The New Jersey Legislature passed a law requiring appraisal management companies (AMCs) to register with the Real Estate Appraiser Board. As part of the registration requirements, appraisers must obtain a special type of surety bond called a New Jersey Appraisal Management Company Bond. Learn what this bond is, why it’s required, and how you can keep your business fully compliant with the new law.
What are the Requirements?
AMCs need a bond that pays up to $25,000 for claims filed against it. This requirement applies to any AMC that oversees a panel of 15+ appraisers in New Jersey alone or 25+ appraisers across multiple states within a 12-month period. Companies owned by banks or thrifts are exempt from the bond requirement.
What Does This Bond Do?
This bond, like all surety bonds, is meant to protect the public from unscrupulous businesses. Three parties are involved in the bond agreement:
- You and anyone you share ownership with is considered the It’s your responsibility to obtain a New Jersey Appraisal Management Company Bond, renew the bond as required, and pay for any claims filed against the bond.
- The Real Estate Appraiser Board is the obligee. They create the bond requirements and verify that appraisers meet them before completing the registration process.
- The company that issues your bond is the surety. They investigate claims filed against the bond, pay any valid claims, and then collect the claim total from you, the principal.
As an appraiser, the way you conduct your business has a significant impact on your client’s lives. In order to protect the public, New Jersey has created laws governing the appraisal business. Bonds are a way to guarantee that the public can seek and receive compensation if any of those laws are broken.
Bonds are also a way to hold AMCs accountable. Since there is no way to escape paying for valid claims, businesses have an extra incentive to act legally and ethically. As companies become more accountable, the entire industry becomes more trustworthy. Plus, the cost of the bond creates a financial hurdle that elevates the credentials of any new AMC. For all these reasons, having to get a New Jersey Appraisal Management Company Bond is good for everyone.
What is the Cost?
A $25,000 bond costs a small percentage of that total, usually in the range of 3-5%. Your bond premium is based on your credit risk. Applicants with lower credit scores will pay on the higher end of the spectrum, but in most cases, they will not be denied a bond as long as they work with the right surety company.
Once the premium is paid, most bonds are active for 12-months. At the end of that period, your credit is reassessed and your premiums are recalculated, meaning they could go up or down on a yearly basis. Keeping the bond active by renewing it annually is mandatory for keeping your AMC within the legal requirements.
Claims are the most important cost to consider because it can be higher than any other, yet it’s entirely under your control. As the principal, you have ultimate financial responsibility for any claims paid. The surety company pays first (up to the $25,000 bond total) as a way to guarantee that claims are compensated, but then they collect the total from you. AMCs can avoid paying thousands in unnecessary costs by following all New Jersey laws.
How Do I Obtain a Bond?
The first step is to find a surety bond company that offers the New Jersey Appraisal Management Company Bond. Since this requirement is relatively new, the bond may not be available from all sureties. To apply for the bond you will need to supply basic information about your personal and professional finances. Any additional owners need to do the same. Underwriters will take this information, evaluate your credit risk, and return a quote for the bond premium. After the premium is paid, you will supply a form to the New Jersey Division of Consumer Affairs that proves you have an active bond from a valid surety.
What Else is Required?
Registering with the Real Estate Appraiser Board involves more than just obtaining a bond. You will also need to meet these requirements:
- Pay a $250.00 application fee
- Complete the official application
- Provide passport-style photograph of all owners
- Submit to criminal background check
Get a Bond ASAP
Your AMC is not legal in New Jersey without a New Jersey Appraisal Management Company Bond. Fortunately, Viking Bond Service has all the resources you need to meet the state’s requirements. Complete a bond application at your convenience, and count on our team to get you a quick quote at a low cost. If you have more questions about how bonds work, find the information and answers you need in our complete guide to surety bonds.