States who prohibit BPOs as alternatives for Appraisals

[Greenback]

From the FDIC website/just wanted to add this, too

§ 323.3 Appraisal not required; transactions requiring a state certified or licensed appraiser.

(a) Appraisals required. An appraisal performed by a state certified or licensed appraiser is required for all real estate-related financial transactions except those in which:

(1) The transaction value is $250,000 or less;
(2) A lien on real estate has been taken as collateral in an abundance of caution;
(3) The transaction is not secured by real estate;
(4) A lien on real estate has been taken for purposes other than the real estate's value;
(5) The transaction is a business loan that:
(i) Has a transaction value of $1 million or less; and
(ii) Is not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment;
(6) A lease of real estate is entered into, unless the lease is the economic equivalent of a purchase or sale of the leased real estate;
(7) The transaction involves an existing extension of credit at the lending institution, provided that:
(i) There has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the institution's real estate collateral protection after the transaction, even with the advancement of new monies; or
(ii) There is no advancement of new monies, other than funds necessary to cover reasonable closing costs;
(8) The transaction involves the purchase, sale, investment in, exchange of, or extension of credit secured by, a loan or interest in a loan, pooled loans, or interests in real property, including mortgaged-backed securities, and each loan or interest in a loan, pooled loan, or real property interest met FDIC regulatory requirements for appraisals at the time of origination;
(9) The transaction is wholly or partially insured or guaranteed by a United States government agency or United States government sponsored agency;
(10) The transaction either:
(i) Qualifies for sale to a United States government agency or United States government sponsored agency; or
(ii) Involves a residential real estate transaction in which the appraisal conforms to the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation appraisal standards applicable to that category of real estate;
(11) The regulated institution is acting in a fiduciary capacity and is not required to obtain an appraisal under other law; or
(12) The FDIC determines that the services of an appraiser are not necessary in order to protect federal financial and public policy interests in real estate-related financial transactions or to protect the safety and soundness of the institution.

(b) Evaluations required. For a transaction that does not require the services of a state certified or licensed appraiser under paragraph (a)(1), (a)(5) or (a)(7) of this section, the institution shall obtain an appropriate evaluation of real property collateral that is consistent with safe and sound banking practices.

(c) Appraisals to address safety and soundness concerns. The FDIC reserves the right to require an appraisal under this part whenever the agency believes it is necessary to address safety and soundness concerns.

(d) Transactions requiring a state certified appraiser--(1) All transactions of $1,000,000 or more. All federally related transactions having a transaction value of $1,000,000 or more shall require an appraisal prepared by a state certified appraiser.

(2) Nonresidental transactions of $250,000 or more. All federally related transactions having a transaction value of $250,000 or more, other than those involving appraisals <A name=fdic2240.02>of 1--to--4 family residential properties, shall require an appraisal prepared by a state certified appraiser.

(3) Complex residential transactions of $250,000 or more. All complex 1--to--4 family residential property appraisals rendered in connection with federally related transactions shall require a state certified appraiser if the transaction value is $250,000 or more. A regulated institution may presume that appraisals of 1--to--4 family residential properties are not complex, unless the institution has readily available information that a given appraisal will be complex. The regulated institution shall be responsible for making the final determination of whether the appraisal is complex. If during the course of the appraisal a licensed appraiser identifies factors that would result in the property, form of ownership, or market conditions being considered atypical, then either:
(i) The regulated institution may ask the licensed appraiser to complete the appraisal and have a certified appraiser approve and co-sign the appraisal; or
(ii) The institution may engage a certified appraiser to complete the appraisal.

(e) Transactions requiring either a state certified or licensed appraiser. All appraisals for federally related transactions not requiring the services of a state certified appraiser shall be prepared by either a state certified appraiser or a state licensed appraiser.

(f) Effective date. Regulated institutions are required to use state certified or licensed appraisers as set forth in this section no later than December 31, 1992, unless otherwise required by law.

[Codified to 12 C.F.R. § 323.3]
[Source: Section 323.3 amended at 57 Fed. Reg. 9050, March 16, 1992; 59 Fed. Reg. 29501, June 7, 1994]

 

[Greenback]

...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.

Brokerage clients in the definitions can pretty much mean a wide variety of things and twisted into several other things with regard how it may apply. Correct me if I am wrong, please (potential client clause)

Sincerely,

 

[Greenback]

Reminder:

...YES!!! Make it VERY ILLEGAL for anyone other than a licensed appraiser to be paid for any kind of 'value' and/or 'price' on a piece of real estate. ~ Posted by Mizz Pam

Sincerely.

 

[Greenback]

...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.

This is very informative. You pointed out the strengths and you pointed out some weakness. May I ask you if you Michigan defines a CMA as Competitive or comparative analysis?

North Carolina and Pennsylvania States definitions are weak, in my eyes.

Arkansas laws are interesting.

Sincerely,

 

[Hamlet]

Benji,

Here is a list from the AI showing each states stand on BPOs.

 

[Greenback]

...Benji,

Here is a list from the AI showing each states stand on BPOs.

Thank you Hamlet

Sincerely,

 

[Hamlet]

Thank you Hamlet

Sincerely,

You are welcome.

 

[Terrel L. Shields]

Some of you are barking up the wrong trees. BPOs are not used for loan purposes except in the rarest of cases...I don't know any loan made that was supported by BPOs.. They use BPOs for preforeclosure and postforeclosure applications and not for a loan per se.

Some of those have multiple BPOs performed. Evaluations are more frequently performed by bank employees or contractors who do the below de minimus valuations. Some brokers and or agents do evaluations but the correctly performed ones are not using the BPO forms but a more generic form or simple letter that addresses the minimum requirements listed above.

 

[Greenback]

This information was recently sent to me:


...Louisiana [FONT=Arial,Arial][FONT=Arial,Arial]– La. R.S. 37:3393 Summary: [/FONT][/FONT]Broad [FONT=Arial,Arial][FONT=Arial,Arial]E. Nothing in this Chapter shall preclude a licensed real estate broker or salesperson from performing a broker price opinion/comparative market analysis in the ordinary course of the practice of real estate, provided that the broker or salesperson does not represent himself as being a state licensed real estate appraiser. [/FONT][/FONT]

[FONT=Arial,Arial][FONT=Arial,Arial]Since the law doesn't prohibit the practice agents/brokers use that as an excuse to perform BPOs for any reason and call it "ordinary course of business." [/FONT][/FONT]
[FONT=Arial,Arial][FONT=Arial,Arial][/FONT][/FONT]
[FONT=Arial,Arial][FONT=Arial,Arial]
Sincerely,

[/FONT][/FONT]

 

[Mary Tiernan]

Greenback -

The "potential client" clause you questioned is detailed under Article 26 as previously posted -

(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

Terrell -

You are wrong. BPOs are being done for lending purposes all the time - only problem is, the Realtors are not at fault, the lenders are. I have proof in my area of at least two BPOs being utilized in a lending transaction - see my previous post.

I will try to get together with the assessor I mentioned previously and see if she is willing to start something, but not everyone has the cahoonies to do something - a lot of folks would rather complain about a situation to each other - taking action scares them.

As I said, I took action, and won, in two instances. My appraisal business is hurting - I would rather clean up the process before I lose everything than sit back and watch this occur.