AMC Bonds Frequently Asked Questions

When you purchase a surety bond it guarantees your contracted performance as a licensee of the state. A surety bond provides the state appraisal board the assurance that should your services fail to comply with the state licensing regulations, any fees or monetary penalties levied by the appraisal board will be collectable under the bond. Some states have drafted their legislation to allow for unpaid appraisal fees to also be paid by the bonds. Even if the AMC or appraisal firm fails or goes bankrupt, the Surety will still pay up to the face amount of the bond.

A surety bond is a contract between three parties: the Obligee (the state appraisal board) which is the party requesting the bond; the Principal (the AMC or appraisal firm) which is the party performing the service; and the Surety (the insurance company) which is the party providing the financial guarantee that the service will be performed. When the Surety issues a bond it is, in a sense, offering a line of financial credit towards the specific contract between the Obligee and the Principal. Should an occurrence arise that falls within the parameters of a payable claim, the Surety will pay the Obligee up to the bond amount. The Surety will then contact the Principal for reimbursement of the claim just as with consumer lines of credit.

Currently there are over 20 states that require bonds for AMCs operating in their state.

This varies by state and ranges from $20,000 to $100,000. The most common amount is $25,000 with seventeen states requiring that amount. Eight states require $20,000, West Virginia and Alaska require $50,000, Virginia and Washington require $100,000, and Pennsylvania requires $40,000.

This can vary considerably depending on the financial strength and credit history of the AMC and, in some cases, its owner(s). Generally, for AMCs with strong balance sheets, solid operating records and good credit histories, LIA is able to obtain bonds for 1% of the bond amount. However, we do have underwriters available who will issue bonds to AMCs with less favorable financials at a higher cost.

No, it is not an insurance policy in the traditional sense. When you purchase a surety bond it guarantees your contracted performance as a licensee of the state. If there is a failure on your part, any fees or monetary penalties levied by the appraisal board will be collectable under the bond. Some states have drafted their legislation to allow for unpaid appraisal fees to be paid by the bond. Even if the AMC goes bankrupt, the Surety (company issuing the bond) will pay up to the face amount of the bond. The Surety will then attempt to collect from you or your corporation as the Principal and this is why the company performs a thorough financial analysis before issuing a bond.

Yes, here is an overview of how our process works:

• Continuation and verification certificates are mailed to the relevant state board 30-60 days prior to the bond expiration date.
• LIA sends an email to the AMC with a copy of the renewal bond letter and accompanying cover letter to the State Board.
• The Surety (insurance company) sends an invoice to the AMC 30-45 days prior to the bond expiration date.
• If a bond requires a Principal’s signature, the Surety notifies the AMC via email that the bond is being mailed to its office with instructions regarding the signature requirement as well as the need to mail the original embossed bond document to the State Board.
• In the event of cancellation for non-payment or any other reason, LIA notifies the AMC via email. The Surety will also confirm cancellation.