BILL ANALYSIS Ó
AB 1381
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Date of Hearing: January 12, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Susan Bonilla, Chair
AB 1381
Weber - As Amended March 26, 2015
SUBJECT: Real estate appraisers.
SUMMARY: Requires real estate appraisers to obtain education in
valuing sustainable real estate assets for purposes of meeting
educational background requirements and continuing education
requirements.
EXISTING LAW:
1)Establishes the Real Estate Appraisers' Licensing and
Certification Law (Act), administered by the Bureau of Real
Estate Appraisers (BREA) within the Department of Consumer
Affairs (DCA), which regulates the licensing of real estate
appraisers. (Business and Professions Code (BPC) Section
11300 et seq.)
2)Requires the Director of the DCA to adopt regulations for
licensure which shall meet, at a minimum, the requirements and
standards established by the Appraisal Foundation and the
federal financial institutions regulatory agencies acting
pursuant to Section 1112 of the Financial Institutions Reform
Recovery and Enforcement Act of 1989, Public Law 101-73
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(FIRREA). (BPC Section 11340(c))
3)Authorizes the Director to issue a citation to a licensee if
the person or entity is in violation of the Act or any
regulations adopted to carry out its purposes, which may also
contain an order to enroll in and successfully complete
additional basic or continuing education courses. (BPC
Section 11315(a))
4)Provides that when a citation imposes an education course or
courses, failure to satisfactorily complete or timely report
an education course to the office by the date specified in the
citation shall result in the automatic suspension of the
licensee's real estate appraiser license as of that date.
(BPC Section 11315(d))
5)Provides that a license shall not be renewed prior to the
satisfactory completion of an education course specified in
the citation. (BPC Section 11315(d))
THIS BILL:
6)Requires the Director, for purposes of establishing
educational background requirements, to require education in
valuing sustainable real estate assets, which include, but are
not limited to, solar and wind power generation installations,
and energy efficiency measures.
7)Requires continuing education requirements to include
education in valuing sustainable real estate assets, and
prohibits the renewal of a license unless the licensee
provides evidence of continuing education in valuing
sustainable real estate assets.
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FISCAL EFFECT: Unknown. This bill is keyed fiscal by the
Legislative Counsel.
COMMENTS:
Purpose. This bill is sponsored by the author. According to
the author, "California has been at the forefront of the
expansion of the green economy and has continued to make
strides to support growth within the renewables market. As
this growth continues it is critical that homeowners who make
investments in renewable residential retrofits with the
reasonable expectation of adding value to their homes are
ensure to be assessed as such. Having required education for
the appraisal of sustainable real estate assets makes sense as
the way to make sure homeowners have these changes adequately
valued."
Background. In 1989, Congress adopted the Federal Financial
Institutions Reform, Recovery and Enforcement Act (FIRREA),
which requires states to license and certify real estate
appraisers who appraise property for federally related
transactions (FRTs), as a result of the savings and loan
disaster. In short, FRTs are transactions involving loans
made, guaranteed, or insured by federally supervised financial
institutions. The FIRREA, and rules promulgated pursuant to
that act, require that real estate appraisals be performed in
accordance with generally accepted uniform standards as
promulgated by the Appraisal Standards Board (ASB) of the
Appraisal Foundation.
The Appraisal Foundation also has an Appraisal Qualifications
Board (AQB) that establishes the qualification criteria for
state licensing, certification, and recertification of
appraisers. FIRREA mandates that all state certified
appraisers must meet the minimum education, experience, and
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examination requirements promulgated by the AQB. These
criteria, among other things, establish four levels of real
property appraiser classifications, which are reflected under
California law, and have different education, experience, and
scope of practice requirements. As of January 1, 2015:
Trainee Licensees may appraise any property which the supervising
appraiser is permitted to appraise. Requires 150 education hours
and does not require experience.
Residential Licensees may appraise any non-complex family
property with up to four dwelling units with a transaction value
up to $1 million, and non-residential property with a
transaction value up to $250,000. Requires 150 education hours
and 30 semester hours of college level education or an
associate's degree or higher in any field and 2,000 hours of
appraisal experience.
Certified Residential Licensees may appraise any family property
with up to four dwelling units without regard to transaction
value or complexity, and non-residential property with a
transaction value of up to $250,000. Requires 200 education
hours and a bachelor's degree or higher and 2,500 hours of
appraisal experience.
Certified General Licenses may appraise all real estate, without
regard to transaction value or complexity. Requires 300
education hours and 3,000 hours of appraisal experience.
Background Education Requirements. Educational requirements for
all certifications are based upon national standards
determined by the AQB, and require specific modules to be
covered, such as basic appraisal principles and procedures and
a 15 hour National USPAPA course, or its equivalent. The AQB
made changes relating to real estate appraiser qualifications
which became effective January 1, 2015. Among other things,
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the qualifications specifically provide that case studies
relating to special energy efficient items (i.e. "green
buildings") may be used as a part of the curriculum required
under certain education modules for certified residential and
certified general licensees. It is unclear the extent to
which these foundational courses already incorporate energy
efficiency items.
Continuing Education Requirements. The current term of a
California real estate appraiser
license is two years, and all licensed appraisers must meet
minimum continuing education requirements (CEs) before
renewing their license. A total of 56 hours of CEs are
required every four years, although proof of completion of the
seven hour National USPAP Update Course, or its equivalent, is
required every two years and must be submitted with each
renewal application. Of the remaining hours, proof of
completion of a four hour BREA approved course covering
federal and state laws and regulations and remaining CE
courses is required every four years. The cycle starts with
the issuance date of the current license. Currently, the AQB
allows, and the BREA may grant, CE credit for courses that
cover topics including, but not limited to, energy efficient
items and "green building" appraisals.
Valuing Sustainable Real Estate Assets. According to the
author, there have been concerns raised regarding the
consistent assessment of solar and other renewable
technologies when added to a home. While these retrofits are
often relatively costly, they are worthwhile, considering the
savings found in energy bills and a perceived increase in the
value of the home, and research shows that sustainable real
estate assets do indeed add value to a home. However,
according to "The Challenges of Valuing Green," published in
the Winter 2015 issue of the Appraisal Journal, an industry
publication, valuation professionals, real estate agents, and
homebuyers face challenges in the process of valuing, selling,
and purchasing green and energy efficient homes due to a lack
of comparable properties and lack of data. When applied to
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homes, the term "green" can take a variety of meanings, which
creates difficulty in the marketplace when valuing a home that
has been classified as green or has energy efficient or high
performance features. This bill would build upon current
efforts to appropriately value green features by requiring the
Bureau to require education in valuing sustainable real estate
assets.
Renewable Energy in California. According to the Solar Energy
Industries Association (SEIA), in 2014, California installed
4,316 megawatts (MW) of solar electric capacity, and of this
capacity, 615 MW were residential, 307 MW were commercial, and
3395 MW were utility-scale. As of September 2015, the 11,535
MW of solar energy currently installed in California ranks
first in the country in installed solar capacity.
According to the SEIA, prices for solar systems for the
residential market continue to drop year after year, and have
fallen nearly 50 percent since 2010. In 2014, over 230,000
homes in California had solar panels. According to the March
2015, California Energy Commission's New Solar Homes
Partnership Program (NSHP) Case Study, the NSHP, part of
California's comprehensive statewide solar program, the
California Solar Initiative, had the highest market
penetration in Southern California, reaching 27 percent of new
single-family homes in 2012. Market penetration was 8 percent
in Northern California and 4 percent in Central California.
Prior Related Legislation. AB 2519 (Berryhill) Chapter 683,
Statutes of 2012, among other things, prohibited the renewal
of a license if the licensee failed to satisfactorily complete
the additional education requirements imposed by a citation.
SB 706 (Price) Chapter 712, Statutes of 2011, required licensees
to take a four-hour course relating to federal and state
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appraisal laws instead of certifying that they have read and
understand specified state and federal laws.
ARGUMENTS IN SUPPORT:
Broadway Heights Community Council writes, "Renewable
technologies are quickly becoming a fixture in residential and
commercial markets as a way not only to save on energy costs but
also to increase the value of a property. Nationwide in 2015
alone there has been enough solar and wind energy installed to
run more than 2.6 million homes according to the Natural
Resources Defense Council. Although the trend of retrofitting
real estate with green technology is a promising one, there have
been a number of complaints from those who received these
updates that additions are being undervalued or not taken into
account at all. These situations are detrimental to those who
have invested a great deal in these green technologies and if
issues with valuing persist over the long term, they have the
potential to hinder the ability of the renewable industry to
continue to grow."
ARGUMENTS IN OPPOSITION:
The Appraisal Institute California Government Relations
Committee writes, "?AB 1381 imposes a (CE) requirement for
valuing sustainable real estate assets on all appraisers,
whether or not their practice includes any solar energy
appraisals. Appraisers may specialize in agricultural, right of
way, drainage, and other appraisals, and it is inappropriate to
extend this (CE) requirement to all appraisers."
POLICY ISSUES:
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Course Availability and Amount of Education Required. While the
AQB recently specified that foundational courses may include
energy efficient items, it is unclear how many foundational
courses incorporate energy efficiency into their curriculum. As
a result, unlike CE courses, which already exist for energy
efficiency and green building characteristics, applicants for
initial licensure may have a harder time finding foundational
courses that meet this requirement without having to take
supplemental courses. In addition, this requirement would also
affect reciprocity for out-of-state applicants, who may also
have to take supplemental courses to receive State licensure.
Accordingly, the author may wish to consider delaying the
operative date for the background educational requirement to
give the market time to adjust, and to provide more time for
applicants to meet this requirement. In addition, the author
may wish to consider specifying the amount of coursework (e.g.,
number of hours) required to meet these new requirements, and
whether all licensees, including those who do not work with
sustainable real estate assets, should be required to take
ongoing CEs credits in this area.
REGISTERED SUPPORT:
Broadway Heights Community Council
REGISTERED OPPOSITION:
Appraisal Institute California Government Relations Committee
Analysis Prepared by:Eunie Linden / B. & P. / (916) 319-3301
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