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Appraisers and Agents File Class Action Lawsuit Against JPMorgan Chase

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In January, Evaluation Solutions/ES Appraisal Services (ESA) 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 (BPOs), it is the worst of a growing number of appraisal management company (AMC) 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 Chase, the lender who 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 (OCC) and the Consumer Financial Protection Bureau (CFPB).  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 WAMU-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 12-18 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, L.P., 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, 2013 at 5:00 p.m. (EST).  Additionally, on June 4, 2013, 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 the Full Text of Settlement Agreement here.) 

Here’s how some appraisers are fighting back. 

Appraisers and Agents 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. If you are interested in contributing, you can do so here: www.gofundme.com/EsAppraisal.

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 (see the story, AMC Recovery Fund for Appraisers).  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. (Learn more about property liens in One Appraiser's Solution to Getting Paid.)

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.

If you’d like to contribute to the Appraiser Lawyer Fund to stop the Bar Order from absolving Chase from all liability, please donate here: www.gofundme.com/esappraisal.

If you’re interested in joining the class action lawsuit, Nick Conteduca can be contacted at Contact@EsAppraisalScam.com.

About the Author

Isaac Peck is the Associate Editor of Working RE Magazine and Marketing Coordinator at OREP.org, a leading provider of E&O insurance for appraisers, inspectors, and other real estate professionals in 49 states. He received his Bachelors in Business Management at San Diego State University. He can be contacted at isaac@orep.org or (888) 347-5273.

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Melanie Narducci
Hillscape Properties, Inc. - San Francisco, CA
Your San FranciscoBay Area Real Estate Expert
A big bank not paying their legit bills? And the beat goes on. Thanks for posting this, Isaac. Keep us in the loop as it progresses.
May 22, 2013 09:25 AM
Julie A. Black
KAUAI DREAMS REALTY Kauai Real Property Specialist - Kapaa, HI
CLHMS, CRS, GRI, Realtor, Broker

I feel sorry for the agents and appraisers but I think they should of cut off ESA earlier. I have an agent who is owed for 10 BPOs from IAS. She told them no more until she gets paid.

May 22, 2013 09:26 AM
Evelyn Santiago, Managing Broker Heart Realty Group, Inc.
Heart Realty Group, Inc.. - Oswego, IL
Passionate About Real Estate & Our Clients!

I did some BPO's for this company a few years ago and they never paid.  Luckily I caught on quickly and refused further BPO's from them after it took them a year of threats to pay me the measly $50 bucks for my initial one. 

Just another way to scam real estate professionals that need to work with banks to make a living.  Hope the class action suceeds

May 22, 2013 09:26 AM
Trisha Bush-LeFore
Preferred Properties Land & Homes - Walla Walla, WA
Providing Realtor Services in the Walla Walla Area

Thanks for posting! I wasn't aware of this situation. It seems as thoough it'll be something interesting to keep updated on. Banks can be nasty.

May 22, 2013 09:42 AM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

Recently, a story was reported about the arrest of several demonstrators, who protested the banks handling of loan modifications, etc.  It is interesting that homeowners managed to get arrested, but to this date I know of no bankers or Wall Street entities which have gone to jail over their shenanigans which brought our entire economy to the brink!

May 22, 2013 10:49 AM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

I had not heard anything about his.  I hope that it is resolved in a way which iws fair an equitable to all involved..

May 22, 2013 11:55 AM
Richard Weisser
Richard Weisser Realty - Newnan, GA
Richard Weisser Retired Real Estate Professional

I hate to see people work and not get paid, but why would you keep doing work without being paid for so long ... sounds like some bad business decisions were made.

May 22, 2013 12:29 PM
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

WOW. Who would have guessed that as power and control flow to the "few" that this could have happened? How on earth could Barney Frank and Christopher Dodd have missed this??? They are experts and long standing veterans in our industry, right? Oh my fault they are attention grabbing self serving political deviants who wrote laws that HURT the consumer and gave even more power to the banks they serve.

Sick - I hope Chase pays EVERY penny!

Maybe nows a good time to rethink this foolishness

May 22, 2013 01:06 PM
Richard Iarossi
Coldwell Banker Residential Brokerage - Crofton, MD
Crofton MD Real Estate, Annapolis MD Real Estate

How could they have had such a backlog of unpaid bills for so long? Why were appraisers still accepting work? Thanks for the info, I wasn't aware that AMC's were going bankrupt.

May 22, 2013 01:32 PM
Kathy Scipione
Long and Foster Re Inc - Malvern, PA
Kathy Scipione, CRS, GRI, AHLS, ABR,

I'm amazed so many appraisers and agents are left holding the bag.   They worked too hard to come up empty.  Hopefully, the corporate world will pay up.

May 22, 2013 02:21 PM
Bill Reddington
Re/max By The Sea - Destin, FL
Destin Florida Real Estate

Gave up doing BPO's a long time ago. Not worth the effort of the time to do them correctly for little or in this case no money.

May 22, 2013 02:51 PM
Aaron Hofmann
Atlanta Communities - Smyrna, GA
aka Mr. Smyrna Vinings

That is bad. Personally, I would think if Chase still owed the money for the work, then you should be able to go after them. But if they've already paid for the work to the intermediary company, then they shouldn't be charged twice. They're not responsible for the financial management of the intermediary company. Would be interesting to learn what the real issue was behind the BK.

May 22, 2013 03:34 PM
Jordon Wheeler
The Jordon Wheeler Group - Fairburn, GA
J W Group Real Estate Sales and Service

I had performed BPOs for Evaluation Solutions in previous years.  It always took long periods to get paid.  I had to continuously 'threaten' to take a legal action.  So glad that I did get paid eventually for work performed and so glad I stopped doing business with Evaluation Solutions.  Yes there are agents/brokers owed thousands of dollars.  Very sad story.

May 22, 2013 03:39 PM
Rosemary Brooks
BMC Real Estate - 209-910-3706 - Stockton, CA
The Mother & Daughter Realty Team

Banks are not interested in real estate!  Remember that being shoved down our throats......?  Now what?

May 22, 2013 04:34 PM
Scott Fogleman
New Home Team - Richmond, VA

One has to wonder how people wouldlet the bills get to that point.. Dont pay me once, i will not work for you again.. 

May 22, 2013 07:02 PM
Sheila Morales
Kauai Property Shop - Kapaa, HI
Your Kauai Hawaii Agent

With the improving housing market I'm sure we will see more and more of the "asset management co" closing their doors.

May 22, 2013 07:13 PM
Sandy Padula & Norm Padula, JD, GRI
HomeSmart Realty West & Florida Realty Investments - , CA
Presence, Persistence & Perseverance
This class action lawsuit will fail because it is an attempt to change the priorities of creditors' claims set forth in Federal Statute. Not likely to happen.
May 22, 2013 09:04 PM
Than Maynard
Coldwell Banker Heart of Oklahoma - Purcell, OK
Broker - Licensed to List & Sell - 405-990-8862

Maybe if they weren't so busy paying people to try and get BPOs done for $45 they could have stayed in the black. I can't count the number of times that a BPO order would come in for $45 on a rush (needed in the next 24-48 hrs) and I would see the same order for 2 or 3 weeks and receive multiple calls offering me the appraisal.

Rural markets without MLS and crummy courthouse records require a ton more time. We must be paid accordingly. How much are BPO companies spending trying to get it done on the cheap?

One agent in my company is owed $1100 and another is owed $150.

May 22, 2013 10:08 PM
Tracy Oliva
West USA Realty - Arizona - Fountain Hills, AZ
The Oliva Team Arizona Agents

Good Morning,  I don't think this will work,  keep up the great Info on this and good luck with your business,  E

May 22, 2013 10:59 PM
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

People all over the world have noticed that the only way to settle or get ahead in the United States is to sue...Sad but true

May 22, 2013 11:15 PM