AN ACT Relating to certified real estate appraisals; adding a new chapter to Title 18 RCW; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. It is essential that a professional appraiser render his or her analyses, opinions, and advice in a manner that will be meaningful to the client and will not be misleading in the marketplace. The intent of this chapter is to assist appraisers in arriving at and communicating their analyses, opinions, and advice; to assist the appraisal profession in establishing appropriate standards for certified appraisals; and to make the users of appraisal services and the public aware of these standards.

NEW SECTION. Sec. 2. This chapter may be cited as the certified real estate appraisal law of Washington.

NEW SECTION. Sec. 3. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Real estate appraisal" or "appraisal" means the act or process of estimating value. It is an analysis, opinion, or conclusion relating to the nature, quality, value, or utility of specified interests in, or aspects of, identified real estate.

(2) "Certified real estate appraisal" or "certified appraisal" means an appraisal designated as such under this chapter by a real estate appraiser.

(3) "Real property" means one or more defined interests in a parcel of real estate, whether an unencumbered fee or a lesser estate.

(4) "Report" means any communication, written or oral, of an analysis, opinion, or conclusion relating to the nature, quality, value, or utility of specified interests in, or aspects of, identified real estate, including valuation reports, real estate counseling reports, real estate tax counseling reports, real estate offering memoranda, mortgage banking offers, highest and best use studies, market demand and economic feasibility studies, and all other reports communicating an appraisal analysis, opinion, or conclusion, regardless of title.

(5) "Compensation" means compensation for performing the act or process of a certified appraisal or preparing, rendering, or communicating a report of a certified appraisal, and not for the performance of any activities collateral thereto.

NEW SECTION. Sec. 4. In developing a certified appraisal, an appraiser shall:

(1) Be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal;

(2) Not commit a substantial error of omission or commission that significantly affects an appraisal;

(3) Not render appraisal services in a careless or negligent manner, such as a series of errors that, considered individually, may not significantly affect the results of an appraisal, but which, when considered in the aggregate, would be misleading;

(4) Adequately identify the real estate, identify the real property interest under consideration, define the purpose and intended use of the appraisal, consider the scope of the appraisal, describe any special limiting conditions, and identify the effective date of the appraisal;

(5) Define the value being considered. If the value to be estimated is market value, the appraiser shall clearly indicate whether the estimate is the most probable price: (a) In terms of cash; (b) in terms of financial arrangements equivalent to cash; or (c) in such other terms as may be precisely defined.

If an estimate of value is based on submarket financing or financing with unusual conditions or incentives, the terms of such financing must be clearly set forth, their contributions to or negative influence on value must be described and estimated, and the market data supporting the valuation estimate must be described and explained;

(6) Consider easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, or other items of a similar nature;

(7) Consider whether an appraised fractional interest, physical segment, or partial holding contributes pro rata to the value of the whole;

(8) Identify any personal property, fixtures, or intangible items that are not real property but are included in the appraisal;

(9) Consider the effect on use and value of the following factors: Existing land use regulations, reasonably probable modifications of such land use regulations, economic demand, the physical adaptability of the property, neighborhood trends, and the highest and best use of the property; and

(10) Recognize that land is appraised as though vacant and available for development to its highest and best use and that the appraisal of improvements is based on their actual contribution to the site.

NEW SECTION. Sec. 5. In developing a certified appraisal, an appraiser shall when applicable:

(1) Value the site by an appropriate appraisal method or technique;

(2) Collect, verify, analyze, and reconcile:

(a) Such comparable cost data as are available to estimate the cost new of the improvements (if any);

(b) Such comparable data as are available to estimate the difference between cost new and the present worth of the improvements (accrued depreciation);

(d) Such comparable rental data as are available to estimate the market rental of the property being appraised;

(e) Such comparable operating expense data as are available to estimate the operating expenses of the property being appraised; and

(f) Such comparable data as are available to estimate rates of capitalization and rates of discount.

!ixNo pertinent information may be withheld;

(3) Base projections of future rent and expenses on reasonably clear and appropriate evidence;

(4) When estimating the value of a leased fee estate or a leasehold estate, consider and analyze the effect on value, if any, of the terms and conditions of the lease;

(5) Consider and analyze the effect on value, if any, of the assemblage of the various estates or component parts of a property and refrain from estimating the value of the whole solely by adding together the individual values of the various estates or component parts;

(6) Consider and analyze the effect on value, if any, of anticipated public or private improvements, located on or off the site, to the extent that market actions reflect such anticipated improvements as of the effective appraisal date;

(7) Identify and consider the appropriate procedures and market information required to perform the appraisal, including all physical, functional, and external market factors as they may affect the appraisal; and

(8) Appraise proposed improvements only after examining and having available for future examination:

(a) Plans, specifications, or other documentation sufficient to identify the scope and character of the proposed improvements;

(b) Evidence indicating the probable time of completion of the proposed improvements; and

(c) Reasonably clear and appropriate evidence supporting development costs, anticipated earnings, occupancy projections, and the anticipated competition at the time of completion.

NEW SECTION. Sec. 6. In developing a certified appraisal, an appraiser shall:

(1) Consider and analyze any current agreement of sale, option, or listing of the property being appraised, if such information is available to the appraiser in the normal course of business;

(2) Consider and analyze any prior sales of the property being appraised; 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.

NEW SECTION. Sec. 7. (1) Before entering into an agreement to perform a certified appraisal, an appraiser must carefully consider the knowledge and experience that will be required to complete the appraisal competently and either:

(a) Have the knowledge and experience necessary to complete the appraisal competently; or

(b) Immediately disclose the lack of knowledge or experience to the client, and take all steps necessary or appropriate to complete the appraisal competently.

(2) Except as provided in section 4(1) through (3) of this act and section 6 of this act, an appraiser may enter into an agreement to perform a certified appraisal that calls for something less than, or different from, the work that would otherwise be required by this chapter, if, before entering into such agreement:

(a) The appraiser has determined that the appraisal to be performed is not so limited in scope that the resulting appraisal concerning real estate would tend to mislead or confuse the client, the users of the report of the certified appraisal, or the public; and

(b) The appraiser has advised the client that the appraisal assignment calls for something less than, or different from, the work required by this chapter, and therefore the report of the certified appraisal will include a qualification that reflects the limited or differing scope of the appraisal.

NEW SECTION. Sec. 8. (1) Each written or oral report of a certified appraisal shall:

(a) Clearly and accurately set forth the appraisal in a manner that will not be misleading;

(b) Contain sufficient information to enable the persons who receive or rely on the report to understand it properly; and

(c) Clearly and accurately disclose any extraordinary assumption or limiting condition that directly affects the appraisal and indicate its impact on value.

(2) Each written report of a certified appraisal shall:

(a) Identify and describe the real estate being appraised;

(b) Identify the real property interest being appraised;

(d) Define the value to be estimated;

(e) Set forth the effective date of the appraisal and the date of the report;

(f) Describe the scope of the appraisal;

(g) Set forth all assumptions and limiting conditions that affect the analyses, opinions, and conclusions;

(h) Set forth the information considered, the appraisal procedures followed, and the reasoning that supports the analyses, opinions, and conclusions;

(i) Set forth the appraiser's opinion of the highest and best use of the real estate being appraised when such an opinion is necessary and appropriate;

(j) Explain and support the exclusion of any of the usual valuation approaches;

(k) Set forth any additional information that may be appropriate to show compliance with, or clearly identify and explain permitted departures from, the requirements of sections 1 through 7 of this act; and

(l) Include a certification that the analysis, opinion, and conclusions were developed and the report was prepared in conformity with this chapter, or a statement of the particulars for which that certification is not made.

(3) Each oral report of a certified appraisal shall, to the extent possible and appropriate, comply with subsection (2) of this section.

NEW SECTION. Sec. 9. Each written report of a certified appraisal shall contain a certification that is similar in content to the following form:

!tm1 !ix"I certify that, to the best of my knowledge and belief:

-!sc ,3The statements of fact contained in this report are true and correct.

-!sc ,3The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions.

-!sc ,3I have no (or the specified) present or prospective interest in the property that is the subject of this report, and I have no (or the specified) personal interest or bias with respect to the parties involved.

-!sc ,3My compensation is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report.

-!sc ,3My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with chapter ..... RCW (sections 1 through 17 of this act).

-!sc ,3I have (or have not) made a personal inspection of the property that is the subject of this report. (If more than one person signs the report, this certification must clearly specify which individuals did and which individuals did not make a personal inspection of the appraised property.)

-!sc ,3No one provided significant professional assistance to the person signing this report. (If there are exceptions, the name of each individual providing significant professional assistance must be stated.)"

NEW SECTION. Sec. 10. Except as provided in section 8(1) of this act and section 9 of this act, an appraiser rendering a report of a certified appraisal may enter into an agreement that calls for a report that is something less than, or different from, the complete report that would otherwise be required under this chapter, provided that before entering into such an agreement:

(1) The appraiser has determined that the resulting report would not be so limited in scope that it would tend to mislead or confuse the client, the users of the report, or the public; and

(2) The appraiser has advised the client that the report to be prepared is something less than, or different from, the report required by the specific reporting guidelines and therefore the report for the service will include a qualification that reflects this fact.

NEW SECTION. Sec. 11. No person may:

(1) Accept an engagement to make a certified appraisal or to prepare a report of a certified appraisal in which the employment itself or the fee payable for the service is contingent upon the appraiser reporting a predetermined or specified amount of value, or in which the employment or fee to be paid is otherwise contingent upon a preestablished analysis, opinion, or conclusion or preestablished finding in the report of the certified appraisal; or

(2) Claim or accept compensation for a certified appraisal or a report of a certified appraisal contingent upon the amount of, or otherwise determined as a percentage of, an award of monetary damages arising out of a condemnation or other legal action in which the value of the property to be appraised is disputed.

NEW SECTION. Sec. 12. A person performing a certified appraisal shall retain for three years from the date of submitting the report of the certified appraisal to his or her client originals or true copies of the following:

(1) Any contract for the performance of the certified appraisal;

(2) The report of the certified appraisal; and

(3) Any supporting documentation or data required by this chapter or otherwise necessary to the formulation and preparation of the certified appraisal.

NEW SECTION. Sec. 13. Any person who has been damaged, or can demonstrate that he or she will potentially be irreparably damaged, may bring an action for damages, equitable relief, or both, against any person who violates this chapter. The court may award costs and reasonable attorneys' fees to the prevailing party, as determined by the court. The rights and remedies provided in this chapter are not exclusive of other rights or remedies provided by law.

NEW SECTION. Sec. 14. Prior to January 1, 1989, no state agency may require the use of a certified appraisal for any transaction, other than a transaction to which the state is a party, without express statutory authorization.

NEW SECTION. Sec. 15. Each real estate appraiser shall comply with this chapter for the development and communication of real estate appraisals for any certified appraisals of real estate located in this state.

NEW SECTION. Sec. 16. Any person who wilfully violates or knowingly participates in a violation of this chapter is subject to a civil penalty not to exceed one thousand dollars. The attorney general or prosecuting attorney in the county in which the violation occurred may bring an action to seek the civil penalty. This chapter shall not be construed to preclude the applicability of any other provision of the criminal laws of this state which is otherwise applicable to an act or omission which violates this chapter.

NEW SECTION. Sec. 17. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 18. Sections 1 through 17 of this act shall constitute a new chapter in Title 18 RCW.