SENATE BILL REPORT

HB 1109

BYRepresentatives O'Brien and May

Establishing requirements for certified real estate appraisals.

House Committe on Commerce & Labor

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):March 27, 1987; February 18, 1988

Senate Staff:Charles Woods (786-7911)

AS OF FEBRUARY 11, 1988

BACKGROUND:

Real estate appraisers who work for county assessors must meet specified qualifications and be certified by the Department of Personnel.  Sales of certain public property, such as school district property, must be preceded by an appraisal by real estate brokers or professionally designated real estate appraisers.

No requirements for private real estate appraisals exist.

SUMMARY:

A new designation of certified real estate appraisal is created.  All certified appraisals must meet certain requirements.

Certified appraisal requirements:  In developing a certified appraisal, an appraiser must, among other things:  1) employ those recognized methods and techniques that are necessary to produce a credible appraisal, 2) not render services in a careless or negligent manner; 3) if estimating market value, indicate whether the estimate is the most probable price in terms of cash, financial arrangements equivalent to cash, or other defined arrangements; and 4) recognize that land is appraised at its highest and best use.

An appraiser developing a certified appraisal must also:  1) consider and analyze any current agreement of sale, option, or listing, if such information is available to the appraiser in the normal course of business; 2) consider and analyze prior sales; and 3) consider the quality and quantity of data available and analyzed within the approaches used, and the applicability or suitability of the approaches used in the final reconciliation.

When applicable, an appraiser developing a certified appraisal must: 1)  collect, verify, analyze, and reconcile comparable data as are available;  2) base projections of future rent and expenses on reasonably clear and appropriate evidence; 3) appraise proposed improvements only after examining and having available for the future documentation to identify the scope, character and probable time of completion of the proposed improvements, and development costs, anticipated earnings, occupancy projections and anticipated competition.  Additional requirements to be met when applicable are also set forth.

Requirements for reports of certified appraisals:  All reports of certified appraisals must clearly and accurately set forth the appraisal, contain sufficient information to understand the report, and clearly and accurately disclose any extraordinary assumption or limiting condition.  Additional standards for written appraisal reports, which also cover oral reports to the extent appropriate, are established.  A written report must also contain a certification stating, among other things:

            oThat the facts contained in the report are true and correct;

            oThat the appraiser has no (or the specified) interest in the property;

            oThat the appraiser's compensation is not contingent on an action or event resulting from the report;

            oThat the report was prepared in conformity with chapter; and

            oWhether the appraiser made a personal inspection of the property.

Agreements:  Before entering into an agreement to perform a certified appraisal, an appraiser must disclose any lack of knowledge or experience to competently complete the appraisal and take steps to complete the appraisal competently.  An appraiser may enter into an agreement to perform a certified appraisal for something less than, or different from, the work otherwise required by the chapter, if the appraisal would not be so limited as to mislead, and the appraiser has made a disclosure to the client.  Under the same conditions, an appraiser may also enter an agreement for a report of a certified appraisal less than, or different from, the appraisal report required by the chapter.  Certain requirements, such as consideration of prior sales, may not be waived.

An appraiser shall not agree to make a certified appraisal in which the employment or the fee is contingent upon the appraiser reporting a certain value, or is otherwise contingent upon a preestablished analysis or finding, or in which the compensation is contingent upon or determined by a damage award arising out of a condemnation or other legal action.

Appraisers shall retain records of certified appraisals for three years from the date of submitting the report.

Enforcement:  Enforcement is by private action.  The court may award costs and reasonable attorneys' fees to the prevailing party. Any person who wilfully violates or knowingly participates in a violation of the chapter is subject to a civil penalty not to exceed $1000.

Certified appraisals/state agencies:  Prior to January 1, 1989, no state agency may require the use of a certified appraisal for any transaction, other than one in which the state is a party, without express statutory authorization.

Fiscal Note:      available