On March 23, Idaho Governor C.L. “Butch” Otter signed into law Senate Bill 1318, requiring all Idaho appraisal management companies to submit a $25,000 surety bond to the Idaho Bureau of Occupational Licenses – Real Estate Appraisal Board on or before July 1, 2017 in order to become a licensed in the state.

Why is this bond necessary?

For starters, the legislation is in place to regulate appraisal management companies that operate in Idaho. Without this system in place, the majority of Idaho appraisal management companies would be unable to take part in federal real estate transactions. The specific bond requirement will become an integral part of the licensing process for appraisal management companies in Idaho, and without it, they could face license revocation. Once a license has been revoked, further appraisal duties carried out may result in legal action, including fines and imprisonment in a county jail.

Another reason why the bond is important is that it offers protection for consumers. Should an appraisal management company or its employees fail to comply with any rules and regulations set by the bond, a party suffering loss or damage as a result of the appraisal management company’s conduct may file a claim directly against the bond up to $25,000, as long as the claim is filed no more than 120 days after the alleged violation occurs.

More information on surety bonds for appraisal management companies is available on this page.

What does an appraisal management company do?

Before an individual can purchase a home, their mortgage lender will want to ensure that it has recently been appraised in order to assess an accurate real estate value. Although mortgage companies existed previously, lenders preferred to work directly with appraisers, which led to instances of appraisers being influenced by the lenders with whom they worked. Due to fiduciary duties not being met by the individual appraisers, mortgages were being sold based on inaccurately high appraisal values, ultimately, according to columnist Ned Bushong, resulting in the mortgage crisis of the late-2000’s.

On July 21, 2010 President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. This 848 page piece of legislature was written as a measure to protect Americans from ever incurring loss on the scale seen during the mortgage crisis and includes sections that pertain directly to appraisal management companies. Among other regulations, Sec. 1124. Appraisal Management Company Minimum Requirements mandates that appraisals are to be conducted independently in order to avoid “inappropriate influence and coercion.”

Once Dodd-Frank became law, lenders themselves were no longer able to select an appraiser for property on which they would be lending funds, therefore, the use of appraisal management companies increased tremendously. What an appraisal management company actually does is bridge the gap between lenders and appraisers by employing independent appraisers that are designated to assess real estate valuation for lenders, thus eliminating the likelihood of property value being inaccurately inflated.

What are the current licensing requirements for Idaho appraisal management companies?

In order to be licensed by the state, those employed by Idaho appraisal management companies must adhere to licensing requirements established by the board. Once pre-licensure education has been completed, applicants should aware of the additional steps to become fully licensed:

• Submit a complete application and wait for review by the board
• Be prepared to provide 2 work samples from your experience log
• Pass an examination and submit the original completion certificate to the board

For a more in-depth look at licensing requirements for Idaho appraisers, please see the Licensure Application Process page of the Bureau’s website.