BPO's in NJ

[dobie]

Is anyone aware of any legislative efforts in NJ to limit the use of BPO's in transactions where a licensed/certified appraiser should be used? I know there are some efforts in other states like Connecticut along these lines.

Here's a link to a realtor website where I think we may be seeing realtor trying to encroach on traditional appraisal services. I don't think this guy is unique.

http://www.bonafiderealty.com/bpo_brokers_price_opinion_home_value.php

 

[Mike Kennedy]

Very interesting Client Roster for those "non-appraisals" on that Copyrighted Website

 

[Mike Kennedy]

http://realestate.about.com/gi/dynamic/offsite.htm?site=http://www.njar.com/

CODE OF ETHICS

Standard of Practice 1-3

REALTORS ®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value.

Article 2

REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law. (Amended 1/00)

Article 5
REALTORS® shall not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties.

Standard of Practice 10-2
When not involved in the sale or lease of a residence, REALTORS® may provide demographic information related to a property, transaction or professional assignment to a party if such demographic information is (a) deemed by the REALTOR® to be needed to assist with or complete, in a manner consistent with Article 10, a real estate transaction or professional assignment and (b) is obtained or derived from a recognized, reliable, independent, and impartial source. The source of such information and any additions, deletions, modifications, interpretations, or other changes shall be disclosed in reasonable detail. (Adopted 1/05, Renumbered 1/06)

REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/95)

___________________________________________________________________________________________________
Standard of Practice 11-1

• When REALTORS

• ® prepare opinions of real property value or price, other than in pursuit of a listing or to assist a potential purchaser in formulating a purchase offer, such opinions shall include the following:
  
  
  
  1. identification of the subject property
  2. date prepared
  3. defined value or price
  
• 4. limiting conditions, including statements of purpose(s) and intended user(s)
• 5. any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants
  [*]6. basis for the opinion, including applicable market data

7. if the opinion is not an appraisal, a statement to that effect (Amended 1/01)

• ** APPARENTLY AN APPRAISAL IS NOT AN APPRAISAL WHEN THE REALTOR SIMPLY SAYS SO.

Interesting Concept.

 

[Mike Kennedy]

Inside the Beltway: Downturn in Market Leads to Upturn in BPOs

[FONT=Arial, Helvetica, sans-serif]Over the last year, there has been a tremendous increase in the use of broker’s price opinions (a.k.a. comparative market analysis, broker’s estimate of value, etc.) that are being performed by real estate brokers and salespeople, in lieu of appraisals. While BPOs were previously used for very limited purposes, they are now being used as valuation products in the finance arena, primarily for the review of distressed properties prior to short sales or foreclosure. They are also being used in areas previously unimagined several years ago, including segments of the commercial market.[/FONT][FONT=Arial, Helvetica, sans-serif]

The increase in the use of BPOs for these purposes is largely a result in the downturn in the real estate market, and a reduction in the commissions being earned by brokers and salespeople on the sale of property. Real estate professionals have seized upon BPOs as a way to supplement their incomes. In addition, other industries, particularly in the lending arena, have picked up on the fact that they can save a significant amount of money by ordering BPOs instead of appraisals, regardless of their quality level.

However, the BPO work being done by brokers and salespeople may not be legal.

In fact, in West Virginia brokers and salespeople may not lawfully issue a broker’s price opinions or any other estimate of the value of real property for compensation, even in connection with the sale, or potential sale of real property.

According to the West Virginia Real Estate Commission, “the rendering a broker’s price opinion for compensation constitutes the activity of real estate appraisal for which a license issued by the Appraiser Board is required.”

In many other states, the ability of a real estate professional to perform a BPO is only authorized if it is directly related to a listing or a prospective listing. For example, in Mississippi, it is permissible for a broker or salesperson to “in the ordinary course of business, give an opinion as to the price of real estate for the purpose of a prospective listing or sale.”

In that state, any other expression of the value of real property is an appraisal and is subject to appraiser licensing/ certification laws and appraisal standards. Laws similar to Mississippi’s are on the books in at least 17 other states.

The appraisal profession does not dispute that BPOs have their place in the real estate sales marketplace. However, including the review of distressed properties within the definition of the listing process is a stretch. The likelihood that a broker or salesperson will obtain a listing as a result of performing a BPO for a short sale or foreclosure is remote. As such, a broker or salesperson that is performing a BPO for these, and other, purposes could be violating the rules applicable to their profession, or the rules applicable to the performance of appraisals.

Because of this gray area, there has, not surprisingly, been a flurry of activity at the state legislative and regulatory level as it relates to expanding the use of BPOs. Just in the last several weeks, proposals have been offered to expand the use of BPOs to what are typically appraisal assignments, begging the question – if it looks like an appraisal and carries virtually the same information as an appraisal, why isn’t it called an appraisal and subject to the same regulations as an appraisal?

In Nevada, the state brokers’ and salespersons organization has approached the Real Estate Commission to issue regulations to expand their authority to perform BPOs outside of the listing process. In Utah, the Department of Natural Resources has proposed using BPOs as an alternative to appraisals when purchasing or selling state land. And, in Alaska the Department of Administration has awarded contracts to determine the market value rent for the properties that it leases throughout the state to several brokers who perform BPOs, rather than to appraisers.

In each of these states, the Appraisal Institute’s chapters are working to protect requirements that certified or licensed appraisers be utilized to perform all valuation assignments. However, beginning in January, 2009 the decision whether to grant additional authority to brokers and salespeople will rest with the state legislatures. The industry can only hope that our elected representatives will recognize the added consumer protection benefits that are inherent in valuation services performed by regulated appraisers, as opposed to non-regulated sales agents.

The Appraisal Institute also continues to remind policymakers, clients and appraisers themselves that the Uniform Standards of Professional Appraisal Practice position appraisers to offer competitively priced products that leverage their unique knowledge and skills. The Scope of Work rule allows appraisers to offer USPAP-compliant services that can effectively compete against BPOs, should they desire.

“Many may see this as an appraiser versus broker issue. It is not,” says Scott DiBiasio, Appraisal Institute’s Manager of State & Industry Affairs.. “The questions being asked by clients are critical to the proper function of today’s real estate markets. However, real estate brokers and sales people are experts in the marketing and sale of real estate and can competently prepare a price estimate as part of the listing process,” he said.

“On the other hand, protecting the interests of the lender, the buyer and the public by using their education, training, and expertise to provide an independent opinion of the value for a property is something a regulated appraiser can best provide,” DiBiasio concluded.

Inside the Beltway welcomes your thoughts on this issue. Send us an e-mail at insidethebeltway@appraisalinstitute.org.
[/FONT]

 

[Mike Kennedy]

http://appraisersforum.com/showthread.php?t=147094

 

[Walter Kirk]

It would seem that these BPO's prepared by people without appraisal licences are in violation of the law. Unfortunately the New Jersey commission won't do anything about this until someone makes a complaint.

The commission won't consider the complaint unless the proper form is filled out. Then they won't do anything. What is needed is a change in the law which would allow unlicensed BPO vendors to be prosecuted in municipal court just like unlicensed plumbers and electricians.

 

[ezradams]

I'm willing to make a complaint. Where are the forms....which commission? I'm in the middle of a divorce case where my appraisal will be compared to a BPO. I'd like to take the BPO company to task. Besides the fact that the BPO was a joke, it upsets me that the judge may weigh both reports equally!

 

[GCJim]

http://www.nj.gov/oag/ca/nonmedical/reappraisers.htm
Or, do a search on the NJ Board of Real Estate Appraisers. There is a link on the page for a complaint form, but I'm not sure this is what you would need.
Go get 'em EZ. Good luck, and please let us know how you make out.

 

[ezradams]

Just an update on this issue. I was at the March Real Estate Appraisal Board meeting in Newark. They have agreed to prosecute agents that perform BPO's for anything other than listing purposes.

 

[Michigander]

Just an update on this issue. I was at the March Real Estate Appraisal Board meeting in Newark. They have agreed to prosecute agents that perform BPO's for anything other than listing purposes.

That is a great step forward. Do you have anything in writing that we might be able to pass on to other boards?