A lot of lenders don’t even use an AMC
anymore.They’ve gone back to having a separate,
in-house person do the ordering.I think the more the lender is going to be
responsible for their actions, the more we’ll see them going back to managing
appraisals in house, but still removed from the influence of loan officers,”
Show Her the
Money- First Jones has refined her techniques even further.
Her current policy is to refuse to submit the appraisal until payment is
received. After her appraisal report is complete, she notifies the AMC or
correspondent lender that it is ready to upload as soon as payment is received.In regards to late payment, Jones says she
refuses to work on that basis.“I don’t think you have to settle for it.They need an appraiser or they wouldn’t have
called you.You can bet your butt that the people at the
AMCs probably get paid every week or two.My theory is that I can sit on my butt and it
won’t cost me any money, but if I start doing work that I don’t get paid for,
then I’m in the hole.No other profession is paid the way we are,
we can’t work for free and we need to stand up for ourselves,” says Jones.
Jones admits that working in a rural area, where
good, geographically competent appraisers are hard to come by, has strengthened
her negotiating position but she insists that even appraisers in competitive
markets can’t afford to work for free, nor should they.
Issues: State by State Richard Hagar, SRA cautions appraisers that
property lien law vary by state and can be legally complex, depending on what
state the property and appraiser are located in.“In most states, before you have lien rights,
that property owner must be notified that the appraiser has the right to lien
the property if payment for services is not received. It’s a law to prevent a
type of fraud where anybody can go around placing liens on properties. For
instance, when you go to borrow money from a home, you agree to a lien being
placed on your house,” says Hagar. “In some states, when work is performed on a
property, you may have the right to lien the house, without the owner’s advanced
permission.However, there are legal notification
requirements and lien rights may have to be executed within certain time
Not only are the legal issues complex, but they can
vary widely by state.The fact that mechanic’s liens are most often
used with construction projects also complicates the matter.“The question becomes who has that right to
file that lien. In Washington, for instance, if you are building a new house you
could put a lien on it for the delivery of concrete.With new construction, if I provide an
appraisal to get a construction loan then I have rendered services at the
property just like a tradesman.But if it’s a 20 year old house do I have
that same right?” Hagar says it is not always clear.
Hagar says that his company
has actually filed a lien on a property that was appraised but the appraisal
never paid for.The result was that his company was paid in
full because the property lien prevented the lender from placing their own
“primary” lien on the property, which they needed for lending purposes.“The lien my company put on the property
really messed up the bank’s ability to place their own lien on the property.Because my company recorded this mechanic’s
lien, it had to be paid off, otherwise the bank would be in second position,
which is not a position banks want to be in,” says Hagar.
“So appraisers shouldn’t run out and file liens
until they understand their state laws or hire a good attorney who has
experience with lien rights.This is a nice tool for forcing payment from
poorly run lenders and AMCs.But better yet, find a good client (lender or
AMC) who actually pays on time and do not allow your receivables to become more
than 45 days old,” says Hagar.
Thursday's Webinar:Surviving AMCs: Get Paid and Protect Yourself
About the Author
Isaac Peck is the Associate Editor of Working RE Magazine and Marketing
OREP.org, a leading provider of E&O Insurance
for appraisers, inspectors, and other real estate professionals in 49 states. He
received his Bachelors in Business Management at San Diego State University. He
can be contacted at
Isaac@orep.org or (888) 347-5273.
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