States who prohibit BPOs as alternatives for Appraisals

[Greenback]

...There was that whole Oregon ACLB vs Chicago Title lawsuit 15 years ago, but nothing ever came out of it.

This is what I found when I copied and pasted "Oregan ACLB vc Chicago Title lawsuit" into Google's search engine. From the Appraisers Forum and it was posted by Mr. Kennedy - interesting thread. I think I read this thread in 2007.




http://appraisersforum.com/showthread.php?t=130512

Memo - September 1, 2007 BPOs and/or Appraisals

There is a new article located in the "Useful Forms and Documents" section of this website. This article, which was in the August issue of REALTOR Rightings, written by Andy Schaus, the Executive VP of the Arkansas Realtors Association and a former appraiser, explains better than I have as to the differences in Arkansas between BPO’s and APPRAISALS. Andy wrote this in response to the legislation sponsored by the Arkansas Appraisers Association (Act 17-14-303 of 2007). Please make certain that this information is well-circulated in your area of the State and that you don’t hesitate to report those in violation of it. Pay particular attention to the next publications in the next issues of The Communicator Magazine and Working RE Magazine. Both of these appraisal magazines are doing articles on the pro-appraiser legislation originating in Arkansas that has been sponsored by the Arkansas Appraisers Association. We certainly hope that this mind-set spreads throughout the country with the upcoming focus on predatory lending that is sure to result from the failures in the mortgage industry as a result of habitual sloppy lending practices.

Tom M. Ferstl
Executive Secretary
Arkansas Appraisers Association

http://www.arkansasappraisersassociation.com/

 

[Rob Baum]

My opinion is this BPO by real estate agents for loans is simply a myth. Nobody can offer any proof that it actually happens.

Do you mean BPOs for loans above $250,000? Or BPOs for loans of any value?

 

[Bob Ipock]

http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=235651






http://www.appraisalinstitute.org/ano/current.aspx?volume=11&numbr=5/6#9835

 

[Bob Ipock]

Do you mean BPOs for loans above $250,000? Or BPOs for loans of any value?

Show me evidence of any loan made based on a BPO where the loan amount is over $250,000.

That is what I said.

If there is no prohibition (laws, statutes or banking regulations) then what is the beef. If no law is being broken then there is not much argument ....untill there is a change in the law.

You have proof of ANY BPO that violates existing law? How about a BPO used for other loans?

I have never, ever performed a BPO. Real estate agents can have at it for the small fees they get. I have no interest in using my time in that manner.

 

[Mary Tiernan]

Michigan:

339.2601 Definitions.
Sec. 2601.

As used in this article:

(a) "Appraisal" means an opinion, conclusion, or analysis relating to the value of real property but does not include any of the following:

(i) A market analysis performed by a person licensed under article 25 solely for the purpose of assisting a customer or potential customer in determining the potential sale, purchase, or listing price of real property or the rental rate of real property as long as a fee or any other valuable consideration is not charged for that analysis.

(ii) A market analysis of real property for a fee performed by a broker or associate broker licensed under article 25 which does not involve a federally related transaction if the market analysis is put in writing and it states in boldface print "This is a market analysis, not an appraisal and was prepared by a licensed real estate broker or associate broker, not a licensed appraiser.". Failure to do so results in the individual being subject to the penalties set forth in article 6.



In addition, the Administrative Rules (Definitions) state:

(e) "Market analysis as performed by a real estate licensee" means the
activity defined in section 2601(a)(i) and (ii) of the act, and means
analysis solely for the purpose of establishing potential sale, purchase, or
listing price of real property or the rental rate of real property and is not
for the purpose of evaluating a property for mortgage lenders in the primary
or secondary mortgage market.



Article 25, Real Estate Brokers and Salespersons define a real estate licensee as anyone who is licensed under Article 25.

Furthermore,

Article 25, Real Estate Brokers and Salespersons, states:

339.2512 Prohibited conduct; penalties.

Sec. 2512.

A licensee who commits 1 or more of the following is subject to the penalties set forth in article 6:

(i) Conducts or develops a market analysis not in compliance with section 2601(a)(ii).



and Article 26, Real Estate Appraisers states:
Duties of licensee.

Sec. 2633.
A licensee shall do all of the following:

. . . . .

(d) Advertise only the services authorized to be rendered according to the type of license issued and only in the name and address under which the individual is licensed. The licensee shall indicate on every appraisal report the license number and level of licensure.

 

[Mary Tiernan]

Now, the MAR (Michigan Association of Realtors) recently tried to get the state of Michigan to change their web site for real estate brokers and sales persons to NOT officially state that BPOs could not be done outside of the listing arena - guess what? I fought it and won. Their attorney tried to mince Article 25 - however, he did not look at the Administrative Rules. Gotcha.

We recently had a real estate company in our fair state offering BPOs whose form utilized the words "Market Value." Guess what? That is a violation. They no longer offer that form or format.


I am aware that an assessor in my state applied for a refinance. She received a copy of the BPO with a value that she thought was very low. I informed her of our laws, and that the BPO is not a viable alternative in the lending transaction. She was going to talk to some folks at the state level, I don't know what happened.

But, during our lengthy conversation she did tell me that Realtors in her area are keeping her hopping - and they demand immediate service. The township records are kept at the townhall. She has to go to the townhall to provide all data. She does not keep regular business hours. She indicated she was being run ragged by the Realtors demanding information - for BPOs.

Talked to a Broker in another part of my area - he quit doing BPOs for lenders as they were demanding more and more and paying less and less. He was aware of the laws, however, they get around it by the "potential client" clause.

Had a friend of a friend who tried to get his mortgage payments reduced. A Realtor came over to the house to provide a value for the lender.

Don't be so naive as to think that sales agents are not preparing BPOs for the brokers and that BPOs are replacing appraisals.

That's why we have to fight. For every BPO performed, I have less work.

Diminimus is not an issue in this state - BPOs for lending transactions are not allowed.

Although I don't think BPOs should replace appraisals, we have to accept the fact that lenders don't care.

Therefore,
I think if a BPO is provided to a lender, no one in the broker's office should be allowed to list the property. We have to have some kind of wall between the people setting the price and selling the property.

The only thing I can think of in our state to stop the BPO for lending purposes is to send letters to the Editor detailing the law - the public doesn't know what our laws state - maybe we should be the ones getting the word out?

I wish our state would send out some sort of press release, or newsletter.

 

[Greenback]

Just wanted to add this

From FIRREA of 1989:

SEC 1113. TRANSACTIONS REQUIRING THE SERVICES OF A STATE CERTIFIED APPRAISER.
In determining whether an appraisal in connection with a federally related transaction shall be performed by a State certified appraiser, an agency or instrumentality under this title shall consider whether transactions, either individually or collectively, are of sufficient financial or public policy importance to the United States that an individual who performs an appraisal in connection with such transactions should be a State certified appraiser, except that
(1) a State certified appraiser shall be required for all federally related transactions having a value of $100,000 or more; and
(2) 1-to-4 unit, single family residential appraisals may be performed by State licensed appraisers unless the size and complexity requires a State certified appraiser.

SEC 1114. TRANSACTIONS REQUIRING THE SERVICES OF A STATE LICENSED APPRAISER.

All federally related transactions not requiring the services of a State certified appraiser shall be performed by either a State certified or licensed appraiser.

SEC 1120. VIOLATIONS IN OBTAINING AND PERFORMING APPRAISALS IN FEDERALLY RELATED TRANSACTIONS.

(a) VIOLATIONS. - Except as authorized by the Appraisal Subcommittee in exercising its waiver authority pursuant to section 1119(b), it shall be a violation of this section -
(1) for a financial institution to seek, obtain, or give money or any other thing of value in exchange for the performance of an appraisal by a person who the institution knows is not a State certified or licensed appraiser in connection with a federally related transaction; and
(2) for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or the Resolution Trust Corporation to knowingly contract for the performance of any appraisal by a person who is not a State certified or licensed appraiser in connection with a real estate related financial transaction defined in section 1121(5) to which such association or corporation is a party.
(b) PENALTIES. - A financial institution that violates subsection (a)(1) shall be subject to civil penalties under section 8(i)(2) of the Federal Deposit Insurance Act or section 206(k)(2) of the Federal Credit Union Act, as appropriate.
(c) PROCEEDING. - A proceeding with respect to a violation of this section shall be an administrative proceeding which may be conducted by a Federal financial institutions regulatory agency in accordance with the procedures set forth in subchapter 11 of chapter 5 of title 5, United States Code.

 

[Greenback]

...Talked to a Broker in another part of my area - he quit doing BPOs for lenders as they were demanding more and more and paying less and less. He was aware of the laws, however, they get around it by the "potential client" clause.

May I ask what the "potential client" clause is?

Sincerely,

 

[Bob Ipock]

The BPO laws in some states (including NC) do not apply to a BPO that is done in order to potentially get a listing on the property. That is an easy lie to tell.

 

[Bob Ipock]

From NC Real Estate Commission:


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.