BPO's

[Ray Ohler]

A lot of loan "programs" out there do not require an "appraisal". However, the lenders want to cover themselves by having at least a BPO in the file in case the loan goes down the tubes. In THAT case, you better believe that BPO is going to be "showcased" and, if the person performing that BPO was in violation of applicable state or federal laws, EVEN BETTER for the lender.

 

[Caterina Platt]

The BPO's I've seen believe or not, are nearly as detailed as our reports. Not quite, but darn close. They are often required on a monthly basis for relocation listings. The Realtors HATE them and I can't blame them. Who in thier right mind would do anything near an appraisal for $50? Many accept the compensation as a reimbursement for photos and costs. As long as it's involved in the practice of maintaining or obtaining a listing, this is fine. New Mexico is also a state where any valuation outside of listing purposes requires an appraisal license.

Divorce and bankruptcy lawyers are famous for trying to get by with a CMA or BPO. When I was only a Realtor, I used to get quite a few calls from folks saying their lawyer asked them to get a CMA. :roll: Not only are they asking this poor slop to tour and value the property for free, they would also get eaten alive with their little BPO in court.

Those who do these for anything other than a potential listing are truly asking for it. I would highly doubt their broker/salesperson E & O covers such activity. I get on my soapbox about this with Realtors every chance I get. Usually a quick mention of the liability involved brings them to their senses.

 

[airphoto]

All,

Interestingly, the two most recent matrimonials that I'm involved with in both cases the opposing spouse has engaged a real estate broker to provide their "appraisal." New York is an 'open' state, so there's now question of licensing, but don't you think it'll be interesting when it comes before the court when the qualifications of the other 'appraiser' comes to light?

 

[bradellis]

To All,

1. There are legitimate reaspons for using a BPO. I agree that this should not be used for financing purposes, but am obliged to ask why they would be any less reliable than an "evaluation" by a bank clerk? That is allowed under current banking regs.

2. Fannie and Freddie use BPOs on foreclosures- but they also get appraisals on each REO.

3. Even where prohibited by the state, there is almost always the "listing" loophole. Its OK if you are after the listing.

4. Are you aware that you can do them, too, if you wish? Not saying you should, but it IS your choice. When done by an appraiser, the ethics and competency rules still apply, BUT Standard rules do NOT- because you are solving for "PRICE" and not an opinion of value. I know this seems strange, but first read the definitions in USPAP for value and price. They are different. I KNOW many will want to argue, but this came from a USPAP instructor course. A BPO is a valuation service that falls outside of appraisal practice.

Some BPOs are very detailed but most are not. Most are 1 page- 3 sales/3 listings- about 5-6 pieces of info on each, a shot of the front and street, and pricing recommendations. Maybe an hour's work tops. (Fannie/Freddie use the 2 page forms so they take more time)

I know of one guy who squeezes them in betwen assignments- 2 or 3 a week and it pays for the lease on his Mercedes.

What is going on here is a client trying to save money. We've all been through that before, and each appraiser must make up his/her mind on these based upon their own needs and desires.

Have fun!

Brad Ellis, IFA,RAA

 

[Dale Smalley]

Brad

Appraisers can not do BPOs because they do not contain the certification and limiting conditions and therefore do not comply with USPAP.

Even if you carry both licenses your appraisal board may still bind you to USPAP standards. Check with with your state enforcement board just to be sure.

While a BPO does contain sales and listing data. They are orderd to find out about market conditions that would not be in an appraisal report. And most importantly what would it take to sell this property. And as we all know appraisers are not great salespeople.

Stick to appraising and leave the BPOs for the Realtors.

 

[bradellis]

Dale-

That is what I thought as well, but I was wrong. Pay attention- I do not lightly or often make such an admission.

PRICE is a fact whereas value is an opinion. YES, I know this is hard to grasp. Solving for PRICE is a valuation service that is NOT a part of "Appraisal Practice". That means you can remove your "appraiser" hat, just as if you were doing brokerage, development of a home, and the like.

So long as you are not hired as an "appraiser" (meaning impartiality, objectivity and independence is the primary reason for having selected YOU), only the ethics and competency rules apply. THERE ARE NO STANDARDS THAT APPLY TO BPOs- including any sort of signed certification as is required in STD-2.

Please understand that I was as blown away as anyone. I have spent years telling appraisers who are also brokers that they could not remove the "hat".

BUT, my info comes from the mouth of the chairman of the ASB. See lines 48 through 78 in the 2002 edition of USPAP and you will see what I mean.

Are we having fun yet?

Brad Ellis, IFA, RAA

 

[Pamela Crowley (Florida)]

See lines 48 through 78 in the 2002 edition of USPAP

The particular lines 48 - 78 that apply here are on page 197.

 

[Francois K. Gregoire]

Dale-

That is what I thought as well, but I was wrong. Pay attention- I do not lightly or often make such an admission.

PRICE is a fact whereas value is an opinion. YES, I know this is hard to grasp. Solving for PRICE is a valuation service that is NOT a part of "Appraisal Practice". That means you can remove your "appraiser" hat, just as if you were doing brokerage, development of a home, and the like.

So long as you are not hired as an "appraiser" (meaning impartiality, objectivity and independence is the primary reason for having selected YOU), only the ethics and competency rules apply. THERE ARE NO STANDARDS THAT APPLY TO BPOs- including any sort of signed certification as is required in STD-2.

Please understand that I was as blown away as anyone. I have spent years telling appraisers who are also brokers that they could not remove the "hat".

BUT, my info comes from the mouth of the chairman of the ASB. See lines 48 through 78 in the 2002 edition of USPAP and you will see what I mean.

Are we having fun yet?

Brad Ellis, IFA, RAA

Brad,

The blanket statement in a prior post that appraisers may complete BPO's and not be subject to USPAP may not be correct in all jurisdictions and might depend upon the type of license(s) held.

Here's one example:

In a certain state, to provide a "valuation service" an individual must be licensed as a broker, salesperson or as an appraiser. Brokers and salespersons are permitted, by law, to perform what are called the seven services of real estate which include appraisal. Licensed and Certified Appraisers are permitted to perform "appraisal services". (NOTE: the law does not state "valuation services").

Both the Real Estate License Law and the Appraisal Statute in this state require appraisals to be in compliance with the USPAP.

AO-21, which is your reference, states on page 199, lines 127-130.

"If a person’s identity as an appraiser, appraisal expertise, and ethical reputation contribute to his being chosen to provide a service, that service likely is included in appraisal practice. As such, that service should be performed in compliance with USPAP. This concept is underscored in the Comment to the definition of "appraisal practice":"

on the same page, lines 141 - 144, AO -21 continues:

"Except for this general requirement, appraisers who perform valuation services in roles other than as appraisers are not obligated to comply with USPAP. However, it is critical, again, for appraisers to remember that laws in some jurisdictions may be more stringent than USPAP and may require that part or all of USPAP apply in all of their professional activities."
-------------------------------------------------------

Why would an individual without a broker's license be chosen to provide a valuation or pricing service? Good looks, nice car, sunny disposition or their identity as an appraiser, appraisal expertise, and ethical reputation?

The answer determines if the service must comply with the USPAP.

The decision about the applicability of the USPAP becomes more difficult when the individual has either a broker or salesmans license AND an appraisal license. Why is the individual chosen? It is by no means as clear cut as your illustration. We're not looking for an "out" or a means of circumventing the law.

Another point all readers must consider: As much as I respect the Chairman of the ASB, he does not sit on the State Regulatory Board with the right and responsibility to judge my behaviour. I understand the way this matter is interpreted by the ASB, but State Regulatory Boards enforce laws which vary from state to state. It's highly unlikely a member of the ASB will be at your right hand supporting your side of the story while you attempt to provide an explanation to state regulators.

If appraisers want to provide these alternative services, it would be wise to be 100% sure of their state law and how the State Regulatory Board views the applicability of the USPAP.

Keep in mind, also, this statement included as a heading to every Advisory Opinion:

"This communication by the Appraisal Standards Board (ASB) does not establish new standards or interpret existing standards. Advisory Opinions are issued to illustrate the applicability of appraisal standards in specific situations and to offer advice from the ASB for the resolution of appraisal issues and problems."

 

[bradellis]

Frank,

Well, of course states can (and do) have laws that regulate such activities. Every appraiser should already know that.

I was talking about USPAP specifically, as was the chair of the ASB. It has nothing to do with supplemental standards or the JE that states may involve themselves in.

The statement was made that an appraiser cannot do a BPO. That is wrong, insofar as USPAP is concerned. USPAP may be the only standard set in a state or a state may have other regs covering it, and many do.

Let's also remember that, unless it is a FRT- and the overwhelming majority are not, in any non-mandatory state an appraiser can do this. Why would he/she be chose? Maybe there is no broker in the area willing to do one, but since the appraiser has the data, he/she could be chosen- NOT as an appraiser (with the requiremetns), but simply as a person who happens to have the data.

The reasons are separate from the facts.

Brad

 

[Francois K. Gregoire]

Frank,

Let's also remember that, unless it is a FRT- and the overwhelming majority are not, in any non-mandatory state an appraiser can do this. Why would he/she be chose? Maybe there is no broker in the area willing to do one, but since the appraiser has the data, he/she could be chosen- NOT as an appraiser (with the requiremetns), but simply as a person who happens to have the data.

The reasons are separate from the facts.

Brad

Brad,

The statement above is another broad generalization. The state mentioned in my prior post is not a mandatory state. Real Estate Brokers, Real Estate Salesmen as well as Licensed and Certified Appraisers are permitted to appraise real property for others for a fee. Only Licensed and Certified Appraisers may provide appraisal services for Federally Related Transactions.

The state law requires ANY appraisal performed by a licensed or certified appraiser to comply with the USPAP. There are not exceptions.

The statement, made about the appraiser being chosen to provide the service because they have the data is a good stab at rationalization. Could you speak those words with a straight face? The secretary most likely happens to have access to the data as well. Why would the client choose the licensed or certified appraiser over the secretary?

Just trying to illustrate not everything is cut and dried. Answers will vary from state to state and Board to Board. Not just because of inconsistency in law and perception, but the USPAP itself (not a model of clarity, eh?).

Advisory Opinion (AO-21), which attempts to clear the air as to when USPAP applies, is not cut and dried as to permissiveness. Spend a little time with Adivisory Opinion (AO-13) and the answer to the questions are less clear.

After reading both, would you stake your license on an answer? Me either. Besides, it's too tough changing hats all the time.