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

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.

Served With a Subpoena?

In my role as an attorney helping and advising appraisers and appraisal firms, I have been contacted lately by a number of appraisers who have been served with a subpoena.  Typically, the subpoena will seek to compel the appraiser to appear and testify before the court or at a deposition or to produce and permit inspection and copying of named documents (usually the appraisal and work file.)  In some cases, the compelling party is neither the client nor a named intended user and the issue in the related action is nowhere close to the intended use of the appraisal.

There are a number of issues to be evaluated and possible steps to take once an appraiser is subpoenaed.  In addition to me, there are also some good sources of information on this topic.  First, the North Carolina Appraisal Board has published a very good article on page 4 of their February 2011 newsletter.   The article is not attributed to a particular author.  Next, Claudia Gaglione provides guidance on things to keep in mind when an appraiser has been subpoenaed related to an old appraisal and the file has been shredded.

So next time you are subpoenaed, relax, take a deep breath and do what you need to do.  Ignoring it and hoping it goes away is not a viable option.  HS5J6JTKG26H
 
 
 
 
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.

The UAD – September 1, 2011 or January 1, 2012?

With HUD’s Mortgagee Letter issued this week to FHA Roster Appraisers there is some confusion about when the UAD is actually going to be effective.

September 1, 2011 is still the effective date for Fannie Mae and Freddie Mac.

HUD is making the UAD mandatory for all FHA case numbers assigned on or after January 1, 2012 and for all REO and PFS properties within an effective date on or after January 1, 2012.  This delay by HUD is “to allow Mortgagees sufficient time to make any necessary data system changes.”

Keep in mind that FHA will only apply the UAD to the URAR (1004) and the condo report (1073).

Of particular note on page 3 of this week’s letter are the 4 areas where FHA has specific compliance requirements that relate to the improvements, finished/unfinished basement area, “as-is” appraisals and the use of supervisory appraisers and trainees.

So, is the UAD effective September 1, 2011 or January 1, 2012?  Both dates may apply based on the type of assignment.

HS5J6JTKG26H
 
 
 
 
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 Appraisal Board Heading Toward Historic Change

Three new members of the NC Appraisal Board were sworn in at the August 9, 2011 board meeting. It is anticipated that two additional new members will be sworn in at the September 13, 2011. This could mean that by September a majority of the board members (5 of 9) will be newly-appointed. I post this to the blog not as a commentary on the individuals who have rotated off the board after their service or on those who are new to the board and not as any prediction in policy changes, but simply to note the significance of the change.

The NC Appraisers Act calls for the appointing authorities (Governor, Speaker of the House, and President Pro Tempore of the Senate) to make appointments on a schedule so that “members of the Board shall serve three-year terms, so staggered that the terms of three members expire in one year, the terms of three members expire in the next year, and the terms of three members expire in the third year of each three-year period.” However two of the appointments that were to have been made in 2010 were actually made in 2011, giving us the total of 5 new members in a year.

I have been connected to the NC Appraisal Board for over twenty years (licensed as an appraiser on January 1, 1991, on the board staff from 1995 to 2003, and now as an attorney handling appraisal cases and an appraisal instructor since 2003) and I do not recall any one year in which a majority of the board members changed. In addition, one of the new board appointments was made under last year’s change to the statute that requires one of the appointees, “…shall be a person representing either the real estate appraisal management industry or the banking industry.”

Here is the current list of board members that will likely be updated to show all 9 members after the September meeting. You can expect the Appraiser Report, the board’s newsletter, to introduce the new members in the next issue.
 
 
 
 
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.

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