HOUSE BILL REPORT

HB 1109

BYRepresentatives O'Brien and May

Establishing requirements for certified real estate appraisals.

House Committe on Commerce & Labor

Majority Report:  Do pass.  (11)

      Signed by Representatives Wang, Chair; Cole, Vice Chair; Fisch, Fisher, R. King, O'Brien, Patrick, Sanders, Sayan, C. Smith and Walker.

House Staff:Joan Elgee (786-7166)

AS PASSED HOUSE FEBRUARY 5, 1988

BACKGROUND:

Currently, real estate appraisers who perform appraisals for taxation purposes 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:

The certified real estate appraisal law of Washington is established.

Certified appraisals:  A real estate appraiser may designate an appraisal as a certified appraisal.  All certified appraisals must meet the requirement set forth in the act.

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 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:      Requested February 2, 1987.

House Committee ‑ Testified For:    William Ith, American Institute of Real Estate Appraisers; Robert L. Shedd, Weyerhaeuser Real Estate Company; Sally Strickland, Society of Real Estate Appraisers; John T. Keefe, American Institute of Real Estate Appraisers; E.E. (C.C.) Sandstrom, American Society of Appraisers (ASA); and Michael B. Lamb;  American Institute of Real Estate Appraisers and Society of Real Estate Appraisers.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The public and financial institutions are being defrauded by unregulated appraisers.  Standards are needed to prevent faulty appraisals.

House Committee - Testimony Against:      None Presented.