Pennsylvania Gov. Tom Wolf signed HB 863, which allows the PA’s real estate brokers, associate brokers and salespeople to provide broker price opinions. The law defines a BPO as “an estimate … that details the probable selling price of a particular parcel of real property and provides a varying level of detail about the property’s condition, market and neighborhood, and information on comparable sales.”

Brokers, associate brokers and salespeople must complete at least three hours of continuing education on BPO topics during the current or preceding two-year license period. Additionally, salespeople must have been licensed for at least three years prior to preparing BPOs and each BPO must be co-signed by their broker or associate broker. The law also outlines the minimum contents of a BPO and specifies that compensation due salespeople for a BPO be paid only to their affiliated broker.

The Circuit Court of Cook County, Illinois (Chancery Division) ruled that attorneys who referenced comparable property valuations and market values based on an income approach as part of tax appeal proceedings were simply engaged in the traditional practice of law and not in appraisal practice. In Illinois State Bar Association vs. Illinois Department of Financial and Professional Regulation, two attorneys were accused by the IDFPR of engaging in unlicensed appraisal practice after they submitted comparable property valuations, income approach information and market value opinions as part of two tax assessment appeals.

 

The main question before the court was whether an attorney representing a client in a tax proceeding violated the state’s Appraisal Act and functioned as an unlicensed appraiser when providing an analysis of comparable property valuations or developing an opinion of market value utilizing the income approach in a legal brief supporting a tax appeal. In its order granting summary judgement to the ISBA, the court stated, “There is nothing in the text and structure of the Appraisal Act that suggests that the General Assembly intended its prohibition on unlicensed appraisers to extend to what is the traditional practice of law in the property tax context.” The court further noted, “An attorney’s reference to comparable valuations in a property tax proceeding constitutes the practice of law, which is regulated exclusively by the Illinois Supreme Court.”

The Ohio Supreme Court on Tuesday vacated an Ohio Board of Tax Appeals decision affirming a county appraiser’s $8.8 million valuation of a Lowe’s Inc. property. The Court found, in a 4-3 decision, that new case law required reconsideration. These new cases established that comparable properties used to determine a property’s market value generally must be adjusted to reflect any lease encumbrances that might affect sale prices.

The case is Lowe’s Home Centers Inc et al., v. Washington County Board of Revision et al., slip opinion 2018-Ohio-1974, in the Supreme Court of Ohio.

The California Court of Appeal, Third Appellate District certified for publication its recent decision in Tindell v. Murphy. In that case, mortgage borrowers sued an appraiser saying they relied on his appraisal to purchase their home. The trial court had dismissed the suit because the borrowers were not intended users of the appraisal since the appraisal was prepared for the lender, and the Court of Appeal upheld that decision. A discussion of that case can be found at http://www.appraiserlawblog.com/2018/05/newly-published-california-case-helpful.html

The House Financial Services Committee recently passed legislation exempting appraisers from having to conduct evaluations in accordance with the Uniform Standards of Professional Appraisal Practice for loans under $250,000 that were held in a portfolio for three years. Appraisals are not required for loans of $250,000 or less, but federal bank regulatory policy requires lenders to obtain an evaluation to understand the collateral risk involved with the loan. HR 3221 is intended to create greater flexibility for lenders.

The Federal Reserve Board has issued a statement providing for temporary exception to appraisal requirements in hurricane areas affected by severe storms and flooding related to Hurricanes Harvey, Irma, and Maria. Below is that statement:

Responding to widespread damage caused by Hurricanes Harvey, Irma, and Maria, four federal financial institution regulatory agencies today took action to facilitate the recovery process by temporarily easing appraisal requirements for real estate-related financial transactions in areas declared to be a major disaster.

The agencies will not require financial institutions to obtain appraisals for affected transactions (1) if the properties involved are located in areas declared major disasters; (2) if there are binding commitments to fund the transactions within 36 months of the date the areas were declared major disasters, and (3) if the value of the real properties support the institutions’ decisions to enter into the transactions.

The exceptions apply to transactions in areas of Florida, Georgia, Puerto Rico, Texas, and the U.S. Virgin Islands and expire three years after the date the president declared each area a major disaster. The exceptions are being made under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and its implementing regulations.

Financial institutions that use the appraisal exception must maintain information estimating the collateral’s value that sufficiently supports their credit decision to enter into the transaction. The agencies will monitor institutions’ real estate lending practices to ensure the transactions are being originated in a safe and sound banking manner.

 

 

35 appraiser organizations including the Appraisal Institute are asking Congress to prevent Freddie Mac and Fannie Mae from issuing appraisal waivers. Freddie and Fannie recently announced plans to no longer require appraisals for first purchase loans, as well as for mortgage refinancing. In a letter to the chairs and ranking members of the Senate Banking, Housing and Urban Affairs Committee and the House Financial Services Committee, the Appraisal Institute wrote: “We recognize that the Enterprises have, since 1994, been exempted from appraisal requirements established by Congress on the basis that their requirements exceeded those established by Congress and that they would continue to make responsible decisions. These new programs call this privilege into question.”

The Appraisal Institute offered some suggestions to Congress and to the FHFA: “At a minimum, the Agency should request the estimates of the number of loan purchase and refinance transactions that would be subject to the new programs and make those estimates public for comment by affected stakeholders and other experts.

In addition to the Appraisal Institute, organizations signing onto the letter to Congress were: American Society of Appraisers; American Society of Farm Managers and Rural Appraisers; Appraisers’ Coalition of Washington; Arizona Association of Real Estate Appraisers; Association of Texas Appraisers; California Coalition of Appraisal Professionals; Coalition of Appraisers in Nevada; Coalition of Arizona Appraisers; Colorado Association of Real Estate Appraisers; Columbia Society of Real Estate Appraisers; Delaware Association of Appraisers; Foundation Appraisers Coalition of Texas; Illinois Coalition of Appraisal Professionals; Kentucky Association of Real Estate Appraisers; Louisiana Real Estate Appraiser Coalition; Maryland Association of Appraisers; Massachusetts Board of Real Estate Appraisers; Michigan Coalition of Appraisal Professionals; Mississippi Coalition of Appraisers; National Association of Appraisers; National Association of Independent Fee Appraisers; New York Coalition of Appraiser Professionals; North Carolina Real Estate Appraiser Association; Ohio Coalition of Appraisal Professionals; Oklahoma Professional Appraisers’ Coalition; Real Estate Appraisers Association of California; Real Estate Appraisers of Southern Arizona; Rhode Island Real Estate Appraiser Association; South Carolina Professional Appraisers Coalition; Tennessee Appraiser Coalition; United Appraisers of Utah; Utah Association of Appraisers; Virginia Coalition of Appraiser Professionals; and West Virginia Council of Appraiser Professionals.

 

Freddie Mac announced that it will utilize automated collateral evaluations to determine when an automated appraisal can be used for new home mortgages and refinancing. ACE uses data from multiple listing services, public records and historical home values to determine collateral risks. This decision was criticized by the Appraisal Institute. “Since 1994, the government sponsored enterprises have been exempted from appraisal requirements established by Congress on the basis that they would make responsible decisions,” said Appraisal Institute President Jim Amorin, MAI, SRA, AI-GRS. “Last week’s announcement to waive appraisals in blind loan purchase decisions calls this privilege into question, as it will undoubtedly result in a race to the bottom and create more risk for taxpayers.”

Federal agencies are considering raising the threshold for commercial real estate transactions requiring an appraisal from the current level of $250,000 to $400,000. The agencies including the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency have stated that they believe raising the floor will greatly reduce the number of transactions that require an appraisal and save costs and expenses in these transactions.  The proposal requires that commercial real estate transactions at or below the threshold receive an “evaluation” which are less detailed than appraisals and do not require completion by a state licensed or certified appraiser.