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.
Tennessee has enacted a law establishing a new statute of limitations regarding civil lawsuits and disciplinary actions against real estate appraisers. Under HB 376, any action to recover damages against a real estate appraiser must be brought within one year from the discovery of the act of omission giving rise to the action. However, in no event can an action be brought more than five years after the date the appraisal was performed.
Additionally, the Tennessee Real Estate Appraiser Commission cannot consider a complaint for a disciplinary acting that relates to an appraisal that was completed more than three years before the complaint was submitted.
The new law will take effect July 1, and will apply to appraisals performed after that date.
Florida has enacted a bill changing its appraiser licensing law. HB 927 includes changes advocated by the Appraisal Institute.
The law defines an “evaluation” as a “valuation permitted by any federal financial institutions regulatory agency for transactions that do not require an appraisal” and clarifies that a state-licensed appraiser may perform an evaluation. According to AI, appraisers in Florida were prevented from providing evaluations that are not in full compliance with the Uniform Standards of Professional Appraisal Practice even though federal requirements only call for compliance with the Interagency Appraisal and Evaluation Guidelines. State-licensed appraisers will now be able to perform services in compliance with federal requirements.
In addition, the law clarifies that the Florida Real Estate Appraiser Board has the authority to adopt rules allowing for the use of standards of professional practice other than USPAP for “nonfederally related transactions.” Such transactions include appraisal assignments for portfolio monitoring, financial reporting, litigation, tax and consulting, among other areas. The law requires appraisers using development and reporting standards other than those contained in USPAP to comply with USPAP Ethics and Competency Rules and other requirements adopted by the Board by rule. The law clarifies that any valuation work performed per standards other than USPAP cannot be used to satisfy the experience requirements for any Florida appraiser credential.
The Appraisal Institute reported April 17 that 37 bills affecting the valuation profession are pending in 23 states. According to the Appraisal Institute, the proposed legislation includes:
Arizona SB 1197 which makes various changes to the state’s appraiser licensing law and appraisal management company oversight and registration law.
California SB 70 which allows a state-licensed or state-certified appraiser to deviate from the Uniform Standards of Professional Appraisal Practice in certain circumstances.
Connecticut SB 780 which allows real estate brokers and salespersons to estimate for a fee or other valuable consideration a probable property sale price or lease price.
Florida SB 716/HB 927 which makes changes to the state’s AMC law and would allow appraisers to perform evaluations in compliance with the Interagency Appraisal and Evaluation Guidelines and allow the Florida Real Estate Appraiser Board to consider the adoption of standards of valuation practice other than USPAP for use in non-federally related transactions.
Hawaii HB 50/SB 390 which enacts a comprehensive AMC oversight and registration law.
Illinois HB 722 which prohibits AMCs from passing along to appraisers any costs, fees or other expenses.
Illinois HB 723 which requires the fee paid to an appraiser be shown separately from the fee paid to an AMC in any residential real estate closing document that lists real estate appraisal fees.
Indiana SB 76 which requires AMCs to compensate appraisers within 30 days of their submitting an appraisal to an AMC.
Kansas SB 2414 which allows appraisers to utilize the Appraisal Institute’s Standards of Valuation Practice and Valuers’ Code of Professional Ethics when performing an appraisal for any purpose other than a real estate-related financial transaction, and would allow appraisers to perform evaluations.
Kentucky HB 443 which reorganizes the state’s appraiser licensing and certification agency.
Massachusetts SB 104 which enacts mandatory appraiser licensing.
Minnesota HF 593/SF 366 which clarifies that allegations that do not result in disciplinary action against an appraiser are not made public, and that a background check is only required for an initial appraiser application. It also provides for the sequestering of information related to disciplinary actions more than five years old and imposes a six-year statute of limitation on civil actions against real estate appraisers.
North Carolina HB 431/SB 576 which clarifies that state-licensed and state-certified appraisers may perform evaluations.
Nebraska LB 17 updates the state’s AMC law to bring it into compliance with federal minimum requirements and the state’s supervisor and trainee requirements so they’re consistent with the Appraiser Qualifications Board.
New Hampshire SB 53 updates the state’s existing AMC law to bring it into compliance with federal minimum requirements.
New Jersey AB 1973 enacts a comprehensive AMC oversight and registration program.
Oklahoma SB 533/HB 1505 requires appraisers to include an invoice in the appraisal report.
Oregon HB 2189 establishes an appraiser-specific statute of limitations.
Pennsylvania HB 863 establishes the parameters around which a real estate broker or salesperson may perform a broker price opinion or comparative market analysis.
Rhode Island SB 543/HB 5620 establishes a comprehensive AMC oversight and registration program in accordance with federal minimum requirements.
South Carolina S279 enacts a comprehensive AMC oversight and registration program in compliance with federal requirements.
Tennessee SB 279/HB 376 enacts a statute of limitations applicable to civil claims against real estate appraisers.
Texas SB 1516/HB 3261 makes various changes to the state’s existing AMC oversight and registration law.
Vermont HB 506 repeals both the requirement for criminal background checks for appraisers and the state’s existing AMC oversight and registration program, vesting that authority instead to the Vermont Real Estate Appraiser Board.
The PA State House is considering a bill that would amend the state’s Real Estate Licensing Law. According the Bill’s sponsor, HB863 would define “a Broker Price Opinion (BPO) as ‘an estimate prepared by a broker, associate broker or salesperson 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, but does not include an automated valuation model’ and provides standards.” The Bill is currently in the Professional Licensure Committee.
A Texas appellate court recently affirmed the dismissal of the city of Austin’s lawsuit claiming commercial and vacant property are being undervalued during property tax appraisals. Austin sued the Travis Central Appraisal District after an appraisal review board in Travis County denied the city’s formal challenge to what it said was the systematic undervaluation of two classes of vacant and commercial properties. The city alleged the state’s property tax appraisal system is unconstitutional and creates two different standards of assessment, resulting in arbitrary and unequal taxation.
In Austin v. Travis Central Appraisal District et al., case number 03-16-00038-CV, the Third Court of Appeals said, though the city does have statutory standing to challenge the level of appraisals of any category of property in the district, Austin had effectively foregone the administrative determination of its challenge, depriving the district court of jurisdiction. The court said the city could bring its concerns over tax policy to the attention of the Legislature, but that Austin “has no standing to pursue such a debate in this court.” “The city’s constitutional challenge is a transparent attempt by a taxing unit to debate an issue of tax policy that is within the prerogative of the Legislature, rather than the judiciary,” the court said.
Austin filed the suit in August 2015, two months after the appraisal review board’s ruling, also naming as defendants several individual property owners it claimed held undervalued properties. It argued commercial and vacant properties weren’t being appraised at market value because property owners aren’t required to disclose real estate sales data, which the city said created an imbalance in information available for different properties.
The Subcommittee on Housing and Insurance will hold a hearing entitled “Modernizing Appraisals: A Regulatory Review and the Future of the Industry” at 10:00 a.m. on Wednesday, November 16, 2016. This hearing will examine the appraisal industry since the creation of the Appraisal Subcommittee in 1989, review the Dodd-Frank Act’s impact on appraisers, consumers and stakeholders, and explore the future of appraisals, including alternative home valuation methods.
The link to view the hearing is: http://financialservices.house.gov/
This will be a one-panel hearing with the following witnesses:
- Mr. James R. Park, Executive Director, Appraisal Subcommittee
- Mr. David S. Bunton, President, The Appraisal Foundation
- Ms. Joan N. Trice, Chief Executive Officer and Founder, Clearbox
- Mr. Bill Garber, Director of Government and External Relations, Appraisal Institute
- Mr. Ed Brady, Chairman of the Board, National Association of Home Builders
- Ms. Jennifer S. Wagner, Managing Attorney, Mountain State Justice, Inc.
A Pennsylvania state appellate court recently held that a taxing authority could not present an appraisal prepared by a non-testifying expert for the taxpayer. In Millcreek County School District v. Erie County Board of Assessment Appeals v. Wegmans Food Markets Inc., 39 C.D. 2015, the Court of Common Pleas of Erie County allowed the Millcreek Township School District to present certified appraiser Barry Polayes’ appraisal submitted by the taxpayer during a 1998 valuation. The Commonwealth Court of Pennsylvania reversed the decision. It ruled that Polayes was not an agent of the taxpayer and his earlier opinions should not have been used against the taxpayer in court. They held that the appraiser was not a representative of the taxpayer and, therefore, the appraisal violated the hearsay rule.
The Appraisal Institute has reported that it will lobby Congress for the modernization of the appraisal regulatory process. The issues the Appraisal Institute want to see addressed include the relationship of Federal and state regulations, the ability of appraisers to work in multiple states, more flexibility in the appraisal process and better processes for sharing information.
The Appraisal Institute has been advocating the use of alternatives to the Uniform Standards of Professional Appraisal Practice (“USPAP”). USPAP is provided by the Appraisal Foundation and is described as “the generally accepted standards for professional appraisal practice in North America. USPAP contains standards for all types of appraisal services.” The Institute’s Florida government relations leaders and staff met with the Florida Real Estate Appraisal Board in October and December to discuss the possibility of the FREAB allowing state-licensed and state-certified appraisers to utilize standards of valuation practice other than the Uniform Standards of Professional Appraisal Practice when performing non-mortgage lending, non-federally related appraisal assignments. A similar meeting was held with the Montana Board of Real Estate Appraisers on Dec. 9.
According to the Institute, a rulemaking proceeding will commence in Florida in early 2016, and all stakeholders will have input into the development of rules allowing for the use of alternate valuation standards. In Montana, the next steps have not yet been finalized.