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.

North Carolina to Update Banking Laws

This morning, I attended a meeting of the Joint Legislative Study Commission on the Modernization of North Carolina Banking Laws at the General Assembly.


The members of this committee are state Senators and Representatives who have been selected to take on the task of revamping our state’s banking laws. The Committee has been meeting about once a month for several months to study each section of the long and detailed statute. Paul Stock, Legal Specialist from the office of North Carolina Commissioner of Banks, put it this way: “This committee is undergoing the tedious task of reviewing every banking law in North Carolina.”


Representative Harold Brubaker and Senator Harry Brown are co-chairs of this committee. “This is the first time in about 50 years that the General Assembly has taken this close of a look at banking laws,” noted Brubaker.  The technological improvements over the past half-century are too many to name and there have been numerous changes in lending and mortgage practices.


At today’s meeting, two specific changes were proposed. One would require holding companies of banks to be registered with the Commissioner of Banks within 180 days of becoming a company and the other would amend laws regarding liquidation and dissolution of banks.


“The goal is to get a leaner, cleaner and more modern banking statute,” said Stock.


The committee members believe they are well on their way to meeting that goal and are expected to make a report to the 2012 Regular Session of the 2011 General Assembly prior to May 1, 2012. Committee member Sen. Tom Apodaca said, “This is the kind of committee I like. I like the fact that government and industry participants are working together to address things and move forward in the right way.”


Of course this is just a small piece of everything that’s been discussed by the committee over the past few months, and there’s still quite a way to go. I’ll be keeping an eye on this process.



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.

BPO Case — Raleigh Broker Disciplined by Commission

A Raleigh, NC real estate broker accused of performing unlawful broker price opinions (BPOs) recently agreed to a revocation of their broker license via a formal Consent Order accepted by the North Carolina Real Estate Commission.  In addition, the broker’s Broker-in-Charge agreed to a suspension with certain conditions.

The Commission has made its position on BPOs patently clear, publishing articles in the Real Estate Bulletin in May 2009 (see page 7) and in March 2011 (see page 4) and including the subject in this year’s Update Course which is required of all brokers..

Here are some of the issues related to the case as obtained from the Commission staff:

  • A real estate broker filed the complaint with the Commission after this broker performed an unlawful BPO for a lender on a property involved in a short sale.  Allegedly, the lender had evaluated an offer on the property and was moving toward closing when the lender engaged this broker for an unlawful BPO to confirm the value of the property.
  • As a result of the complaint, the Commission began an investigation that showed that the broker had performed over 400 BPOs but had received zero listings from the client.
  • The BPOs were produced on a form that had many characteristics of a typical Sales Comparison grid used by appraisers.

It should also be noted that the Commission has published that a BPO is an opinion of value of real property and consequently an appraisal under the law, unless it meets a narrow exemption.  NCGS § 93E-1-12 (a) provides that the Appraisal Board may take disciplinary action against any person who performs appraisals without an appropriate registration, license, or certificate or against any person who has acted or held himself or herself out as a registered trainee or a licensed or certified real estate appraiser when not so registered, licensed, or certified.  NCGS § 93E-1-13 provides that any person who willfully violates G.S. 93E-1-12(a) “shall be guilty of a Class 1 misdemeanor.”  I have no information on whether this sanction will be pursued.


This case may send shock waves through the real estate brokerage and financial communities. We’ll see what shakes loose.

For a detailed treatment of the law related to Broker Price Opinions in North Carolina see our October 11, 2010 post.
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.

Energy Efficiency Summit

Today I spoke at the 2nd Annual Energy Efficiency Summit in Raleigh, presented by The North Carolina Energy Efficiency Alliance. I was part of a panel that included an energy rater, a lender, and a real estate broker.  The audience consisted of builders, energy raters, lenders, brokers, policy makers, academia, government representatives, and yes, one other appraiser.

Many folks are pushing to have the consumer understand energy efficiency better in the hopes of being able to “drive” the further acceptance of energy efficiency in the market place.  Appraisers, however, need to remember that our job is to stay independent, impartial, and objective and to be ready to analyze the market’s reaction, if any, to energy efficient characteristics.  We sit back, watch the market, gather data, analyze data, and give our opinion on how the market will view a particular set of circumstances.  It is not our job to “drive” anything.  Our job is to develop and report credible assignment results.


Some of the topics raised at the summit include:


Changes in NC building codes and builders building to new standards


Loan programs for energy efficient properties


Adding more data in MLS to describe property features in more detail


Real estate brokers assisting appraisers by providing accurate and complete data


Consumer response to energy savings and if it is changing


HERS ratings and when will we all know our property’s rating


The relationship of “cost,” “price,” and “value”


Contribution of property characteristics to value


Substitution and the typical buyer


The Sales Comparison Approach relies on past data to form a current opinion


 Are we on the verge of social change?   Will buyers begin to ask sellers for past utility bills, HERS ratings, energy efficiency certifications, walk scores, and other energy related characteristics of the house?  Will these matters impact value?  Time will tell.

What is certain is that appraisers must keep abreast of social changes to determine if they have an impact on appraisal theory and practice and we must also be ready to revise current appraisal methods and techniques and devise new methods and techniques to meet new circumstances.  The competent, professional appraiser will also continuously improve skills so as to remain proficient in their profession.


BrightPath Education is pleased to be chosen for a joint venture with Appalachian State University and the North Carolina Energy Efficiency Alliance to offer a series of classes across the state to help appraisers increase competency level in appraising energy efficient subjects.

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.

AppraiserLoft has Registration Suspended in North Carolina


Yesterday, the North Carolina Appraisal Board (“Board”) took action to suspend AppraiserLoft’s registration as an appraisal management company (“AMC”) in North Carolina.


AppraiserLoft, a San Diego-based AMC, is the first AMC to have a registration suspended in North Carolina using the Board’s new power to summarily suspend an AMC’s registration under NCGS § 93E-2-8(b). Under the law, AppraiserLoft has the right to make a written request for a hearing before the Board.


After much speculation, AppraiserLoft closed October 10, 2011 and has left appraisers stuck with unpaid appraisal fees to the tune of approximately $3 million.


If you believe AppraiserLoft owes you fees and you would like to evaluate the situation to look into possible options for collection, you may want to seek legal assistance from an attorney.


Currently there are 136 Appraisal Mortgage Companies registered in North Carolina. Most of the 18 AMC complaints received by the Board in 2011 have involved issues related to the payment of appraisal fees. There are currently 8 matters pending with the Board.

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.

NC Banking Laws to Change?

Today there was a meeting of the Joint Legislative Study Commission on the Modernization of North Carolina Banking Laws.  This Commission was formed by Senate Bill 555 back in June of this year and its purpose is to determine whether and to what extent the North Carolina Banking Laws need to be updated.


Rep. Harold Brubaker and Sen. Harry Brown co-chair the Commission.  Rep. Brubaker presided today and the Commission received remarks from Commissioner of Banks Joe Smith and reviewed a presentation on the proposed draft changes of Articles 1 to 10 of the banking laws.


Chairman Brubaker set a detailed agenda for the Commission to review each of the 10 Articles during monthly meetings through spring 2012.  The Commission is expected to make a report to the 2012 Regular Session of the 2011 General Assembly prior to May 1, 2012.


There was a similarly-titled Commission appointed in 2009 that made findings and recommendations in the spring of 2010.


The next meeting of the current Commission is December 19, 2010 at 10:00am in room LOB 544.
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.

Guidance on Sales Concessions – You Have a Voice

Earlier this month, The Appraisal Foundation’s newly-created Appraisal Practices Board released its first Exposure Draft, Adjusting Comparable Sales for Seller Concessions. The draft has been released for appraisers to review and make scholarly comments and recommendations for modifications to the Appraisal Practices Board.


This first Exposure Draft covers six important topics:

  • Definitions of sales concessions and financing concessions
  • Important considerations when verifying concessions
  • Determining when to adjust for concessions
  • Methodology for special and creative financing, seller paid loan discount points or buy-down programs, inclusion of personal property and cash incentives, settlement assistances or seller contributions, and statistical analysis
  • Considerations for concessions and non-residential property
  • Working with concessions in the cost approach and income approach


Historically there have been multiple approaches and opinions related to identifying and adjusting for concessions. This draft is significant because it not only emphasizes The Appraisal Foundation’s attention to this issue, but also the value it places on your opinion, the appraiser, who is actively dealing with concessions.


Some approaches worth reviewing are as follows:


Fannie Mae’s Guidance for Lenders and Appraisers says that sales and financing concessions should be adjusted to the market at the time of the sale, and that dollar adjustments should reflect the market reaction to the difference rather than the cost of the difference. In Question 15 of Fannie Mae’s recent Appraisal and Property Report Policies and Forms FAQs, it is explained that sales concessions must be analyzed for impact on the sale price and that an appraiser must make adjustments for what the property would have sold for without the concession, rather than the dollar amount of the concession itself. They do not suggest across the board adjustments but instead note that each comparable property must be analyzed individually for its differences and similarities to the property in question.


The FHA, in Question 31 of its Frequently Asked Questions, offers clarification on its guidance for concessions, explaining that each individual comparable sale must be analyzed on a cash-equivalent basis that reflects the market difference in sale prices. FHA notes specifically that dollar for dollar cash equivalency adjustments are not reliable for buyers. Adjustments for concessions should not be based on how typical a concession is in its market segment, but rather only by how it affected the sale price. Adjustments also need to be made for special or creative financing. Appraisers should compare the financing terms of the comparable property to those offered by a third party lender who is not involved in the current transaction. Adjustments are to be made in terms of market reaction and not by dollar for dollar cost of financing nor concessions.


The Appraisal Institute’s Appraisal Journal, Winter 2009 offers solid guidance and detailed examples on concessions.   The article also refers to the Uniform Standards of Professional Appraisal Practice’s Standards Rule 1-2(c), which states that any financing terms with unusual conditions or incentives must be clearly identified and their impact on the property’s selling price thoroughly analyzed. AI recommends compliance with USPAP and places an emphasis on full disclosure. Appraisers should specifically indicate where concessions are included and whether the appraisal is based on cash or cash equivalent. Appraisals also need to indicate in their reports whether concessions have been assumed to be typical.  See the article, it is worth your time.


Appraisers are reminded to consult the “Definition of Market Value” on page 4 of the Uniform Residential Appraisal Report  and review the language that addresses market value and concessions.


It’s worth reviewing these opinions, but don’t pass up this opportunity to inform yourself, generate your own opinion, and share it with the APB!


The Appraisal Practices Board is looking for your comments on this first Exposure Draft. The Board plans to take these comments under consideration and will then vote on adopting suggestions and making revisions to guidance that will be reflected in future exposure drafts.


All comments will be thoroughly read and considered by each member of the Board. Send comments by December 2, 2011, to:  


Appraisal Practices Board

The Appraisal Foundation

1155 15th Street NW, Suite 1111

Washington, DC 20005


Comments can also be faxed to 202-347-7727, or emailed to APBcomments@appraisalfoundation.org.  


Commenters should include references to line numbers, thorough explanations about your concerns, examples or illustrations, suggestions for change, and finally, any other issues you think the APB should take under consideration.

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.

USPAP – The Washington Update

Hello!  I have been in Washington, DC for the past few days at the Association of Appraiser Regulatory Officials (AARO) conference.  AARO is celebrating their 20 Year Anniversary and graciously invited me, as one of their former presidents, to attend as a guest.  One of the benefits of attending the AARO conference is meeting with and attending presentations given by the members of the Appraisal Standards Board. (ASB)  As you know, the members of the ASB are the folks that write and update the USPAP.  Back when I was part of the NC Appraisal Board staff, I was lucky enough to have the opportunity to receive this level of training for many years.  It was extremely valuable then, just as it is today, to be able to receive this information directly from the authors of USPAP.


Some major changes to the New USPAP, effective January 1, 2012 are: revisions to the definitions of “client”, “extraordinary assumption” and “hypothetical condition”, additional guidance related to “exposure time”, creation of the new RECORD KEEPING RULE, and an addition to the appraisers certification, revisions to Standards 7 & 8, updated illustrations in AO-21, and some new frequently asked questions.


Upon returning to NC this week, I will be briefing all of the BrightPath USPAP instructors on the information I’ve gathered at this conference.  Already, all of our NC USPAP instructors have successfully completed the instructor renewal course that is required of all approved USPAP instructors.  And very soon we will all be fully prepared to give you a detailed explanation of all the USPAP changes.  It is our goal to explain the changes, the reason behind the changes, and their application to your job of appraising in the real world.


While the focus of the meeting was on USPAP 2012-2013, we were given information on possible changes coming in 2014.  But, let’s focus on the task at hand and worry about that later.


So, get your new USPAP 2012-2013 book, and enroll in one of our many classes.  And we’ll do our job of explaining USPAP accurately and timely so you can know the rules and lower your risk as you go about your profession of appraising.

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.