BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 624 (Wilk) - Real estate appraisers: standards of conduct
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|Version: June 22, 2015 |Policy Vote: B., P. & E.D. 6 - |
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|Urgency: No |Mandate: No |
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|Hearing Date: July 13, 2015 |Consultant: Mark McKenzie |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 624 would authorize licensed real estate appraisers
to use a standard of valuation practice approved by the Bureau
of Real Estate Appraisers (BREA) for performing nonfederally
related appraisal activities, as specified.
Fiscal
Impact:
The BREA estimates costs of approximately $110,000 in 2016-17
and $102,000 in 2017-18 for 1 PY of staff to develop and adopt
regulations regarding the approval of nationally or
internationally recognized valuation standards. (Real Estate
Appraisers Regulation Fund)
AB 624 (Wilk) Page 1 of
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BREA indicates costs of $150,000 in 2016-17 to develop
specialized investigator training related to any new valuation
standards. These costs could be ongoing to the extent
additional valuation standards are approved by the BREA.
(Real Estate Appraisers Regulation Fund)
Additional BREA costs of approximately $50,000 annually,
beginning in 2017-18, to contract for subject matter experts
to assist in training development and provide expert witness
testimony for enforcement cases. (Real Estate Appraisers
Regulation Fund)
Background: Following the Savings and Loan crisis in the 1980s, the
federal government enacted the Financial Institutions Reform,
Recovery, and Enforcement Act (FIRREA) in 1989. Included in
FIRREA was the establishment of a federal regulatory structure
for oversight of real estate appraisal activity performed in
conjunction with federally related transactions (FRTs: those
requiring loans made, guaranteed, or insured by
federally-supervised financial institution). Federal law
requires real estate appraisals used in conjunction with FRTs to
be performed in writing, and in accordance with uniform
standards, by appraisers whose competency has been demonstrated
and whose professional conduct will be subject to effective
supervision. Existing federal law establishes the Uniform
Standards of Professional Appraisal Practice (USPAP) as the
minimum standard for appraisals used for FRTs. USPAP contains
standards for appraisal services including real property,
personal property, business valuation, and mass appraisal, and
also contains ethics, record keeping, competency, and
jurisdictional exception rules for all aspects of an appraisal
assignment. These standards are updated every two years through
a transparent, public process.
Existing state law, the Real Estate Appraisers Licensing and
Certification Law was enacted by the California Legislature in
1990 in response to FIRREA, and establishes the BREA as the
licensing and enforcement body for appraisal activity. The
licensing unit of the Bureau sets the minimum requirements for
education and experience according to criteria set by the
federal Appraisal Subcommittee and California law to ensure that
only qualified persons are licensed to conduct appraisals in
federally related real estate transactions. Applicants must
meet the minimum education and experience requirements and
AB 624 (Wilk) Page 2 of
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successfully complete a nationally approved examination. The
BREA's enforcement unit, which also operates under federal
enforcement mandates, ensures adherence to the
federally-required USPAP, California laws, and other regulations
by investigating complaints of violations of national appraisal
standards filed against licensed appraisers.
Proposed Law:
AB 624 would authorize licensed appraisers to use a standard
of valuation practice other than USPAP when performing
nonfederally related appraisal activity, if that practice is
disclosed to, and agreed upon, by the client and the practice is
described in the appraisal. This bill would also do the
following:
Specify that "nonfederally related real estate appraisal
activity" is the performance of an appraisal on real estate or
real property for any purpose other than a FRT.
Define "standard of valuation practice" as any nationally or
internationally recognized valuation standard approved by the
BREA.
Clarify that USPAP constitutes the minimum standard of conduct
and performance for federally related real estate appraisal
activity.
Require a licensee that uses a standard of valuation practice
other than USPAP to comply with ethics, record keeping,
competency, and scope of work rules specified in the 2014-15
edition of USPAP.
Staff
Comments: This bill is intended to authorize licensed and
certified appraisers to use alternate standards of valuation
approved by the BREA instead of USPAP when performing appraisal
activity for non-FRTs. While there are other recognized
(primarily internationally recognized) valuation standards,
California law related to appraisal activity has been structured
around the federal USPAP standards and licensed activities
related to FRTs. As such, the BREA would need to develop and
adopt regulations to review and approve other valuation
standards, and train its investigator and enforcement staff on
any new standards that are approved by the Bureau.
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BREA estimates staffing costs of $110,000 in 2016-17 and
$102,000 in 2017-18 to develop and adopt regulations to
establish an application and review process for approving
alternate valuation standards. Due to the complexities of these
valuation standards, volume of information involved in assessing
standards, and expectations of significant interest among
stakeholders, the BREA expects significant workload associated
with these regulations.
BREA expects to incur additional costs to develop a specialized
investigator training program to foster necessary expertise on
any new standards that are adopted. Preliminary estimates
indicate these costs would be approximately $150,000, and could
be ongoing to the extent multiple valuation standards are
approved. Lastly, BREA also expects to require contracts of
approximately $50,000 each year for subject-matter experts to
assist in the development of specialized training and to serve
as expert witnesses in enforcement cases.
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