Appraisal management company cost
The Department of Professional and Occupational Regulation – Real Estate Appraiser Board requires appraisal management companies to submit a $100,000 surety bond or irrevocable letter of credit (ILOC) as part of their application in order to receive a license within the state.
Because the required bond amount is so great, it is perceived to be more risky to issue by surety companies. Therefore, applicants for this bond are subject to strict underwriting. For those with exceptional credit, the premium of this bond may be as little as 1.75%—or $1,750—for the entire length of the term.
When the bond’s renewal comes up, underwriters will take another look at the credit of all owners of the company. If credit has improved during the previous term, then the principal may find themselves qualifying for a lower rate.
Why this bond
Providing the board with a bond is part of the licensing requirement for all Virginia appraisal management companies. By submitting a bond, the appraisal management company is acknowledging that they will operate in accordance with all applicable rules and regulations, specifically those established by 54.1-20.2 of the Code of Virginia. Several acts that are prohibited of appraisal management companies include:
- Entering into a contract with an unlicensed independent real estate appraiser
- Prohibiting an appraiser from disclosing fees charged for appraisal services
- Influence the development, reporting, result or review of a real estate appraisal by any means
If it is found that an appraisal management company has engaged in any acts defined in section 20.2, including those listed above, a claim of up to $100,000 may be brought against the company’s bond. If it is determined that the claim is valid, then the surety will pay to reach a settlement. Once the claim has been settled, it becomes the responsibility of the principal to reimburse the surety for all expenses incurred during the claims process, including the cost of the claim.
Why this bond
Virginia appraisal management company bonds are issued for 2-year terms to run concurrently with the principal’s license and are automatically renewed biennially for as long as the company wishes to keep its license active.
However, the surety may opt not to renew the bond by providing written notice to the board, as long as they do so at least 60 days prior to the bond’s renewal date.If a surety does opt to renew a bond for an appraisal management company, the company must contact another surety ASAP so as to avoid penalization for not having a surety bond.
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