The document summarizes the stringent quality control review requirements for appraisal management companies (AMCs) operating in Texas. It outlines that Texas law mandates AMCs to: 1) Review 5% of randomly selected appraisals performed in Texas plus the first appraisal of new appraisers; 2) Conduct USPAP Standard 3 desk reviews performed by qualified, licensed reviewers; 3) Ensure reviewers check for USPAP compliance, appraiser competency, and validate property details and valuation approaches used. Non-compliance can result in penalties of $10,000 per violation.

1. Don't Mess with Texas. The Texas AMC Law Simplified!
Posted on Fri, May 10, 2013 @ 05:53 PM
AMC’s take heed… Texas has stringent quality control review requirements for AMC’s and the
penalties for non-compliance are high! According to Texas Occupations Code (§1104.202(b))
each violation can cost you $10,000!
The Texas AMC Law is found in Texas Occupations Code §1104 and Texas Administrative
Code §159.1-159.204. These laws mandate the following requirements:
1) Quantity of appraisals
2) Type of review
3) Qualifications of the reviewer
4) Scope of Work for the review report
1) Quantity of Appraisals:
The Texas AMC Law requires AMCs to provide USPAP compliant Standard 3 Reviews on
appraisals performed in the state as follows:
The 5% Rule:
 AMCs must perform USPAP compliant Standard 3 reviews on a total of 5% of randomly selected
appraisals performed for each twelve month period following the date of the AMC’s registration.
Texas Admin Code §159.155(a)(2)
The 1st of Five Rule:
 The AMC must also perform USPAP compliant Standard 3 reviews on one of the first five
appraisals performed by each appraiser prior to making a sixth assignment (the 1 of first 5 rule).

2. Note: Reviews performed under the “1 of first 5” rule can apply to the “5%” requirement. Texas
Admin Code §159.155(a)(1)
2) Type of Review:
At minimum a USPAP Compliant Standard 3 Desk Review is required. Texas Admin Code
§159.155(a)
3) Qualifications of the Reviewer:
The Texas AMC law has specific requirements for the reviewer performing the required USPAP
Compliant Standard 3 Desk Review which includes the following:
 The reviewer performing the requisite USPAP Compliant Standard 3 Desk review must be
licensed or certified in Texas with at least the same certification for the property type as the
appraiser who completed the report being reviewed. Texas Occupations Code 1104.153; Texas
Admin Code §159.155(d)
 The review appraiser must have access to appropriate data sources for the appraisal being
reviewed (i.e. MLS data). Texas Admin Code §159.155(d)
Note: A certified residential appraiser can review a report completed by a certified general
appraiser if the review appraiser is otherwise permitted by Texas law. Texas Admin Code
§159.155(e)
4) Scope of Work:
Texas also mandates the Scope of Work for the quality control reviews performed by AMCs
operating in their jurisdiction. The Texas AMC Bill indicates that the Reviewer must:
 Assess the appraisal for USPAP compliance. Texas Admin Code 1104.155(1) Note: Further posts
will address this issue – it seems simple enough but, do you really know what this means?!?!
 Assess whether the appraiser that performed the work under review was competent to perform
the assignment. Texas Occupations Code §1104.15; Texas Admin Code §159.155(f)
 Validate the significant characteristics of the comparables and the essential elements of the
transaction. Texas Admin Code §159.155(g)(1)
 Research and consult the appropriate data sources for the appraisal being reviewed including:
o The multiple listing service(s) or commercial databases and other recognized methods,
techniques and data sources for the geographic area if the appraisal included a sales
comparison approach. Texas Admin Code §159.155(g)(1)(a)
o Published cost data sources and other recognized methods, techniques and data
sources for the geographic area in which the appraisal under review was performed, if
the appraisal under review included a cost approach. Texas Admin Code
§159.155(g)(1)(b)
o Comparable rental data, income and expense data, and other recognized methods,
techniques and data sources for the geographic area in which the appraisal under

3. review was performed, if the appraisal under review included an income
approach. Texas Admin Code §159.155(g)(1)(c)
 Opine regarding each approach to value used in the appraisal and include any rationale for
disagreement with any valuation approach. Texas Admin Code §159.155(g)(2)
 Determine if any omitted valuation approach was necessary for credible assignment results and
provide the rationale for such a conclusion. Texas Admin Code §159.155(g)(3)
 Confirm, analyze and review the subject sale and listing history. Texas Admin Code
§159.155(g)(1)(d)
And, lastly, the Texas AMC Law mandates that the Review must include the typical Standard 3
requirements (all the typical items such as intended user, intended use, scope of work, ownership
interest, name of appraiser, date of report, date of appraisal, etc). Texas Admin Code
§159.155(g)(3-9)
Note that the Reviewer is not required to develop an opinion of value. However, if any value
opinion is included, the Reviewer must comply with any additional provisions of USPAP
governing the development of an opinion of value (Standard 1). Texas Admin Code §159.155(h)
In Summary:
The instructions are clear – an AMC operating in Texas must review a random sample of 5% of
the appraisals and also one of the first five appraisals performed by each appraiser. The Texas
AMC law also requires USPAP Compliant Standard 3 Reviews by reviewers licensed/certified in
the state with access to MLS data and the skills necessary to determine the competency of the
original appraiser, determine the quality of the report, comply with the indicated scope of work
and also assess USPAP compliance.
Are your quality control standards in compliance with the Texas AMC Law?