Real estate appraisal management companies in Alaska will have to meet new requirements as of 2019.
With Senate Bill 155
, state legislators introduce a registration process for appraisal management businesses. As part of the procedure, applicants will have to provide an appraisal management company surety bond
. Its purpose is to guarantee the strict following of applicable state laws.
Discussions of the bill started in the beginning of 2018. Governor Bill Walker signed it into law as Chapter 67 of the Alaska State Legislature on July 24, 2018.
If you’re already operating a real estate appraisal management company, or planning to start one, below you can find the essential details from the new law that will affect your activities.
The main stipulations in Senate Bill 155
With the passing of the new legislation, Alaska lawmakers have introduced a registration process for real estate appraisal management businesses. In this way, the state aims to better regulate the industry through a clear procedure for launching an appraisal management company. The goal is to ensure that professionals in the field meet strictly defined standards prior to being allowed to operate in Alaska.
The registration process is handled by the Board of Certified Real Estate Appraisers
at the Alaska Department of Commerce, Community, and Economic Development. It sets a list of requirements that applicants need to fulfill in order to be deemed suitable for getting registered. Among them is posting a surety bond. The maximum amount that appraisal management companies will be required to post is $50,000, with the exact amount being set by the Board.
The purpose of the bond requirement is to guarantee that registered appraisal management companies will comply with any applicable laws governing the industry. In a sense, it is a safety net for the state and for the general audience which may use such services. The bond can be used to provide a financial compensation to parties who have been harmed by the unlawful or unethical actions of an appraisal management business.
How to comply with the new rules
The Board of Certified Real Estate Appraisers is in charge of setting the examination specifications, as well as registration procedures, for real estate appraisal management companies. It has to create rules of professional conduct which aim to ensure the high standard of integrity of these businesses.
If you would like to operate as a real estate appraisal management company in Alaska, you will be required to fully meet all conditions set by the Board. More specifically, you will need a registration if you want to:
Provide appraisal management services to a creditor or secondary mortgage market participant; or in connection with valuing a borrower's principal dwelling as security
Oversee an appraiser panel
The new law provides a definition for appraisal management services. They include the conducting of the following activities in the name of of a lender, financial institution, or another person:
►Administering an appraiser panel
►Selecting, recruiting and contracting real estate appraisers
►Reviewing completed appraisal before the appraisal delivery to the client
Applicants for registration with the board will have to:
►Designate a controlling person who will be the main point of contact between the Board and the business
►Require any real estate appraiser who completes appraisals for the registering company to comply with the Uniform Enrolled Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of the Appraisal Foundation
►Work only with certified appraisers
►Complete appraisals independently
►Provide the surety bond mentioned in the previous section
In addition to these registration requirements, registered companies will also need to comply with the Board’s mandatory reporting rules, statement of fees rules, and requirements for retention of records.
The new rules set in Senate Bill 155 take effect on January 1, 2019. However, the Board cannot enforce their application until March 1, 2019, thus creating a two-month adaptation period.
The bonding process for Alaska real estate appraisal managers
The greatest bonding amount that may be required of real estate appraisal management companies is $50,000. The precise sum is set by the Board on a case-by-case basis. This amount is the maximum penalty that appraisal management businesses may have to pay to harmed parties who have suffered damages due to their illegal actions.
In order to get bonded, appraisal management companies have to apply with a surety agency. It considers various factors to determine the bonding price, which is a small percentage of the required bond amount. The most important criteria that shape the bond cost are the personal credit score of the business owner, company financials, and any assets and liquidity showcased in the application.
Bond applicants with stable finances typically get a bond rate of about 1% to 3%. The surety will require a higher price if the perceived bonding risk is higher. Thus, if your overall profile is solid, you can expect to pay between $500 and $1,500 for a $50,000 surety bond.
How do you see the effects of the new legislation for Alaska real estate appraisal management companies? Please share your thoughts in the section below.