BILL ANALYSIS                                                                                                                                                                                                    



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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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