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 PA Commonwealth Court recently held that a claim of adverse possession could be brought against a municipality when the municipality’s only use of the property during the statutory period was to hold the property for possible future sale. In City of Philadelphia v. Galdo, the City of Philadelphia obtained title to a property by condemnation in 1974. The City has not physically occupied or provided any maintenance of the Property since the late 1970s. The City filed a complaint against Galdo – the current owner of the property – for continuing trespass, permanent trespass, and ejectment, and Galdo filed a counterclaim to quiet title, claiming ownership by adverse possession.

The trial court found in favor of the City and ordered Galdo ejected from the disputed property. The trial court further determined that Galdo could not sustain a claim for adverse possession against the City because the Property was devoted to public use.

The Commonwealth Court, in a 2-1 decision, reversed the trial court finding that Galdo could bring a claim for adverse possession. The Court explained:

The City does not provide any analogous obligation imposed by law or evidence of any public use of the Property to justify holding and neglecting it for decades. Furthermore, were we to determine that a municipality that condemns and holds previously private property for possible future sale did so for a public use, we would essentially hold that municipalities could institute a taking of private property for a land bank, keeping the property until the market provides a considerable profit upon its sale. Such a holding would be detrimental to private property rights. The City is not, therefore, immune from Galdo’s counterclaim for adverse possession because it did not hold the Property pursuant to a legal obligation, or for public use.

 

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.