Alabama Appraisal Management Company Bond

What Is the Purpose of the Alabama Appraisal Management Company Bond?

In Alabama, real estate appraisal companies are required to register with the Alabama Real Estate Appraisers Board (REAB) and secure the $25,000 Appraisal Management Company Bond, in accordance with Code of Alabama Section 34-27A-50. The bond acts as a financial guarantee that Appraisal Management Companies (AMCs) will comply with the applicable statutes and regulations in the state and that if they do not, any damaged parties will be compensated. 

Which Businesses Need the Appraisal Management Company Bond? 

Pursuant to the Code of Alabama, registration and the accompanying surety bond are required by the AREAB for any company that wishes to “engage in business as an appraisal management company, perform appraisal management services, or advertise or hold itself out as engaging in or conducting business as an appraisal management company.”

What Do Surety Underwriters Need to Know About the Alabama Appraisal Management Company Bond?

According to the AREAB Administrative Code, the Board reserves the right to censure, conditionally or permanently revoke a registration, levy fines, or impose civil penalties up to the $25,000 penal sum of the bond for any violation of the Uniform Standards of Professional Appraisal Practice, the Appraisers Act or Real Estate Appraisers Board Administrative Code. The Board may elect to pursue a claim against the bond if they find fault on the part of the AMC after a lengthy complaint process. 

In Suretypedia’s investigation of the bond, knowledgeable sources within the industry confirm extremely low loss ratios for bonds of this type: consistently less than 5%. This is likely due to the Board’s protection of AMCs’ due process rights when facing complaints or disciplinary action. Accordingly, surety carriers tend to freely write the Appraisal Management Company Bond.

What Do Surety Claims Handlers Need to Know About the Appraisal Management Company Bond?

As mentioned, the AREAB follows an exhaustive, orderly process when disciplining registered AMCs for infractions or resolving complaints that are filed. The process may be triggered by a complaint from the Board itself or any member of the public. If the Board determines probable cause exists that an AMC has violated the Uniform Standards of Professional Appraisal Practice, the Appraisers Act, or the Real Estate Appraisers Board Administrative Code, they will send a notification to the AMC within 20 days of a hearing to review the facts of the case. That hearing will follow standard court of law proceedings, complete with a discovery phase, attorney representation, plea entry by the respondent, cross-examination, etc. Within 30 days of the final hearing, the presiding hearing officer’s recommendations and conclusion will be delivered to the AMC via certified mail.

Despite the rigor of the formal process, claims handlers should be aware that the Board has carved out a provision to always be able to resolve a pending matter through informal settlement. This offers the principal and surety carrier a potential path to avoiding a potential bond claim by working with the damaged party to a settled agreement. That settlement is subject to board approval, however.

Are There Any Alternatives to the Appraisal Management Company Bond?

Per the Code of Alabama Section 34-27A-55, a deposit of cash or security may be accepted by the Board in lieu of a surety bond.

How Much Does the Appraisal Management Company Bond Cost?

The Appraisal Management Company Bond is typically priced by surety carriers at approximately 1% of the $25,000 penal sum or $250 for one year.

How Is the Appraisal Management Company Bond Filed?

The original version of the bond with signature and seal must be delivered to the AREAB offices, along with the Application for AMC Registration and the $3,500 non-refundable application fee.

All documentation must be sent to the following location:

Alabama Real Estate Appraisers Board
100 North Union St. Ste. 370
Montgomery, AL 36104

Can the Appraisal Management Company Bond Be Cancelled?

The Appraisal Management Company Bond can be cancelled by providing the AREAB with 60 days of notice before the termination date of the bond.

Do Appraisal Management Company Bonds in Appraisal Management Company Renew? 

The Appraisal Management Company Bond is continuous and must be annually maintained upon renewal of the AMC’s registration.