NC appraisal firms and BPOs?

[Michael Tipton]

What is the NC regulation regarding appraisal firms offering to complete BPOs? Now offering BPOs, see attached newsletter.

http://www.elliottco.com/news/2009/july09.htm

 

[David Beasley]

All references to BPOs have been removed from the NC Appraisers Act:

http://www.ncleg.net/EnactedLegislation/Statutes/PDF/ByChapter/Chapter_93E.pdf

(BPO and broker price opinion are not even in the definitions)

Here is a older opinion from the NC Real Estate Commission:

http://www.ncrec.state.nc.us/bulletin/fall97bulletin/broker_price_opinion.htm

My *opinion*: If a duly certified appraiser or trainee renders a value opinion in the state of NC for compensation, it is an appraisal, period.

It is plainly stated in the NC Appraisers Act : § 93E-1-4. Definitions.
When used in this Chapter, unless the context otherwise requires, the term:
(1) "Appraisal" or "real estate appraisal" means an analysis, opinion, or
conclusion as to the value of identified real estate or specified interests
therein performed for compensation or other valuable consideration.

If Elliott is providing BPOs, my guess is that they aren't using appraisers to provide them...but this only applies to the state of NC. Elliott apparently still operates in more states than just NC.

The rub comes in when someone asks the question: Is a BPO for a liquidation/foreclosure/REO considered a FRT? If the answer to that is Yes, then the NC Appraisers Act is the supreme authority - NC appraisers make appraisals, not BPOs. If not an FRT...then who knows? By trying to apply some common sense to the question, and cross-referencing it with the defintion of "appraisal" per the NC Appraisers Act, I still don't think an appraiser, in NC, can legally produce a BPO.

The caveat, of course, are the appraisers that are *also* brokers. They can do BPOs, provided (per my last USPAP class) that they make it clear to their client that they are functioning as a broker and not an appraiser - some seriously thin ice IMO (Appraisal = (market) value opinion, BPO = probable sales price), and is the reason I only have an appraiser's license...lol

 

[Bob Ipock]

From Appraisereport Fall of 2001


http://ncappraisalboard.org/bulletins/Fall01.pdf

 

[David Beasley]

That Appraiserreport defines a CMA (and equates it to a BPO), and why agents and brokers can do them (but NOT in lending situations) without breaking the law (NC Appraisers Act), but nowhere in it did I see whether or not an appraiser could perform them...Again, my best guess is that if an appraiser performs a valuation of any type in NC, it is an appraisal - unless the appraiser is also a broker, who can then do CMAs and BPOs *only* for their non-lender real estate clients...or so I interpreted it from The Act and Bob's reference above.

Than again, I am not and never have been a sales agent or broker so my opinion may well be worth the $0 you're paying for it. My mentor was for a while, but eventually went 100% appraiser when the local MLS amended their bylaws so that "professional licensed or certified appraisers providing appraisal services for compensation" could join. He only kept his broker's license when he got into appraising (1980s) so he could remain a member of the local MLS and join the ones on the fringe of our market...thankfully that isn't a requirement any longer.

 

[Couch Potato]

The NC Appraisers Act defines an appraisal as: “Appraisal” or “real estate appraisal” means an analysis, opinion, or conclusion as to the value of identified real estate or specified interests therein performed for compensation or other valuable consideration. If you get paid for your opinion of value, it is an appraisal, period. If you are a real estate broker, you can do appraisals only as part of an attempt to secure a listing or for a relocation company. Whether that appraisal also carries a label of CMA, BPO, or other acronym is irrelevant.

It is important to note that you can do a report on a URAR with all the bells and whistles, but under the NC Appraiser's Act it is not an appraisal if you do not perform it "for compensation or other valuable consideration." (The is the issue of the form claiming to be an appraisal, but I think the point is still valid; compensation is a critical part of the definition.

 

[David Beasley]

The NC Appraisers Act defines an appraisal as: “Appraisal” or “real estate appraisal” means an analysis, opinion, or conclusion as to the value of identified real estate or specified interests therein performed for compensation or other valuable consideration. If you get paid for your opinion of value, it is an appraisal, period. If you are a real estate broker, you can do appraisals only as part of an attempt to secure a listing or for a relocation company. Whether that appraisal also carries a label of CMA, BPO, or other acronym is irrelevant.

Pretty much what I said...an appraiser in NC produces "appraisals" according to the letter of the law here. It still begs the question raised by the OP, if Elliott & Co is providing BPOs, who is doing them? In NC, it had better not be appraisers since they make "appraisals". And according to the NCREC, CMA/BPOs are only supposed to be performed for genuine real estate (non-lender) clients. My bet is appraisers are producing these appraisals labeled as "BPOs" and are just getting pennies on the dollar for their services.

It is important to note that you can do a report on a URAR with all the bells and whistles, but under the NC Appraiser's Act it is not an appraisal if you do not perform it "for compensation or other valuable consideration." (The is the issue of the form claiming to be an appraisal, but I think the point is still valid; compensation is a critical part of the definition.

I guess this makes "free comp checks" OK under The Act then...lol C'mon, someone had to say it...

 

[Mr Rex]

From the NCREC May 2009: http://www.ncrec.state.nc.us/bulletin/May2009Vol40-1/BeWaryOfPerformingBrokerPriceOpinions.htm

Be Wary of Performing “Broker Price Opinions”

The Commission has noted an increasing number of reports of brokers providing, for a fee, a “broker price opinion” (BPO) for a party who is not a client or potential client of the broker.
The downturn in the real estate market has apparently resulted in more demand for informal estimates of the most probable sale/purchase prices for properties that are less expensive than a full appraisal.
Brokers may be requested by lenders, loan servicers, potential investors or others to provide this service for a fee, or brokers may simply be seeking alternative sources of income in a slow market.
Brokers should remember that the North Carolina Appraiser Act requires any analysis, opinion or conclusion as to the value of real estate performed for compensation to be performed by a licensed or certified appraiser.
However, the statute does provide a limited exception to this requirement that permits real estate brokers to perform a “comparative market analysis” for compensation ONLY for prospective or actual brokerage clients or for real property involved in an employee relocation program.
A “comparative market analysis” (CMA) is defined as “the analysis of sales of similar recently sold properties in order to derive an indication of the probable sales price of a particular property by a licensed real estate broker.”
A “broker price opinion” (BPO) that is based on recent sales of comparable properties is, therefore, a CMA, and may be performed for a fee only as noted above.
The Real Estate Commission considers the performance by a broker of a BPO for compensation in violation of the Appraiser Act to also constitute a violation of the Real Estate License Law.

Practice Tip
When performing a comparative market analysis or broker price opinion for a client or potential client, be sure to:
• Document your relationship with the client or prospective client.
• Document the recent sales of comparable properties upon which you base your analysis.
• Identify the results of your analysis as a “probable sales price” only and not as the “market value” or an “appraisal”.

 

[David Beasley]

Like I said, Mr. Rex, and interesting situation. Appraisers here produce appraisals and brokers cannot perform BPOs for lender clients.

Then again, Charlie has some interesting business ideas...I met with him back in the late 1990s about a possible local franchise deal for his Elliott & Co - I don't know if he still has "franchise offices" or not. It didn't take me long to figure out who was going to do the work and who was going to make the money on that deal so I passed. Here it is some 11 years later and I'm still doing fine - and am guessing that I chose wisely.

Good luck to him while playing this "name game" when it comes to appraisers doing BPOs, in the state of NC anyway. Who knows what the laws in other states are like...

 

[Couch Potato]

I guess this makes "free comp checks" OK under The Act then...lol C'mon, someone had to say it...

Yes, in NC it is not an appraisal if there is not a fee. Of course there still is a prohibition on contingent orders, so a comp check cannot be part of an order.

The rules on appraisals are not the same in every state. :new_all_coholic:

 

[Carnivore]

I know there has been some discussion between the NCAB and NCREC on this topic.

The problem is catching the besterds. They are doing them because I have a friend who is an insider at a major lender. He wont give me the proof because he really needs the job. I can not fault him for that. Hopefully he will turn over to me a large number of names and examples of what they are doing if he gets fired or is laid off.

If he does, there will be all kinds of heck taking place.

This issue is serious as it makes are appraiser licensing and the NCAB irrelevent. I dont quite think the NCAB actually sees it that way, but they should.