Legal maneuverings
In November, the law firm Hilgers Graben filed a class-action lawsuit in California against three AMCs. It includes five allegations related to unjust enrichment, unfair competitive practices and misleading homebuyers about where the fee goes.
“We’re always looking for cases to bring on behalf of people who have suffered financial harm,” said Michael Merriman, a lawyer with the firm. “This came across our radar screen and as we looked into it, we realized that this was widespread practice. Although the individual fees are in the hundreds of dollars, it adds up writ large across the industry.”
But the California lawsuit might be the first of more to come. Morgan & Morgan, one of the largest personal injury firms in the country, recently published a blog post that advises consumers on what AMCs are and how to “protect” themselves.
Morgan & Morgan said that two consumers approached the firm about AMCs about a year ago. This prompted an investigation into how widespread the alleged problem is. While the firm said it’s still in the information gathering process, it seems likely that a lawsuit will be filed — and possibly soon.
“The drama at the CFPB just creates a greater importance for consumer lawyers like me in my firm,” said John Yanchunis, an attorney with Morgan & Morgan. “We’re going to be busier because of it. I’m a big supporter of the CFPB and their absence is not going to be helpful to consumers, and we’re ready to fill the void.”
The plaintiff in the Hilgers Graben suit is a woman named Lacey Timmins, who is also a plaintiff in lawsuits against Walmart and Home Depot, among others. The defendants are Clear Capital, Core Valuation and Rocket Mortgage.
For their part, AMCs say they’re not breaking the law and are simply operating within the confines of regulation around home sales.
“The plaintiff fails to present any legitimate allegations against Rocket Mortgage, ignoring the fact that these fees were standard, lawful and fully disclosed,” Rocket said in a statement to HousingWire. “This lawsuit is meritless and Rocket Mortgage should be removed from the case.”
Clear Capital declined to comment on ongoing litigation. Core Valuation couldn’t be reached for comment.
Drawing battle lines
The appraisal fee disclosure has become a flash point around which appraisers and AMCs have drawn battle lines. For appraisers, the thinking is that if the fee is broken out to show how much AMCs take, it’ll prompt homebuyers to ask questions. And if they don’t like the answers, there could be a wave of public opposition to AMCs.
AMCs, which are unknown entities among the general public, are likely taking the Timmins suit — and the prospect of others — seriously given recent events in real estate.
The industry was brought to its knees in March 2024 when the National Association of Realtors (NAR) agreed to a $418 million settlement of class-action antitrust lawsuits related to offers of commission between agents on NAR-affiliated multiple listing services (MLSs).
The suits claimed that listing agents who provided a blanket offer of compensation to buyer agents on the MLS — which is not open to the public — was anticompetitive and artificially inflated commissions, costing home sellers billions of dollars over the years.
The Sitzer/Burnett suit — which triggered the NAR settlement — was filed in Missouri. Because it was not in a federal court, a web of copycat suits were filed in states across the country. A number of them have yet to be resolved, and there are also lingering copycat suits in which the plaintiffs are homebuyers.
Brokerages that executed $2 billion or more in transactions in 2022 weren’t covered by the NAR settlement and had to write eight-figure checks to settle suits in which they were a defendant.
Improper disclosures?
The accusations in the commission saga bear similarities to the criticisms of AMCs. The Timmins complaint said that the way the appraisal fee is disclosed — or not disclosed — hides the fee and how it’s quantified. This makes it anticompetitive and artificially inflates it, the suit alleges.
Individual states have different regulations around the appraiser fee, but most often the fee is listed on the appraisal report rather than being broken out on closing documents. This arrangement requires homebuyers to subtract the appraisal fee that appears in the appraisal report from the line item in the closing documents.
This not only requires homebuyers to notice that the two numbers in two sets of documents are different — but also to find the two numbers buried in mounds of paperwork to begin with. The fee listed in the appraisal report is particularly hard to find, as some in the industry have said they can’t find it despite knowing what to look for.
In the meantime, appraisers aren’t waiting around to see what happens with the Timmins suit. Their push against AMCs has gotten increasingly aggressive.
They believe AMCs have led to a huge decline in the number of appraisers as it’s gotten increasingly difficult to make a living. They’re taking their case to state legislatures across the country, and meetings about what to do next have escalated.
“We ain’t playing around anymore,” said Pat Turner, an appraiser with P.E. Turner & Co. in Richmond, Virginia. “It’s been going on way too long, and the American public needs to be made aware.”
