In January, Evaluation Solutions/ES Appraisal Services declared bankruptcy, leaving thousands of real estate appraisers, agents and brokers with unpaid invoices for work performed. With close to nine million dollars in unpaid invoices for appraisals and broker price opinions, it is the worst of a growing number of appraisal management company failures that have left appraisers stiffed and steaming.
The fallout has been extensive. According to the bankruptcy documents filed by Stutsman, Thames and Markey P.A., the law firm handling the bankruptcy proceedings, over 10,000 individuals and firms are listed as debtors, making it the most devastating and farthest reaching AMC bankruptcy in recent history.
Since Working RE first reported on this in early 2013, the appraisers and agents affected have been pressuring JPMorgan Chase Bank, N.A., the lender that hired ESA for most of work, to make good on the AMC’s unpaid debts. Many appraisers have filed complaints with the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau. So far, regulators have been indifferent to the problem.
Chase Tries to Settle
Chase is directing inquiries to Brian Reese, a Regional Manager of the Washington Mutual-Chase branch in Florida.
Nicholas Conteduca, an appraiser owed over $30,000 and founder of Esappraisalscam.com, designed to help appraisers collect unpaid fees, reports that Reese told him that Chase will not make any decisions about paying unpaid fees to appraisers until the bankruptcy proceedings are over. The lawyers handling the case told Conteduca that the bankruptcy case could take 12 to 18 months to complete. Reese did not respond to numerous phone calls from Working RE.
But time may be running out for appraisers thanks to a legal maneuver that is part of the bankruptcy proceedings. Chase is seeking to settle its debts with the now defunct ESA to the tune of $2,316,000. However, that money will not go to pay fee appraisers and agents. All but about $100,000 is earmarked for a secured debtor of the AMC, Summit Financial Resources LP, a hard money lender. So, there will be only about $100,000 remaining to cover the estimated $9 million in unpaid fees to appraisers, agents and brokers. This is the equivalent of paying a little over one penny on the dollar for the work that appraisers and agents completed on behalf of Chase.
Worse for appraisers and agents/brokers is that the settlement agreement by Chase allows the bank to avoid any future claims. Included is a notice of bar order which bars all related claims and lawsuits once the secured debtor is paid. This order prevents appraisers, agents and brokers from taking any action against Chase as a means of collection, including taking the bank to small claims court, filing liens on properties where they performed work or filing any other claims for their unpaid fees. For this reason, many appraisers and agents are working together to block the bar order.
The deadline to object to the motion to approve the settlement agreement and bar order is May 24 at 5:00 p.m. Eastern Standard Time. Additionally, on June 4, an evidentiary hearing on the motion to approve the settlement agreement will be held in a Florida court. The notice specifically states that “any party opposing the relief sought at the hearing must appear at the hearing or any objections or defenses may be deemed waived.” (read full text of settlement agreement)
Appraisers Fight Back
A handful of appraisers and agent/brokers are working to stop the bar order. They are also filing a class-action lawsuit against Chase to recover the monies owed. All appraisers and agents affected are encouraged to join the case.
“I speak with appraisers and agents regularly on these issues. We are in contact but it’s hard to get the word out to everybody,” says Conteduca.
Conteduca is working with other appraisers and agents/brokers who have contracted with Breck Milde, a lawyer who has agreed to object to the bar order as well as to file a class action lawsuit against Chase alleging that the bank is responsible for the unpaid fees due to appraisers, agents and brokers.
Attorney Breck Milde, an expert in both real estate and bankruptcy law, has agreed to file the class action lawsuit and oppose the Bar Order.
“We do not believe that the bankruptcy court has the authority to adjudicate the rights of the real estate professionals who performed services for the benefit of J.P. Morgan Chase Bank, N.A., and that it is appropriate for that court to abstain from adjudicating such matters,” says Milde.
Conteduca is asking appraisers who would like to help stop Chase’s bar order to contribute toward the $5,000 retainer fee. Conteduca has set up a donation site where appraisers can contribute to the cause.
Conteduca says all the money will go toward the $5,000 legal fee to file the objection.
“If the goal is not reached, all the money will be refunded to each individual who donated,” says Conteduca.
Breck Milde will also be filing a class action lawsuit on behalf of appraisers and agents, with the lawyer fee contingent on the amount collected. For those interested in joining the class action lawsuit, Conteduca says the following are required:
- Proof you worked for ESA. It can be a written contract or an email trail of orders from the AMC.
- The amount owed to you. You need to furnish order numbers and amounts owed. Email receipts are acceptable. So are screen shots from Evaluation Solutions’ website.
Stories from the Field
Furney, who is owed over $70,000 by ESA, says he believes that appraisers and agents have a strong case against Chase.
“Chase is listed as the client on all of my appraisals,” says Furney.
Furney has been in contact with appraisers and agents who have been affected.
“There are a lot of agents who are owed money for BPOs. Many are afraid to go after Chase because they still work for them. I can see their point because Chase is still a source of income. How do you sue your employer and still expect to work for them? I speak with a handful of appraisers and agents every week who have similar circumstances,” says Furney.
Furney has also filed complaints with the OCC and the CFPB but so far has received no response from regulators.
“They acknowledged receipt but do not respond. Chase responded, saying that they’re looking into the situation. They sent me the same letter maybe six or seven times, telling me to contact Brian Reese,” says Furney.
“I think that we’re just stuck, and until something changes with the regulations for AMCs, there is nothing to protect appraisers from this happening again. People are saying don’t take work from Chase. But what if I have to feed my family from AMC work? After the crash, every mortgage company that I worked for went under. I had to adjust and I did. And I picked up AMCs, lots of them, and that’s how I make my living,” says Furney.
Diana Nytko is another appraiser who is negatively affected by ESA’s bankruptcy and who says she also filed complaints with the OCC.
“The OCC hasn’t done anything. In November, I filed a complaint here in Connecticut with the State Banking Commission and never got a response. I sent them all the information about what was going on. It’s ridiculous,” says Nytko.
There is little question in Nytko’s mind about who is responsible. “WaMu Chase is responsible, they are the ones who received all my reports. They are the ones who benefited from my work, they are the ultimate benefactor. Through the law of agency, they are responsible for paying me,” says Nytko.
Nytko plans to take Chase to small claims court and to file property liens on the properties she appraised.
“I’m going to attach the properties and I’m going to file in the local small claims courts. I plan to file next week, I just need to make sure that Chase took over some of these properties. There are a couple that I did right in my own town. One that Chase foreclosed on, so they won’t be able to resell it until they pay me,” says Nytko.
Nykto says this isn’t the first time her clients have failed to pay her, nor is it the first time she’s had to file property liens.
“It’s legal in my state for an appraiser to file a lien. I’ve taken people to small claims before and filed an attachment against their property and won. I don’t know how Chase can win, they were supposed to pay me and they didn’t,” says Nytko.
In contrast to other appraisers and agents who are worried about a backlash from Chase for speaking out or fighting back, Nytko says she now refuses to complete appraisals where Chase is the client.
“I have closed all my bank accounts with Chase and I think others should do the same. I honestly don’t understand how some appraisers would still want to work for Chase after this but maybe they are that desperate. If Chase wants to pay me up front to do appraisal work, I’ll do it, but I won’t let this happen again,” says Nytko.
