Arizona Gov. Doug Ducey on March 12 signed into law SB 1480, legislation that eliminates the Arizona Board of Appraisal effective July 1. The ABOA’s administrative functions will be reassigned to the Department of Financial Institutions. This provision was included in the state’s FY 2016 budget that passed the legislature March 7.
Arizona will join a handful of states that don’t have an appraiser board or commission. According to the Executive Summary accompanying the Governor’s budget proposal, the action was necessary because the shrinking population of licensed appraisers was depleting ABOA revenues and that was “threatening the ability of the Board to fulfill its statutory obligations.”
During the debate on the legislation, concern was expressed about assigning oversight of appraisers to the same agency in charge of overseeing and regulating state chartered financial institutions and mortgage loan originators. According to the Appraisal Subcommittee’s Policy Statements, “States should maintain an organizational structure for appraiser certification, licensing and supervision that avoids conflicts of interest.” However, the Policy Statements also say that a “State has flexibility to structure its Program so long as it meets its Title XI related responsibilities.” The ASC did not take a position on the Arizona legislation.
In a March 12 email to its members, the Phoenix Chapter of the Appraisal Institute stated that the “PCAI Board is reaching out to the Superintendent of Financial Institutions to be a source of information, offer assistance on behalf of our members and to aid in addressing concerns of our members.” Additionally, the PCAI stated that it will “work to ensure that the organizational structure complies with Appraisal Subcommittee and that Arizona maintains its current ‘excellent’ rating as determined by the ASC.”
The Appraisal Institute California Government Relations Committee announced March 24 a legislative campaign to amend the state’s appraisal license law to allow state-licensed appraisers to use valuation standards other than the Uniform Standards of Professional Appraisal Practice when performing appraisals for any purpose other than for federally related transactions.
Under existing California law, Residential, Certified Residential and Certified General Appraisers must comply with USPAP when performing any real estate valuation services in the state, whether or not the services are performed for a non-FRT-related purpose, such as asset management, feasibility studies, litigation support, tax consulting, financial reporting or portfolio valuation, among others.
When the AIC-GRC announced its legislative campaign, it noted, “California's law impedes the ability of California appraisers to do work outside of the country or for a foreign entity because clients demand compliance with the standards applicable to them, rather than USPAP.”
The announcement also stated, “The provisions of USPAP are focused primarily on the appraisal needs of financial institutions involved in mortgage loan origination” and that “the evolution of USPAP over the past quarter-century to a rules-based rather than a principles-based set of standards makes it not always relevant for non-mortgage purposes.”
The AIC-GRC announcement concluded, “This modernization of the appraisal licensing law will assist California appraisers in meeting the needs of their clients in an effective and efficient manner, while still maintaining the highest levels of professionalism and maintaining the public trust.”
Staff from the Appraisal Institute’s Washington office and professionals from AI’s Connecticut Chapter, as well as from the Connecticut Real Estate Appraisal Commission testified before the Connecticut Insurance and Real Estate Committee Feb. 19 in opposition to HB 6677. As introduced, the legislation would allow real estate brokers and salespersons to estimate the value of real estate for a fee.
Under existing Connecticut law, a real estate broker or salesperson may perform a market analysis for the purposes of a prospective real estate purchase, listing or sale. If a broker or salesperson performs a market analysis and obtains the listing as a result of that analysis, then the amount the seller or purchaser paid for the BPO is required to be credited against any compensation paid to the broker or salesperson.
In its testimony, AI stated that HB 6677 goes far and beyond broker price opinion bills the legislature previously has considered because it allows brokers and salespersons to offer opinions of the value of real estate. AI also stated that if HB 6677 becomes law, it would instantaneously turn the state’s approximately 22,000 real estate brokers and salespersons into appraisers by allowing them to estimate the value of real estate for virtually any purpose (except federally related mortgage lending transactions).
In its testimony, AI noted that it would not matter if a broker or salesperson’s opinion of the value is referred to as an appraisal, an opinion of value, a BPO, a comparative market analysis or any other term, because it would contain a market value and therefore be considered by those who use appraisal services to be equivalent to appraisals performed by state-certified appraisers.
The Georgia legislature on April 1 completed action on HB 253, which will require appraisal management companies operating in the state to pay appraisers a reasonable and customary rate. The bill was presented to Gov. Nathan Deal for consideration.
The legislation, which was requested by the Georgia Real Estate Appraisers Board, grants GREAB the authority to enact rules and regulations to enforce the new requirements.
The state already requires AMCs to separately report to client the fees paid to appraisers for appraisal services and the fees charged by an AMC for services associated with management of the appraisal process.
The North Carolina House of Representatives introduced on April 2 legislation (HB 577) that would require appraisal management companies to compensate appraisers at a reasonable and customary rate.
If the legislation becomes law, the North Carolina Appraisal Board would be required to publish a schedule of customary and reasonable compensation rates every three years, and when AMCs renew their registration they would be required to provide the NCAB with the number of appraisals they performed in the state and the total net compensation paid for all appraisals performed. They also would be required to inform clients of the fee that was paid to the appraiser for the appraisal and any other fees charged for appraisal management services.
A date for hearings and further consideration of the bill has not yet been established.
Staff from the Appraisal Institute’s Washington office and professionals from AI’s Oregon Chapter testified March 20 before the Oregon House of Representatives Committee on Business and Labor in support of pending legislation (HB 3419) that would prohibit financial institutions from using broker price opinions for purposes of mortgage loan origination or in conjunction with a foreclosure.
In its testimony, AI stated, “Our position has long been that financial institutions should be precluded from using BPOs for all residential and commercial mortgage loan originations, in foreclosure situations and for purposes of short sales.” AI noted its position is “primarily due to the potential for a broker or salesperson to be biased in favor of their client — the financial institution — when performing these services.”
AI submitted a package of amendments that also would prohibit the use of comparative market analyses, evaluations and letter opinions for the same purposes.
A hearing was held April 1 in the Texas Senate Business and Commerce Committee on HB 2850 and SB 1007, legislation that would make comprehensive changes to the state’s appraiser licensing and certification law.
If enacted into law, provisions of these two bills would:
1) Clarify that an appraiser who is certified by a jurisdiction other than Texas can provide an appraisal review on real property located in the state without obtaining a Texas appraiser credential as long as the appraiser does not offer an opinion of value as part of the appraisal review;
2) Require that appointees to the Texas Appraiser Licensing and Certification Board undergo training on: a) the Texas appraiser licensing law and other laws applicable to the board; b) the programs, functions, rules, and budget of the board; c) the results of the most recent formal audit of the Board by the Appraisal Subcommittee; d) the requirements of the law relating to open meetings, public information, administrative procedure, and conflicts of interest; and e) any applicable ethics policies before the Board members is allowed to attend Board meetings, deliberate or vote;
3) Expand the membership of the Board’s appraisal management company Advisory Committee to include one additional consumer member and one additional AMC representative;
4) Impose requirements that appraisers disclose certain information regarding criminal convictions;
5) Allow (but not require) the Board to enact rules to mandate that an applicant for a certificate or license or renewal to submit fingerprints for the purpose of obtaining criminal history record information from the state’s Department of Public Safety or the Federal Bureau of Investigation; and
6) Allow the Board to adopt rules relating to the standards for the development of an appraisal by a certified or licensed appraiser that are recognized as substantially equivalent to or consistent with the Uniform Standards of Professional Appraisal Practice.
Virginia Gov. Terry McAuliffe on March 23 signed into law SB 1445, which requires appraisal management companies operating in the state to compensate appraisers at a reasonable and customary rate. The legislation gives the Virginia Real Estate Appraiser Board authority to take administrative action against AMCs not paying appraisers customary and reasonable fees in accordance with federal law.
Prior to enactment of the legislation, Virginia law already required an appraiser engaged by an AMC to disclose as part of the appraisal report the actual fee they were paid. In 2014, the Virginia Center for Housing Research and the Virginia Tech Program in Real Estate completed a survey of Virginia residential real estate appraisers to analyze the patterns of fees earned by appraisers the previous year. Prior to release of the report, no data existed that defined customary and reasonable residential real estate appraisal fees in Virginia.
Several other states have provisions in their AMC laws similar to those passed by Virginia, and a few others currently are considering similar legislation. Some states simply require AMCs to provide a certification to the state appraiser licensing and certification agency stating that they are complying with federal law regarding payments of reasonable and customary fees. Other states specifically require the payment of reasonable and customary fees and grant authority to the state licensing agency to investigate complaints against AMCs related to appraisal fees and to take administrative action against those found to be in violation of state law.
The Appraisal Institute’s four Washington chapters submitted written testimony Feb. 18 to the Washington State Legislature regarding SB 5597, a bill that would implement fingerprint-based background checks for all appraisers in the state, including existing credential holders who are renewing their licenses.
In their testimony, the chapters noted that the Appraiser Qualifications Board had not yet finalized its proposed changes to the background investigation requirements. Additionally, the chapters stated that the proposed changes to the AQB minimum qualification criteria “would no longer be required to conduct FBI, fingerprint-based background checks for all new applicants for licensure or certification as appraisers. Instead, states would be granted significant flexibility to determine whether an applicant possesses a background that could call into question the public trust.” The chapters suggested that it would be “premature for the Washington State Legislature to adopt state law that implements the background investigation requirements.”
The chapters also took issue with a provision in the bill that granted the state’s Department of Licensing the authority to conduct fingerprint-based background checks on existing credential holders at each renewal period.
The chapters stated that they did not “feel that it is appropriate for the DOL to conduct background investigations on existing credential holders who have maintained their licenses in good standing and are seeking to renew or upgrade their existing credential” and that “some existing credential holders have been licensed or certified in Washington for more than 30 years without ever having to undergo a background investigation.” The chapters suggested an alternative, stating “It is sufficient for the DOL to simply require existing credential holders to attest under oath as to whether or not there has been any changes in the appraiser’s background since the last renewal that would call into question the public trust.”
The Appraisal Institute announced March 11 that it has analyzed and compiled all state licensing and certification statutes and regulations pertaining to background checks for applicants seeking appraiser credentials and published them in the special report “State Requirements Regarding Background Checks for Real Estate Appraisers.”
AI’s analysis shows that 42 states have enacted background check statutes or regulations of some form for real estate appraisers. Only 10 states had background check requirements in place prior to 2011, which is when the Appraiser Qualifications Board first included background checks as part of the minimum qualifications criteria. The AQB will consider additional changes to background check requirements at a public hearing March 20.
Most states require fingerprint-based formal background checks/criminal history records checks, but only a handful of states require an additional background check at each renewal period. However, many states require appraisers to submit new fingerprints and undergo new background checks when upgrading their credentials from trainee to licensed/certified, from licensed to certified residential/general or from certified residential to certified general.
Additionally, 21 states require appraisers to undergo background check/criminal history records checks before obtaining a credential by reciprocity, but only nine state require background checks for temporary practice permits.
The 76-page report is free to Appraisal Institute professionals and available for purchase for $50 by others interested in receiving a copy.