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NAR Calls for Ban on AMC Indemnification Clauses

On August 11, 2011, National Association of REALTORS® (NAR) President Ron Phipps sent a letter to federal regulators calling for a ban on the use of indemnification clauses used by appraisal management companies (AMCs). The letter was sent to Federal Financial Institutions Examination Council (FFIEC), the US Department of Housing and Urban Development, the Federal Housing Finance Agency, and the US Department of Veterans Affairs.

Indemnification clauses are becoming more common in service contracts used to engage AMC panel appraisers. In many cases, appraisers are asked to sign contracts that include language to indemnify and hold harmless the AMC against any suit, threat, or claim on any work product or service provided as part of the contract agreement. In some instances, the appraiser is even required to indemnify the lender and the AMC for amounts equal to their costs in repurchasing a mortgage loan, regardless of any proof of culpability on the part of the appraiser. The AMC is free from any legal obligation and the appraiser bears all responsibility.

NAR strongly supports the independence of appraisers and the appraisal process. The use of indemnification clauses places pressure on the appraiser, compromises their independence, and has a negative effect on the quality of appraisal reports. This adds risk for both consumers and lenders while diminishing much needed public trust in the appraisal profession.

Comments
  1. Dan Wilson

    When NAR speaks, alot of prople hear. All appraiser should considered joining their State Association of Realtors Appraisal Section or Committee. They do make a difference, but the Appraisal Section needs your support and help.

    GET INVOLVED.

  2. Matthew Gloege

    I’m looking to “categories” on the right of this email window and do not see a link to the National Association of Independent Fee Appraisers (NAIFA). What happened? If the feds have seen fit to acknowledge that the NAIFA holds a prominent position on The Appraisal Foundation (TAF) one would think NAR would at least provide a link to their website. Additionally you might acknowledge the American Society of Appraisers (ASA) and the American Society of Farm Managers and Rural Appraisers (ASFRMA) as well. If TAVMA and AMC’s have a place in NAR’s recommended links I would think there would be a place for the NAIFA. I have been a Realtor for 38 years (BOD – local board) and a NAIFA member for 12 years. Our chapter in Portland Oregon alone has in its membership nearly 10% of the Appraisers in the State of Oregon including that of the State ACLB Administrator. I would hope such a glaring omission would not be taken as a slight.

    Matt Gloege,

    State Certified Residential Appraiser, Oregon CR00353
    Principal Broker, Family Homes of Oregon, Realtors

    Family Homes of Oregon Real Estate Services
    824 Taylor St.
    Oregon City, OR 97045

    Ph: 503 655-5716 Fax: 503 557-0253

  3. GW Cornelius

    I am a state certified general apprasier and member of NAR. I am glad they finally are getting a clue as to what is happening in the appraisal industry. Their input will be a help to our cause for independence and the ability to do appraisals without undue pressures. Thank you NAR.

  4. Paul

    “The AMC is free from any legal obligation and the appraiser bears all responsibility.”

    I don’t see anything wrong with this. If the appraiser is incompetent, inept, commits fraud, etc. then why should the AMC bear any responsibility? Appraisers are 50% of the cause of this financial meltdown and appraisers are afraid to put their money where their mouth is.

    It is called “skin in the game”, get used to it. If you are going to tell an investor that a home is worth $200,000 then you better stand behind it. You appraisers have gotten away with the biggest collapse of the US economy and take no accountability and I am starting to get sick of hearing you all whine.

    If appraisers would not have “overvalued” every piece of real estate in this country, we wouldn’t be in this financial mess. Appraisers had the power to avoid this disaster and they chose to look the other way. Now they want no culpability, pathetic, absolutely pathetic.

    You appraisers are as spineless as the brokers and bankers that you allowed to twist your arms to overvalue property. Take some responsibility for a change!

  5. When the Appraiser refuses to sign the AMC contract the Appraiser is removed from
    the the”APPROVED APPRAISERS LIST”. As a appraiser based on the information from my Insurance carrier I refuse to sign the AMC contract(s). A lot of the good appraiser are leaving the profession. As a RE license Manging Broker I have notice that the quality of many appraisal reports, the BPOs and AMC are inferior products.
    In the Chicago markets MLS 8006 (Lake View), MLS 8007 (Lincoln Park) MLS 8008
    (Near North Side) the percent ratio of expired listing is 65% – 70%, the sales ratio is 30% -35%. Based on this data, and assuming the above markets had 300 listing. The result would be 90 -105 sales, and 195 -210 expired listings. Based on the data it appears the BPOs and the CMAs values to not refect the above MLS market values.

  6. Jesse

    Paul,

    I am willing to bet that you were one of the first to complain if a deal fell through because of an appraisal.

    The appraisers who refused to bow to the pressures went out of business and/or lost signifacant marketshare to those less ethical or knowledgeable. Unsrupulous bankers and real estate agents strong armed appraisers to do what they demanded or stop getting business.

    I’d like to see you list a house or do financing or whatever it is that you do – and sign a contract that says if something goes wrong…. basically no matter the problem….. YOU will pay for it. And for the legal costs of everyone involved. And the pain and suffering of everyone involved. Out of YOUR pocket. Even if you did your job ok but things went wrong somewhere else. Too bad. You signed the agreement allowing them to not take responsibility for their problems and you volunteered to take it all on yourself. Not to mention you are covering travel for yourself and everyone involved because the jurisdiction is in the home state of the the claimant… 1/2 way across the country. You don’t know the laws there, but what the heck. Sign away.

    Please don’t comment if you have no idea what your talking about.

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