COD Fee+AMC Fee= kickback, yes or no.

[Tony in Ohio]

Hello Forumites,

I have a situation I would like your feedback on.

I have done several reports for a small out of state management company who has been pretty reasonable in the past, they pay my full fee, on time, and even backed me up one time a realtor had an issue with one of my reports.

My problem is they just sent me a COD order (no problem) where they asked me to collect $35 over my fee and send it to them (problem). I think the $35 is a reasonable fee and I know this is done but I don’t like the extra work for me, and more importantly I am under the impression that it could be considered a kickback.

My intention is to call them back and indicate that I am not comfortable with this type of COD work and will only do it if the borrower writes 2 checks, one to me for my fee, and one to the AMC for their fee. I think that covers it by disclosing it. If you have any other suggestions I would really like to hear them.

Thanks,
Tony

 

[John M. Parker]

We have done these COD at the door and issued checks to AMC's and even to appraisers in other states or cities that refer business to us. AMC's (good ones) earn every penny they make having to deal with underwriters and fielding unreasonable demands etc. I have never thought of it as being an issue.

If this is a good client and it sounds like they have done right by you in the past, why lose them over something that is a "Non Issue".

 

[Tony in Ohio]

Thanks John,

I used to work for a company that had a policy of refusing all these. The state reason was that their lawer had indicated it could be construed as a kickback, and it was just better to not even accept such work. I suspect it was also influenced by the accounting headache of tracking such payouts for tax purposes, staff fee splits, and etc.

I tend to agree with the above, but since its a reasonable fee and a reasonable client I am tempted to accept the minor inconvienience, especially if appears to be acceptable practice which would lessen any potential liability on the remote chance something would come up.

 

[Farm Gal]

Tony:
I think this falls under the reasonableness test:

The AMC IS provding a service to you and the end cleint. The method of payemnt for that service can clearly be established as coming from the borrower....

Times have changes and AMC's are a valid portion of htis buisness... the only catch is that if the borrowers check bouces, you are out your work, whatever fee the bank charges YOU AND the $35.

I'd make it certified or money order if it was me :wink:

 

[James Bourgeois]

I have done several of these, and have found a way to avoid the kickback problem and the bouncing check problem. I have the borrower make out the check, which includes my full fee and the AMC fee, to the AMC and mail the check to them. When the AMC receives the check, they pay my fee. Of course, this is done with the AMC's understanding and approval given prior to me going to the property.

This way, the AMC has any bad check headache and there is no way that their fee can be construed as a kickback because I don't pay it, the borrower does.

 

[John M. Parker]

I guess I just not a trusting kind of guy. Every COD clears the bank before the report is sent.

Just remember if you are concerned about tax questions, issue 1099's on them just like any other sub contractor. Although again, this is a non issue. Fee $300 pay AMC $35 ok every day, keep good accounting records. Oh and lawyers don't earn their money if they say yes.

 

[Tony in Ohio]

All good answers, as I expected.

I feel Like I'm being a little... Ahh..Retentive... on this one, but better safe than sorry. I am still hoping a USPAP Guru will chime in.

Thanks again,
Tony

 

[Pamela Crowley (Florida)]

Personally, I wouldn't do it. Why are they throwing this additional head ache on the appraiser? Either they're an AMC or they're not - let them do their own job and collect their own fees. Either that or charge the HO an additional $35 for collection and service fees for yourself. The more you allow an AMC to get away with the further you will be pushed. It's really not that hard to say 'No, thank you'. Seems to me I remember another thread where the general concensus was that this was not a good idea legally either, kickback speaking - just not 100% sure.

All you really need to remember is that NO AMC is watching out for you and will leave you hanging if there ever is any question.

 

[Kevin Shannon]

Tony,

AMC or not, they are a client and you are a businessman in a service orientated industry.

I would do as they request or someone else will. The truth is AMC's are going to be a bigger part of this business sooner than later.

Unless you're looking for more free time to post on this forum.

Kevin

 

[Verne Hebert]

I don't do it. I am not their errand boy. If they need to collect a check, then as a part of their fee they need to handle their paperwork and collect the check.

Ya right. Collect a check, mail it to them, and wait 45 days to bless me with payment for my services. I don't think so.

As a matter of fact. Right now. All COD, unless they are old established customers. I don't have time to collect, or even bill them 3 or 4 times and beg for payment.

Watch yourself. On the last wave a few of the big boys went bellyup--I was caught holding a bag.