Appraisal Management Contracts

After the HVCC implemented new rules in the middle of 2009

, many appraisers realized they had to work with appraisal management companies they had ignored or avoided before that. Before the rules changed in 2009, appraisers tended to stay away from appraisal management companies, or AMCs, and the bad reputations they had. However, with the change of rules, AMC's quickly became the major source of income for many appraisers.

Since the change, appraisers have seen the rise and fall of a good number of AMCs. However, larger appraisal management companies that have outlasted their competition have the entire process mapped out so that they have the legal documents, such as contracts and the software that helps to keep track of the hundreds of appraisers across the nation.

Just as with any legally binding contract, there are stipulations to watch out for. These stipulations can include clauses that benefit the appraisal management companies and leave the appraiser holding the financial bag. If an appraiser is aware of these stipulations, he or she can protect him or herself and still use the appraisal management companies as a viable source of income.

One of these stipulations would be the indemnity clause, which holds the AMC harmless if a problem arises with any part of the appraisal. This clause makes the appraiser responsible for the problem and financial responsibility for any legal cost suffered by the AMC, as well as any suffered by the appraiser. Many appraisers seeking to offset any legal costs have bought E&O Insurance. This type of insurance is reasonably priced and offers protection for peace of mind. However, E&O Insurance does not cover any form of an indemnity clause. Due to the need for income, many appraisers have agreed to these clauses, some without even reading the contract.

If an appraiser were to get a job from an AMC, the contract is already signed. The appraiser can get the job done in time, providing a professional job, with no mistakes and turn the appraisal in for payment. Once the appraisal is in the hands of the AMC, the appraiser has no control over what happens from there. The appraisal can get lost, or the numbers transferred wrong and the final value changed, and the appraiser is still considered liable. In cases where the client suffers loss, it can result in a lawsuit, which falls squarely on the shoulders of the appraiser. Many appraisers are not financially prepared to cover the cost of such expensive lawsuits. For the appraisers that have E&O Insurance, they have coverage for any mistakes they made, but will be completely responsible for any fees incurred by the appraisal management company.

The best form of protection an appraiser has is knowledge. Since word of the indemnity clause has circulated, a great number of appraisal management companies have changed the contract to make it more fair for the appraiser. If an appraiser is careful, he or she can work with the AMCs to utilize their services for a very comfortable income.

by: Ann Williams

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