Mel Black Blog

Information for Appraisers and Real Estate Professionals in the Carolinas

Mel Black is an attorney, writer, speaker, educator, appraiser and broker. Both his law office, Mel Black Law, and the company he co-owns, BrightPath Education, are located in downtown Raleigh.


Mel Black Blog - Information for Appraisers and Real Estate Professionals in the Carolinas

NEW 2014-2015 USPAP BOOKS AVAILABLE FOR $10: Order by Oct. 11, 2013

September 27, 2013

The North Carolina Appraisal Board is making available to each appraiser, trainee, and AMC compliance manger in North Carolina one copy of the 2014-2015 edition of the USPAP at the cost of $10.00. Order your copy using this form and your copy of USPAP will be mailed directly to you from The Appraisal Foundation to the address stated on the order form. Please note the Board will not accept orders after 10/11/2013.

Please purchase your books through the Board as this is THE BEST DEAL for a new USPAP book.  The new book will be used in your required 2014-2015 USPAP Update course as well as for handy reference in your appraisal practice.  This is a great money-saving opportunity because a single USPAP book ordered directly from the Appraisal Foundation will cost you $75.00 plus shipping.
Use the following link to purchase your USPAP book for $10 through the Board postmarked no later than October 11: http://ncappraisalboard.org/forms/USPAPOrderForm.pdf

Please make any comments using the link below the email form.

NJ Governor Vetoes BPO Legislation

August 21, 2013 

The Appraisal Institute, through its weekly E-newsletter “Appraisal News Online,” reported today that New Jersey Governor Chris Christie vetoed proposed BPO legislation. The legislation, Senate Bill 2551, would have greatly expanded the purposes for which a real estate broker in New Jersey could perform a broker price opinion or BPO.  While I haven’t made a close comparison, the bill seems to have much the same purpose as the BPO legislation that passed in North Carolina last year.  (See prior blog posts.)

 

In vetoing the bill on August 19, Governor Christie noted that the bill would have caused confusion in the “complex process” of “determining the precise value of real estate” with consumers “struggling  to determine when and why to use broker price opinions, comparative market analyses, or appraisals.”

 

See the Appraisal Institute’s full article here.

The Future of USPAP and Top Appraisal Issues

July 30, 2013

Recently, I attended a public hearing in Chicago on the future of USPAP and how it might address top appraisal issues. Sponsored by the Appraisal Standards Board of the Appraisal Foundation, the meeting was not to discuss changes contained in the upcoming version of USPAP that will be effective January 1, 2014. The purpose was to hear from a variety of sources about areas the ASB should study when considering whether to amend USPAP beyond the upcoming version.  During the public hearing, the ASB heard from panels composed of:

  • Federal Regulators
  • State Appraiser Regulatory Agencies
  • Professional Appraiser Societies
  • Users of Appraisal Services
  • Litigators and Litigation Appraisers

 

A large number of issues were raised during the day-long meeting.  I did my best to accurately make note of the discussion. Some of the top issues that resonated throughout the day and some of the associated questions are:

Draft Reports

Is it acceptable to submit a draft report, or part of a report, to the client?  What is the impact on an appraiser’s objectivity, impartially, and independence when the client provides feedback and direction on draft reports? How widespread are ethical issues related to draft reports in litigation assignments? Should the appraiser be required to retain a paper trail of all drafts and client comments?  Would the use of draft appraisals for residential mortgages effectively take us back to the “comp check” days?  Would draft reports be a disaster for residential appraisals?

Changing USPAP

Why does USPAP change so often? Does the ASB’s commitment to a biennial schedule for changing USPAP contribute to confusion, misapplication, misunderstanding, inconsistent enforcement, inaccurate application, and increased costs?  Is there merit in leaving USPAP as it is and only adding guidance material if it is needed?  Should the ASB hire legal counsel to review all exposure drafts before they are released for comment? Should the enforceable parts of USPAP focus only on ethics with other areas addressed through guidance material? Should there be two versions of USPAP—one for appraisals for intended uses related to mortgage financing and one for other intended uses?

Workfile Contents

What is required to be in the workfile?  What does “all other data…to support the appraiser’s opinion and to show compliance with USPAP” mean? What does “references to the location(s) of such other documents” mean?  Does USPAP require an appraiser to print or otherwise capture the image for fluid, online, changeable data (MLS, tax records, etc) for the file?  Can the workfile be the entire office or the appraiser’s brain?  Are the state boards enforcing the RECORD KEEPING RULE appropriately?

Years for Workfile Retention

Is five years too long or not long enough?  State boards currently investigate and discipline appraisers on appraisals beyond the five years, should they?  Is it reasonable to lengthen the minimum time to 8 years and have board not investigate reports beyond the 8 years?  Should the minimum be 3 years?

More Definitions and More Detailed Definitions

Does the ASB need to address “misleading,” “credible,” “assignment,” “client,” “agent,” “analyze,” “bias,” “series of errors,” and other terms and concepts?

Enforcement and Interpretation of USPAP

How open to interpretation is USPAP?  If USPAP is subjective and is applied in a variety of ways, who (state boards, lenders, clients, AMCs, courts, or others) decides what it really means?  Are state boards prosecuting honest appraisers on subjective data and alternate interpretations of USPAP? Should state boards hone their focus on enforcing ethical matters?  Are parties in a civil matter filing complaints in an attempt to use the state boards for investigation purposes?  Should clients be required to file any compliant during the time of the appraisal’s intended use and barred from filing the complaint years later after loan default?

Use of an Appraisal

If an appraisal is an opinion and if the client accepts the appraiser as a professional, then shouldn’t they accept the opinion? If the appraiser acted unethical, then shouldn’t they be punished?  Is it appropriate for clients and others to transform the appraiser’s current opinion of market value into a future financial guarantee to be used as an excuse for the client’s bad judgment?

Miscellany

What can be done about pressuring appraisers on fee and turn time?  Are clients and AMCs looking past competency and ethics when selecting appraisers who have low fees and fast turn times?

Do appraisers understand that the “form” is not the “appraisal” and that filling out the URAR (1004) is not developing an appraisal?

Are oral reports abused ethically in litigation?

Should there be more USPAP education for appraisers to include a requirement that all appraisers complete the 15-hr USPAP course and pass the examination periodically?

Should appraisers be required to disclose and analyze the last sale of the subject, even if the last sale was decades ago?

Is more guidance needed on if and how USPAP applies to a variety of services?

Should the focus be on producing reliable value opinions to use to make credit decisions and forget about some USPAP matters such as scope of work, reporting options, recordkeeping, etc?

While the ASB will likely not address all of these issues as some of these issues may be outside their purview, it is positive that they actively sought the input of a variety of groups and that they were willing to receive written and oral comments from panelists.  If the ASB follows the typical pattern, they will issue at least one exposure draft of possible future changes to USPAP and will request comment.  You can monitor exposure drafts via the Appraisal Foundation’s website.  You can also email the ASB with your comments and ideas at ASBComments@appraisalfoundation.org.

Feel free to click on the “comments” link below to post you thoughts on these and other topics. Thanks.

AQB to Meet in NC

April 25, 2013

The Appraisal Qualifications Board of the Appraisal Foundation will hold a meeting in Charlotte, NC on May 3, 2013 from 9:00AM to 12:00PM. This is a unique opportunity for NC appraisers to attend a Foundation meeting held in our area.

The agenda includes:

  • Exposure Draft of a Proposed Interpretation and Revision to the Real Property Appraiser Qualification Criteria
  • Implementation of Adopted Revisions to the 2015 Real Property Appraiser Qualification Criteria
  • National Uniform Licensing and Certification Examination Update
  • Course Approval Program Activity
  • Undergraduate / Graduate Degree in Real Estate Review Program

The location of the meeting is the Charlotte Marriott City Center located at 100 W. Trade Street Charlotte, NC 29202. If you would like to attend the meeting, The Foundation requests that you register online at http://www.appraisalfoundation.org/ and click the Events/Meeting Registration button.

TWO NC APPRAISERS DISCLIPINED THIS WEEK: ONE GIVEN LONG-TERM SUSPENSION AND ONE REVOKED

On Tuesday March 19, the NC Appraisal Board suspended one appraiser and revoked another in separate hearings.   This post contains some general information gained from attending these hearings as an observer.   While the Chairman announced the Board’s decisions after the close of each hearing, the reporting of particular details on the cases should be reserved until the Board has issued the formal “Findings of Fact and Conclusions of Law” for each case.   Also, each appraiser has a statuary right to appeal the Board’s decision.

FIRST CASE

The appraiser received a 2-year suspension of their certification and is required to take the 15-hour National USPAP course and pass the examination.  Also, there are some restrictions on the appraiser’s ability to have trainees in the future.  Some of the hearing topics included:

  • Signing a truthful certification.
  • Sending a trainee to inspect the subject property alone and then the supervisor certifying in the report that the supervisor inspected the subject property when the supervisor is alleged to have not inspected the subject property.
  • Following a client’s assignment condition of not allowing trainees to work on the assignment.
  • Comparing the version of the report that the supervisor sent to the Board in response to the complaint with the version that the Board obtained from the lender.
  • Completely describing and analyzing the characteristics of the subject property.
  • Maintaining an accurate appraisal log.
  • A trainee attempting to upgrade to certified residential when the supervisor is under investigation.

 

This case included testimony from two Board staff members, the trainee who did the inspection, and a notarized affidavit from the homeowner that provided details on who conducted the inspection.

 

SECOND CASE

The appraiser’s certification was revoked. Some of the hearing topics included:

  • Communications with the client.
  • Communications with the Appraisal Board.
  • Laws and rules related to the investigation process and the need to respond to the Board, including the application of NCGS §93E-1-12 and 21 NCAC 57C.0100.
  • Accepting and retaining appraisal fees without delivering the appraisal report to the client.
  • License renewal and late renewal.
  • Appropriately wrapping up appraisal practice when leaving the profession.
  • Intended Use.
  • Contents of the engagement letter.

 

This case included testimony from one Board staff member and a notarized affidavit from the appraiser’s client.

 

An unfortunate observation is that the topics included these hearings were very basic appraisal-related concepts involving non-complex appraisal issues that require only an introductory understanding of the URAR, USPAP, and the Appraisal Board Laws and Rules.  This is knowledge that some might consider fundamental to operating as an appraiser.

 

As an appraiser, please insure that you have a solid foundation of professional knowledge on which to build your practice and consider taking quality appraisal qualifying and continuing education that contains accurate and timely appraisal topics in an educational setting where you get your money’s worth.

 

As an appraisal educator and school owner, I urge you to please consider the following classes that provide solid information on some of the topics addressed at these hearings:

 

  • Limiting Liability: Appraisal Case Law Update
  • Appraisal Board Rules and Laws
  • The URAR Revealed
  • Square Footage and Other Essential Topics
  • Developing, Using, and Defending Adjustments
  • And more

BPO Issue Taken Up By The NC General Assembly

Today, language was added to Senate Bill 521 (“S521”) that would change North Carolina’s position on when and by whom a Broker Price Opinion (“BPO”) a Comparative Market Analysis (“CMA”) may be performed.  Sponsored by Sen. Daniel Clodfelter of Charlotte, the bill was originally drafted to repeal the Rule in Dumpor’s Case.  The BPO/CMA language was added to an existing bill in a procedural move that will allow the language to be considered in this year’s “short session.”

The House Judiciary Subcommittee A took up S521 again today and considered whether to allow a proposed committee substitute (“PCS”) that included language that liberalizes the purposes for which a real estate broker may perform a BPO or CMA.   The Subcommittee, Chaired by Rep. John M. Blust, first considered this issue last Wednesday.  After comments from appraisers and real estate brokers, the Chair displaced the matter until this week to allow interested parties to work on the bill and address a number of questions and issues.

The Subcommittee heard from Rep. William Brawley, who explained the content and meaning of the PCS.  The Chair also recognized interested parties to speak.  One appraiser spoke in opposition of the PCS and described how this PCS would “blur the lines” between objective appraisal practice and brokerage activities.  One appraisal group, that strongly and articulately opposed the PCS last week, voiced its continued concerns with the bill, but added that the group would not oppose the PCS if certain language were added via an amendment.  Rep. Ric Killian offered an amendment that provided that “no appraiser shall be disciplined for completing an appraisal that includes a reduced scope of work or reporting level as long as it is appropriate for the intended use and is performed in accordance with the Uniform Standards of Professional Appraisal Practice.”  The amendment also changed the proposed effective date from July 1, 2012 to October 1, 2012.

The Committee approved the PCS with the Killian amendment after some discussion from Rep. Deborah K. Ross on why the bill was moving so fast and with some thought to waiting to the January 2013 session to have it run as a standalone bill rather than being tacked on to a current bill that may not be considered or evaluated by another House or Senate committee.

The bill currently proposes many changes to the North Carolina Real Estate Commission’s statute and the North Carolina Appraisal Board’s statute.  Some of these proposals would:

  • Define “broker price opinion” and “comparative market analysis” as “an estimate prepared by a licensed real estate broker that details the probable selling price or leasing price of a particular parcel of property of or interest in property and provides a varying level of detail about the property’s condition, market and neighborhood and information on comparable properties, but does not include an automated valuation model.”
  • Clarify that the new language will not apply to any BPO or CMA performed by a broker licensee for no fee or consideration.
  • Expand the purposes for which a broker may perform a BPO or CMA to include for an existing or potential seller, buyer, lessor, or lessee of a parcel of or interest in real property, for a third party making decisions or performing due diligence related to certain activates, and for an existing or potential lienholder for any purpose other than mortgage loan origination.
  • Establish required content for all BPOs or CMAs that would include, but not be limited to, 11 requirements listed in the bill.
  • Give the North Carolina Real Estate Commission the power to promulgate rules not inconsistent with the proposed provisions
  • Restrict brokers from performing BPOs and CMAs when an appraisal is required by federal and state law.
  • Prohibit a BPO or CMA from including the reporting of a predetermined result.

The next step is for the S521 to be considered on the House floor.  If approved, it will be sent to the Senate for concurrence.  If passed by the House and Senate and then ratified by the Governor, the bill would become law October 1, 2012.  Both the House and Senate calendars may be found here.  The bill is expected to go to the House floor tomorrow.

The contents of this blog may only be republished with the  permission of the author. To request permission, please contact Mel Black by email or by phone at 800-268-6180 or 919-865-2577.

APB Adopts Voluntary Guidance on Adjusting Comparable Sales for Seller Concessions

by Alyssa Marcus

One of the responsibilities of the Appraisal Practices Board (APB) is to identify issues where appraisers and appraisal users need some extra guidance. In March, the APB released a Valuation Advisory on adjusting comparable sales for seller concessions.

The purpose of the document is to provide guidance on generally accepted methods and techniques of seller concession. The document defines sales concessions and financing concessions, talks about verifying concessions, explains when an appraiser adjusts for concessions and more. A list of suggested further reading is listed at the end of the 17-page document.

You can download the document at the Appraisal Foundation’s website here.

NC Appraisal Board Denies Request Related to BPOs

At today’s meeting, the NC Appraisal Board voted unanimously to deny a request for a declaratory ruling that would impact how Broker Price Opinions (BPOs) could be performed in North Carolina.  Click here for details on a recent action against a real estate broker  who performed unlawful BPOs taken by the Real Estate Commission.

The Real Estate Valuation Advocacy Association (REVAA) reached back through the cobwebs of administrative law and dusted off a rarely used rule (21 NCAC 57C.0401) to make a request that is even more rarely approved.  In my nearly 20 years of experience with the Board, dating back to when it was part of the Real Estate Commission while I was employed there, there may have been a successful request for a declaratory ruling, but I can’t remember it.

REVAA, a trade organization comprised of companies that produce and deliver BPOs, CMAs, AVMs, and other innovative approaches to valuation, asked the Appraisal Board to clarify the Board’s statute to allow a real estate broker employed by a lender to perform “discretionary BPO/CMA” when it is ordered for “discretionary business reasons” and federal regulations do not require an appraisal.  In its nine-page filing, REVAA addressed a number of areas, including the application and interpretation of the North Carolina Statutes, details of REVAA’s legal argument, and sample language for the Board’s use.

From the discussion at the Board meeting, it seemed to me that the vote to deny the request may have been based largely on procedural matters. Notably, the Board’s rule on declaratory rulings provides that the Board shall not issue a declaratory ruling when the subject is materially related to a matter under investigation by the Board.  It was announced today that the Board has a matter under investigation that relates to a real estate broker who is alleged to have performed an improper BPO.

It’s interesting to me that REVAA would ask the Appraisal Board to broaden the plain meaning of the statute when any effort to do so would be more appropriately addressed in the North Carolina General Assembly.

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