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Are BPOs More Sinister Than They Appear?

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Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
Very interesting and good article. I'm not sure I agree with the part about BPO's not being legal, at least in my state there is a specific exception in the appraisal law for them.

My favorite part of the article:

To be considered a complete appraisal, three approaches to value must be considered, says Burnitt. "That does not necessarily mean they must be utilized," he says, "but they must be considered."

Amen! (In spite of what some have posted here in the past.)
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Depends on the state. In Texas, they are only legal for obtaining listings. They are not legal for other purposes.

Roger
 

Blue1

Elite Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
California
Way to go Mike! Very well said and written!!!
 

Jack Schoppa

Freshman Member
Joined
Mar 29, 2002
Professional Status
Certified General Appraiser
State
Texas
One MORE big WAHOOOO from north Texas for Mr. Garrett ! ! !

I have posted the following on a couple of related threads recently (hoping for some suggestions). I am sure glad to see some others finally getting involved in this.

Here in Texas Brokers have the following legislation, yes, unfortunately this is actual legislation printed in the "Texas Administrative Code". I may paraphrase, but I will quote what I state and then provide the link if anyone wants to read the entire thing, it isn’t really that long. My comments will be in parenthesis () and are NOT part of the actual verbiage in the document.

Texas Administrative Code
TITLE 22 Examining Boards
Part 23 Texas Real Estate Commission
Chapter 535 Provisions of the Real Estate License Act
Subchapter B Definitions
Rule 535.17 Appraisals (yes, the Rule itself refers to "appraisals")

(a) A salesperson (this means the person does not even have to be a licensed Broker) may make, sign, and present real estate appraisals for the salesperson’s sponsoring broker, but the salesperson must submit appraisals in the broker’s name and the broker is responsible for the appraisals. (How about that?)
(b) Texas Civil Statues ……… does not apply to appraisals performed by the employees of a financial institution ….. connected with a contemplated loan …. By their employers. (so employees of the institution can go do appraisals for their employer)
© (THIS IS THE GOOD ONE, PAY ATTENTION) Except as provided (key term is "Except") by this section, appraisals of real property performed … by real estate licensees must be conducted in accordance with USPAP ….. If a real estate licensee …… provides an opinion of value ….. which does not conform with the USPAP ….. the licensee shall also provide ….. a written statement containing the following language: "THIS IS AN OPINON OF VALUE OR COMPARATIVE MARKET ANALYSIS AND SHOULD NOT BE CONSIDERED AN APPRAISAL. In making any decision that relies upon my work, you should know that I have not followed the guidelines for development of an appraisal or analysis contained in the USPAP …". (How about that, too?)
(d) The statement required by subsection ( c) … must be made part of any written opinion or analysis report and must be reproduced verbatim.
(e) The exception allowed by subsection ( c) … does not apply to a transaction in which ….. a federal financial institutions regulatory agency has required compliance with the USPAP …. .


END OF SECTION REGARDING TEXAS ADMINISTRATIVE CODE. You may find the text at http://lamb.sos.state.tx.us/tac then: click on TAC Viewer; then Title 22; then Part 23; then Chapter 535; then Subchapter B; then Rule 535.17 and PRESTO your there.

So, what do you think about that? Here is my synopsis.

Subsection (a) allows anyone with a real estate license to do "appraisals" that conform to USPAP so long as a Broker signs the thing.

Subsection (b) talks about employees of lending institutions. No real problem there.

Subsection ( c) requires that an "appraisal" "must be conducted in accordance with USPAP". But, an "opinion of value" need not conform so long as the paragraph stating that it "SHOULD NOT BE CONSIDERED AN APPRAISAL" and if you rely on my work you should know that I have not followed any guidelines is stated somewhere in the report.

Subsection (d) puts some teeth into the law by requiring that the "SHOULD NOT BE CONSIDERED AN APPRAISAL" paragraph be "reproduced verbatim".

Subsection (e) indicates that these "opinions" are not adequate for federally related transactions requiring compliance with USPAP. This means anything over the "DEMINIMUS" level, which there ain’t much of here in my little rural area, either commercial or residential.

So, the Brokers, and "salespersons" too for that matter, are skipping around with big smiles all the time because all they have to do is include that paragraph and PRESTO, they are free from USPAP. Of course they are not supposed to "call" their work an appraisal, but they do, even though most of them stick that paragraph right on the front page of their report. They STILL "call" them appraisals, to the local lenders at least, who probably know better but just don’t care what the "nomenclature" is. Has anyone else heard lenders say things like: Sure, they are "really" just BPO’s, but we are all just used to calling it an appraisal. Everybody knows it is not "really" an appraisal. Now if we had one sell over the $250,000 mark, THEN we call you for sure on that there kind of a job. But on these small ones, we can save our customers some money by having a Broker do it for us because we just don’t need a "full blown appraisal".

Back quickly to Brokers calling their BPO’s appraisals. I had one salesperson, not even a Broker, call me a while back and ask for "comps" and stated that he is working on an appraisal. One of our local real estate firms, who has no one in the office licensed or certified as an appraiser, advertises in the yellow pages under "Appraisers", right there by my ad.

Back quickly to the $250,000 "deminimus", there are probably not 20 houses in my whole county that could get over that value. The commercial properties around the "square" in my town are all empty, but the car dealership over in the next town is probably worth over a million.

So that is how the BPO’s are killing me. I suppose that I could move to a more affluent area, where property values are higher. Or I could just shut up and wait for the deminimus to come down some.

One quick response to a previous post. One that mentioned something like a Doctor can do minor surgery but that does not relieve him from performing to a higher standard, simply because he is a doctor. I agree with that analogy. I am also a licensed broker. Why don’t I do BPO’s as a Broker and appraisals as an appraiser. Well, is it "valuation services" or is it "appraisal practice"? I have heard arguments from USPAP "scholars" but my interpretation is that if it involves deriving a value then it is appraisal practice and since I am an appraiser, anything that has to do with determining a value is appraisal practice and, so, I hold myself to the higher standard. Unfortunately, it is costing me a lot of money. But I still have integrity, right? I may have to eat my integrity someday.

Valuation Services as defined in USPAP is "services pertaining to aspects of property value". Is that like talking to a client about painting the kitchen in hopes of enhancing value?

Sorry it is so long. Hope it helps someone,
Jack Schoppa
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
As the King (Elvis Presley for those of you too young to remember) once said...."Thank you, thank you very much!"

When you see stuff that isn't right....go to the source, the author and complain about it. Next thing you know they are quoting you!
 
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