BILL ANALYSIS                                                                                                                                                                                                    



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          ASSEMBLY THIRD READING


          AB  
          1381 (Weber)


          As Amended  January 25, 2016


          Majority vote


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          |Committee       |Votes|Ayes                  |Noes                 |
          |                |     |                      |                     |
          |                |     |                      |                     |
          |                |     |                      |                     |
          |----------------+-----+----------------------+---------------------|
          |Business &      |8-3  |Bonilla, Bloom,       |Jones, Gatto, Wilk   |
          |Professions     |     |Campos, Dodd, Holden, |                     |
          |                |     |Mullin, Ting, Wood    |                     |
          |                |     |                      |                     |
          |----------------+-----+----------------------+---------------------|
          |Appropriations  |12-3 |Gomez, Bloom,         |Bigelow, Gallagher,  |
          |                |     |Bonilla, Bonta,       |Wagner               |
          |                |     |Calderon, Daly,       |                     |
          |                |     |Eggman, Eduardo       |                     |
          |                |     |Garcia, Holden,       |                     |
          |                |     |Quirk, Weber, Wood    |                     |
          |                |     |                      |                     |
          |                |     |                      |                     |
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          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.  This bill requires the Director of the Bureau of  








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          Real Estate Appraisers (BREA), 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. 
          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, minor and absorbable costs to BREA.


          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.  










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          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  
            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:      


          1)Trainee Licensees may appraise any property which the  
            supervising appraiser is permitted to appraise.  Requires 150  
            education hours and does not require experience. 
          2)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. 


          3)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. 


          4)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  








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            determined by the AQB, and require specific modules to be  
            covered, such as basic appraisal principles and procedures and  
            a 15-hour National USPAP course, or its equivalent.  The AQB  
            made changes relating to real estate appraiser qualifications  
            which became effective January 1, 2015.  Among other things,  
            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,  








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            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  
            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  
            3,395 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% 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% of new single-family homes in 2012.   
            Market penetration was 8% in Northern California and 4% in  
            Central California. 












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          Analysis Prepared by:                                             
                          Gabby Nepomuceno / B. & P. / (916) 319-3301  FN:  
          0002593