Today the NC Real Estate Commission is holding a training for instructors of the required Update Course. Broker Price Opinions are addressed in Section 4 of the 6 sections. Although only 3 of the total of 85 pages, the course directs anyone who obtains a copy of an illegal BPS may send a complaint to the NC Appraisal Board and the NC Real Estate Commission. Both agencies “will open and investigate the complaint and take whatever action is deemed necessary.”

We were able to ask Real Estate instructors how often illegal BPOs wer being performed.   They overwhelmingly said that it was a rampant practice.  With this course being required for EVERY real estate broker in North Carolina, lets hope we see an impact.
 
 
 
 
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.

ANTITRUST AND APPRAISAL FEES

 -

Yesterday the NC Appraisal Board issued an email related to price fixing, antitrust violations, and boycotting.  The Board’s email was in response to a “Call to Action: Part 2” email that was widely disseminated among appraisers. 

  -

Appraisers are now busy checking their copies of the Sherman Antitrust Act , seeing what Regulation Z of the Trust in Lending Act has to say, checking on what it means to boycott, maybe looking again at the North Carolina Appraisers Act (especially Article 2 related to Appraisal Management Companies), and following the Board’s encouragement for appraisers to “contact their attorney or errors and omissions insurance company.”

  -

In case you missed it, here is the Board’s email in its entirety. 

  -

From: NCAppraisal Board [mailto:ncappraisalboard@ncab.org]
Sent: Thursday, May 26, 2011 11:35 AM
Subject: NCAB – Email entitled CALL FOR ACTION: PART 2

  -

This email, which was apparently sent from a North Carolina appraiser to other appraisers, has come to the attention of the North Carolina Appraisal Board.  The Board was concerned about this email and sought legal guidance in this matter.

  -

Price fixing is a felony under both North Carolina and federal antitrust law. Both the Appraisers Act and the Ethics Rule of USPAP allow the Board to discipline an appraiser who is convicted of a crime or of engaging in criminal conduct. 

  -

It appears that the email solicits other appraisers to commit to charging a minimum fee for an appraisal.  Price fixing does not always have to involve setting a specific price.  Both North Carolina law and federal antitrust law are clear that soliciting others to fix prices is unlawful.  Appraisers should negotiate their own fees with their clients.

  -

The email in question states that “This… is not a form of price fixing.”  The Board does not want its licensees to be misled by this statement.  The standard advice of antitrust attorneys is straightforward: competitors should not discuss pricing among themselves

  -

Finally, the email in question refers to a website where appraisers are invited to sign a petition to refuse to enter into a contract with an AMC. Appraisers should consider the ramifications of signing such a petition as it may be a violation of North Carolina and federal antitrust law for appraisers to engage in a group boycott of their potential clients. 

  -

The Board encourages appraisers with questions about this issue to contact their attorney or errors and omissions insurance company.
 
 
 
 
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 LandSafe Appraisal Services Agreement

 -

Background

Much has been said, written, and discussed about the agreement LandSafe sent to fee appraisers back in late April.  While many appraisers may have signed it without a second thought and maybe without reading it, some appraisers have refused to go forward under the terms of the agreement.  Some have looked to their appraisal professional associations, private attorneys, errors and omission companies, and web searches for information –All trying to answer the question of “Should I sign it?”

 - 

As a practicing attorney advising appraisers and appraisal firms, I have given my opinions and detailed guidance to clients based on their particular situation and factors related to their individual businesses.  I have heard that if you call 800.924.3633 and then 5 on the menu you can request additional time based on certain factors.

 -

“It’s A Business Decision”

That’s the most common opinion I hear from others.  Appraisers ought to read it in detail and make an informed decision.  If you think that it is best for you and your career to sign it – ok.  If you will never sign it, will work to see that all your friends never sign it, and think that it is the first test agreement in the great AMC conspiracy against appraisers – ok.

 -

Some Balanced Guidance

One of the best reviews of this Agreement was put together by Peter Christensen for the benefit of Liability Insurance Administrators and members of READI.  I found this review to be detailed, thoughtful, and balanced.

 -

My Observation and Hope

It looks to me that this Agreement has a bunch of stuff in it that should never be in an agreement for appraisal services.  Maybe some guy at LandSafe copied and pasted some canned language from a Bank America general vendor agreement.  (Then again, it could be their sly way of slipping something by us, getting us on the hook with more liability, and letting them select the venue.)

 -

I hope, with the amount of uproar this thing has caused in the appraisal profession, the number of appraisers who have refused to sign it, and inapplicability of some of the provisions, that we might see an amended version of this Agreement offered by LandSafe.   

 -

I also hope that appraisers will continue to read in detail documents related to their businesses and will continue to seek to work together to address the many remaining issues related to our profession.

 -

Management Companies for Dentist

 -

Some dentists have management companies to deal with, too.  It seems from a pending bill before the North Carolina Legislature that there have been some issues about who controls the business practices and actives of the professional dentist.  House Bill 968, titled “An Act To Require That Dentist Agreements With Management Companies Do Not Shift Control Of Clinical Patient Services Away From Licensed Dentists” is in the House Commerce Committee. There is a similar bill in the Senate, Senate Bill 655.  In addition to addressing the calculation of compensation to the management company, the pending bill seeks to have all management company agreements be submitted to the Dental Board for a review and a determination of compliance with the proposed new law.
 
 
 
 
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.

Assistance for Appraisers

 .

            Many of our appraisal friends have been impacted in a variety of ways by recent storm damage in parts of North Carolina and other states.  There is a program out there with a wonderful purpose: “To provide emergency financial assistance (i) to members, employees (and dependents of members and employees) of the Appraisal Institute, a nonprofit organization, and (ii) to individuals who have made meaningful contributions to the real estate profession, who have experienced a disaster or emergency that has left the recipient in a state of financial, physical or emotional distress.”

.

For more information email relieffoundation@appraisalinstitute.org or go to the Appraisal Institute Relief Foundation.

.

Uniform Appraisal Dataset

.

 With the UAD on the horizon and currently set for an effective date of September 1, 2011, I have been including a discussion of this topic in The URAR Revealed and Appraisal Laws and Rules this spring.  We must follow Standard 2 of USPAP when communicating our assignment results.  One of the concerns I share with many appraisers is that it seems that the UAD seeks to limit us in approximately 61 fields on the URAR by regulating us to a finite set of predetermined descriptions.  We will be required to select the uniform description that is most similar to the actual language that we as professional appraisers would have otherwise chosen to use to adequately describe the property.  Standard 2 provides that we must not be misleading, while some of the proposed standardization requirements narrow down our ability to tell the whole truth about our subject property.  For example, we would be limited to two location factors.  What if the property has three or more factors and we are provided a very small space to include what might be a lengthy description?  Another common concern is the additional work an appraiser may need to put in to comply with Standard 2 by including the whole truth in an addendum or additional comments when the narrowness of the form would cause the report to otherwise be misleading.  Yet another of the many remaining concerns is the general ability of humans to understand the content of a report.  So what does  B;wtr;mtn A;AdjPwr;Lndfl   C3  Q4  6400sf  mean to a person?  Really?  Maybe it will mean more to a computer.

.

On Friday April 29th, the Chair of the Appraisal Standards Board wrote a letter to the Federal Housing Finance Agency to say that the ASB is “greatly concerned” that the instructions for using the UAD will result in “unintended consequences and potentially produce misleading reports.” The letter also notes the “lack of a robust vetting process” prior to putting this thing in motion.

.

Well done, ASB.
 
 
 
 
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 North Carolina Appraisal Board took action February 15 to move along a possible administrative rule that would seek, if approved, to require an AMC to pay customary and reasonable fees to appraisers. It was a split voice vote of 5-3, if I counted correctly.  The issue has been dealt with at the federal level in Sec 226.42 (f) of Regulation Z of the Truth in Lending Act. 

_

With the Board Members looking at this possible rule, there are two different questions — One on the substantive content of the rule and one a procedural question of whether the Board has the authority make such a rule.

-

Substantively, the issue is very simple.  Of course it is a good thing for appraisers to receive a fair fee. Who wouldn’t agree with this?  Professionals should be able to negotiate a fair and reasonable fee for services.  Appraisers perform vital services, have a duty to perform competently and ethically, and face problems when we breach that duty.  We should be paid appropriately.  That is not the issue.

-

The issue is all about procedure and the Board’s statutory authority to adopt the rule. The new AMC law gives the Board the authority to adopt rules that are reasonably necessary to implement, administer, and enforce the provisions of the law.   While the statue allows the Board to prohibit an AMC from withholding timely payment, the law is notably silent on the authority to require a customary and reasonable fee or otherwise address the amount of compensation for appraisers.  During discussion at the meeting last week, one of the Appraisal Board members who voted “no” articulately explained the procedural situation and noted that the matter was simply outside the Board’s authority and scope.

-

The proposed rule will next go to the Rules Review Committee for an evaluation of the Board’s authority to adopt the rule.  With the North Carolina Administrative Procedures Act providing that an agency may not adopt a rule that establishes a fee or other charge for providing a service in fulfillment of a duty (with only a few narrow exceptions), it should be an interesting evaluation. 

-

If the rule is ultimately turned down by the Rules Review Commission, appraisers and appraiser groups in North Carolina who want this rule would do well to study and understand administrative procedures in our state and move their focus from Six Forks Road to Jones Street.      

-

A BRIGHTER HOUSING OUTLOOK FOR 2011?

FannieMae’s recently released “Outlook for 2011 From Fragile Recovery to Firmer Expansion” has FannieMae revising its growth outlook higher for 2011based on an improving backdrop during the past two months supported by a jump in consumer spending and a continued
 
 
 
 
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.

Change coming to our profession in 2011
.
Our profession has seen its share of changes in the last few years and 2011 will not be an exception. Here are some thoughts on a couple of the obvious areas and I’ll save some of the other areas for future posts.

.

“Offer to Purchase and Contract” changes

Significant revisions to the standard form are set to become effective January 1, 2011. USPAP Standard 1-5 requires appraisers to analyze all agreements of sale as of the effective date of a market value appraisal. Remember the verb is “analyze” and the expectation is that the appraiser do just that.

.

I will be teaching an appraisal CE class this spring that covers the revisions to the contract, but until then you might want to study the new form and read this recent memo that provides guidance on the changes specifically for appraisers..

.

Broker Price Opinions—New Legislation?

Could it happen? Maybe. Think about where we are, where we were, and where we are going.

.

Where we are—Much has been made lately of real estate brokers performing BPOs for a fee for purposes that are not within the statute. Members and staff of North Carolina’s Appraisal Board and Real Estate Commission have held a joint meeting and have been in contact on this matter over the past few months.. The Board and Commission have both published guidance on this topic in their newsletters (See my October 27, 2010 post) and there are expectations that they will again address the topic.

.

Where we were— Remember 1997? Early that year the Board and Commission formally addressed BPO’s and published articles that reminded real estate brokers of the law. I recall that the Board’s article was published in about January or February of 1997. On April 15, 1997, a bill was introduced to in the North Carolina House to allow real estate brokers to perform a CMA or a BPO for compensation with very little limitations or restrictions and no language limiting the intended use or intended user of these products. Eventually the Board and Commission allowed BPO’s for a fee for certain purposes and the bill was postponed.

.

Where we are going— The Board and Commission are both looking at this issue again. Rumor has it that a large number of BPO’s for a fee are being performed by real estate brokers with some in violation of the law. If brokers are determined to continue this practice and there is a healthy demand from users of these products (rumor also has it that some lenders actually loan money based on a BPO), then…well, you predict what might happen. (Please leave a comment below with your prediction.)

.

Appraisal Management Companies

AMCs are required to register as of January 1, 2011. As of December 23, 2010, the Board has 28 AMC applications in the database. Soon appraisers will be required to verify on the Board’s website that AMCs we are working for are, indeed, registered in North Carolina. Look for more information on this soon. Here’s a look at the application.

.

I am also interested to see how things pan out with AMCs in NC. How many will pay the $3500 fee to register? How will things change in the appraisal ordering processes? Will appraisal fees change and, if so, how? How many appraisers will renew in 2011? Will our renewal fees change? I’ll do my best to keep you informed and, again, I welcome your predictions and comments.

.

2011 is going to be interesting.
 
 
 
 
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.