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.

 

The U.S. Supreme Court declined to hear a West Virginia eminent domain case. In Beacon Resources Inc. v. W. Virginia DOT, the trial court denied the West Virginia Department of Transportation’s request for a jury instruction that compensation could not include any lost profits suffered by the condemnee. The jury awarded Beacon $24 million and the DOT appealed. The West Virginia Supreme Court vacated the award and remanded the case for a new trial stating the lower court erred in not giving the requested jury instruction. The condemnee appealed and the U.S. Supreme Court declined to hear the appeal.

According to Interthinx, Inc., a subsidiary of First American Financial Corporation, the “National Mortgage Fraud Risk Index” increased 3 percent from the last quarter, and is unchanged from one year ago.  However, the “Property Valuation Fraud Risk Index is down 2 percent from Q3 2014.  According to the report, Florida is the riskiest state this quarter with Property Valuation and Occupancy Fraud Risk being the main drivers of Florida’s overall risk index.  Mortgage fraud risk is also rising in MSAs in Texas, Oklahoma, Kansas and the Dakotas.

The VA Supreme Court recently heard an interesting case involving facts that should be cautionary to litigants.  In that case, VDOT made an initial offer to the property owners of $246,292 based on an appraisal.  When the condemnees rejected the offer, VDOT obtained another appraisal estimating the damages at $92,127.  VDOT told the condemnees that they could either accept the offer or VDOT would only present the lower appraisal at trial.

The condemnees would not agree to the initial offer and at trial the jurors were only allowed to hear the lower value.  The condemnees ultimately appealed to the VA Supreme Court alleging, in essence, that the VDOT engaged in an improper use of its power and the jurors should be permitted to hear the story of the negotiations.  The Court agreed and held that allowing the jury to hear the whole story – the initial appraisal and the state’s explanation for why subsequent appraisals were less – provides a “limited and wholly appropriate check on the broad powers of the state in condemnation proceedings.” The justices ordered a new trial for the condemnees.

The Pennsylvania Commonwealth Court recently ruled that the failure of a local sheriff’s office to include a return of service document in filings related to a disputed tax sale violated notification requirements under state law.  In that case, the allegation was that the Montgomery County Tax Claim Bureau failed to comply with notice provisions because affidavits filed in court by the county sheriff did not include notice of the tax sale.  “In this case, Bureau relied on the affidavits to meet its burden of proving compliance with all applicable statutory notice requirements,” ” Judge Patricia McCullough said in the opinion. “However, because the affidavit of personal service did not include the copy of the notice required by [the statute], that affidavit of personal service was not ‘complete on its face.'”  The court also reversed the trial court’s reliance on the incomplete affidavits to conclude that there was proper notice, emphasizing that “law is clear that ‘no owner occupied property may be sold’ unless the owner has received personal service of notice.”

One issue that continues to be litigated around the country is the extent to which an appraiser is liable to a borrower for a negligent appraisal prepared for a lender.  This issue was recently addressed by the Georgia Court of Appeals. 

In Adams v. DeWitt, 2014 WL 2609974, a purchaser of a property allegedly relied upon an appraisal in deciding to purchase the property.  However, the appraisal expressly stated that the appraisal was intended solely for the use of the lender.  This is generally standard language in appraisals for lenders.  The Court of Appeals held that the appraiser owed no duty of care to the borrower and that it was proper for the appraisal to contain limitations such as those contained in the appraisal.

The law on this subject varies by state and should be consulted if this is an issue.

The Appraiser Qualifications Board of The Appraisal Foundation released a new exposure draft of proposed revisions to the 2015 Real Property Appraiser Qualification Criteria. It includes a new requirement that all applicants for real property appraiser credentials have a background that does not call into question public trust.  Applicants would be required to provide state appraiser regulatory agencies with all information and documentation necessary for a jurisdiction to determine an applicant’s fitness for licensure. An applicant will not be eligible for an appraiser credential if they have been convicted of or pleaded guilty or nolo contendere to a crime that would call into question the applicant’s fitness for licensure.

Due to the original effective date of the background check requirements (Jan. 1, 2015, but now delayed until Jan. 1, 2017), some states already have implemented new laws, some of which contain provisions that go far beyond what is required as minimum criteria by the AQB.  

One frequent issue in eminent domain and other valuation cases is the admissibility of appraisals obtained by a party other than the appraisal they intend to actually use.  For example, in a case that will be heard by the VA Supreme Court, VDOT had two appraisals in an eminent domain case.  VDOT chose only to present the lower value appraisal to the jury and the judge prohibited any reference to VDOT’s higher appraisal.  VDOT has been criticized for this tactic and have been accused of bullying tactics by one newspaper.   http://hamptonroads.com/2014/11/states-high-court-should-put-vdot-its-place-unfair-property-appraisals

It is not uncommon for a property owner or a condemning authority to have more than one appraisal.  Condemnors have been criticized for paying property owners the lower of the appraisal amounts.  The VA Supreme Court will decide the admissibility of these appraisals.

It is also not uncommon for property owners to obtain more than one appraisal in eminent domain and other settings.  One way we try to protect these appraisals from being obtained by third parties is to retain the appraiser – or other experts – as “consulting experts.”  These experts’ work product can then be protected as confidential “work product.”

So, if you are considering retaining valuation experts, it is important to consider retaining these experts through an attorney.

Mortgage Daily has reported that there was no quarterly change in the risk of mortgage fraud, according to the 2Q 2014 National Mortgage Fraud Risk Index published by analytics firm Interthinx.  However, the risk of Valuation fraud was up for the quarter.

The mortgage fraud risk index, which is based on an analysis of loans processed through the FraudGUARD system. California has the highest fraud index. Florida and New Jersey are tied at second place for highest overall risk.  The national Property Valuation Fraud Index was higher than the first quarter and the same point last year.