A bill that would expand real estate agents? ability to perform market analyses of properties could be approved by the General Assembly as early as Tuesday.
The bill is being pushed by the N.C. Association of Realtors, which says it is needed to assist banks in dealing with the wave of foreclosures they?ve taken back in recent years. But aspects of the bill are raising concerns among appraisers, who fear it will blur the lines between what they do and a product that is less rigorous and less expensive.
Senate Bill 521 would allow brokers to perform broker price opinions, also known as comparative market analyses, for a fee for clients and third-party lien holders. Under current North Carolina law, brokers can only perform BPOs when they have a reasonable expectation of getting a listing.
BPOs and CMAs are mostly used to estimate the price at which a house should be listed for sale. BPOs and CMAs typically include an analysis of local market conditions and descriptions of the house and some comparable properties. A BPO or CMA typically costs anywhere from $50 to $150, while an appraisal costs about $400.
The N.C. Association of Realtors says demand for BPOs has increased dramatically as banks have taken back large portfolios of distressed real estate in recent years. Banks are required to review their holdings every 30 to 60 days to assess the value of the property on their balance sheets, said Catherine Thomas, director of governmental affairs for the N.C. Association of Realtors.
The legislation, Thomas said, would ultimately reduce costs for consumers because banks would spend less money on the re-evaluations that are required before things like loan modifications can occur.
?That cost is going to be built in to consumer loan products if they?re required to do full appraisals,? she said.
Appraisals would still be required for refinances and loan origination under the proposed legislation, which originated in the Senate but was modified and approved by the House last week.
Still, appraisers fear that opening the door for more widespread use of BPOs could ultimately lead to them being used in a wider array of financial transactions.
?When you talk about measuring collateral risk there?s a reason we exist,? said Joel Tate, a Raleigh appraiser who is the government relations co-chair for the N.C. chapter of the Appraisal Institute.
He said the appraiser community, beginning after the savings and loan crisis in the 1980s, has developed a set of standards and regulations to protect the public interest.
?We feel like if people out there are going to be doing any type of valuation product in competition with us, then they should have the same level of training,? Tate said.
Thomas said BPOs are a widely adopted tool in the mortgage industry, with the Treasury Department permitting their use in its loan modification programs and more than 40 other states allowing real estate agents to perform BPOs for a fee.
The bill that originally emerged from the Senate was sponsored by Dan Clodfelter, a Democrat from Mecklenburg County, and included no mention of BPOs.
The BPO provisions were added in the House by Rep. Bill Brawley, a Mecklenburg Republican and commercial real estate broker who didn?t return a call seeking comment.
Brawley?s provisions worried the state chapter of the Appraisal Institute, which lobbied successfully to amend the bill.
The amended legislation calls for the state?s Real Estate Commission to come up with a set of standards for BPOs and CMAs, and it would increase the amount of education required of brokers who perform BPOs. Appraisers would also be permitted to perform CMAs, something they cannot do under current state law.
The state chapter of the Appraisal Institute is not officially opposing the bill, but instead is attempting to raise concerns about aspects of the legislation it still finds problematic.
A number of other appraisers have been more vocal in their opposition. Dave LaVigne, a New Bern appraiser, has created a website, www.ncaoa.net, to try and rally support against the bill.
Although the North Carolina Bankers Association has not taken a position on the bill, LaVigne argues banks would be the main beneficiary of the legislation. An appraiser, he said, is better trained and has more of a duty to protect the public interest than real estate agents performing BPOs.
?The only person that?s going to benefit from this is the bank,? he said.
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