COMMISSION CONSIDERS
APPRAISER LICENSING PLAN

The failure of various savings and loan associations and financial institutions in Texas and elsewhere has prompted a Congressional Subcommittee investigation into banking and lending practices across the nation. The Commerce, Consumer and Monetary Affairs' Subcommittee, headed by Representative Doug Barnard, has dramatically concluded that a significant contributor to the weakened condition of many of the nation's financial institutions is "faulty and fraudulent real estate appraisals that overvalue property securing loans and investments." Recognizin~that very few states impose any significant requirements on the conduct at real estate appraisals, Congressman Barnard has sought a federal solution.

On November 20, Congressman Barnard introduced legislation entitled the "Real Estate Appraisal Reform Act of 1987" (H.R. 3675) which would require the ''certification" of persons who perform appraisals in connection with "federally covered transactions." Although the term "federally covered transaction" is not specifically defined in the Bill, it would appear to cover nearly every transaction in which the federal government is either directly or indirectly involved, including transactions where a federal agency insures the deposits of the financial institution which makes a mortgage loan (F.D.I.C., or F.S.L.I.C.) and where it insures or guarantees the mortgage loan in the event of borrower default (e.g., VA and FHA loans).

To become "certified", the appraiser would be required to satisfy certain education and/or experience requirements established by a Federal Interagency Appraisal Council and pass an examination. Once certified, the appraiser must then comply with uniform standards for conducting appraisals which would also be established by the Council. Although each state could create a " State Appraiser Certifying Agency" to implement and enforce the Council's certification requirements~and standards, such agency must operate under the Council's supervision and oversight.

Reacting to the concerns raised by the Congressional study, the North Carolina Real Estate Commission has, during the past year, discussed the need for and desirability of establishing a means for identifying persons who have demonstrated a certain level of competency in the real estate appraisal field

and who subscribe to generally accepted standards of practice. While recognizing that various private appraisal organizations and institutes currently impose educational requirements and standards of conduct on their members, the Commission determined that a governmentally sanctioned program would be of additional benefit to consumers, financial institutions and governmental bodies which rely on the services of real estate appraisers.

The Commission was also of the opinion that this program could best be carried out at the state level where local needs could be more easily identified and local concerns more readily addressed. And it was concluded that the Real Estate Commission is the most logical and appropriate agency to administer a regulatory program for real estate appraisers because the subject matter of the real estate brokerage and appraisal disciplines overlaps and because the Commission currently has in place the core administrative, technical and fiscal resources necessary to develop and administer a program of this nature (resulting in substantial savings to the State when compared with the expense of creating a new agency specifically and exclusively for this purpose. )

In its discussion and study of.this issue, the Commission examined "modem appraiser certification and licensing acts developed by various appraisal organizations as well as legislation currently pending and recently enacted in several states. In the final analysis, the Commission determined that a combination of the approaches represented in these model acts and legislation would best serve the needs of our State, and from this synthesis, the Commission's proposed "appraiser licensing plan" has emerged.

Appraiser Licensing Plan

If approved and directed by the North Carolina General Assembly, the Real Estate Commission would accept responsibility for administering a program for the licensing of real estate appraisers whereby persons who satisfy certain minimum competency requirements could be licensed by the Commission as either a "General Appraiser", enabling the person to appraise all types of real property; a "Residential Appraiser" restricting the person to performing appraisals of residential real property of one to four units; or an "Associate Appraiser", enabling the person to perform certain acts in connection with real estate appraising under the supervision of either a General or Residential Appraiser.

At this early stage in its consideration of the program, the Commission has made no determination as to the educational and/or

experience qualifications necessary for licensure, preferring instead to withhold any decision pending input from real estate licensees, persons currently engaged in the appraisal business, and others. However, the Commission is strongly considering as a part of the licensing process, a requirement that applicants for licensure complete a program of instruction in real estate fundamentals and appraising, have a certain minimum amount of experience in the real estate appraisal business; and pass a written examination covering such subjects as fundamentals of appraising, standards of appraisal practice, and other practical aspects of performing and communicating appraisals. Provisions for exempting persons from the education and/or examination requirements are also being considered by the Commission for persons with exceptional experience in real estate appraising.

To assist the Commission in developing and administering the appraiser licensing program, it is envisioned that a new department would be added to the existing Commission staff and that knowledgeable, experienced appraisers would be called upon to advise the Commission on such matters as the formulation of standards for performing and reporting appraisals; the approval and monitoring of any pre-licensure and continuing education courses; the development of license examinations; the conduct of investigations and hearings on complaints against licensed appraisers; and similar matters. It is anticipated that the appraiser licensing program would be financially self supporting, deriving Its income entirely from application and license fees.

To assure that all interested persons are afforded an opportunity to review and comment on the proposed program for licensing real estate appraisers, the Commission has scheduled a public forum which will be held on Thursday, April 14 at 11:00 a.m. at the North Raleigh Hilton, 3415 Wake Forest Road, in Raleigh. You may obtain a free copy of the proposed plan in its current state of completion by writing or calling the Real Estate Commission Office, P.O. Box 17100, 1313 Navaho Drive, Raleigh, N. C. 27619 (Phone: 919/733-9580).

According to a recent report based upon data from a NARELLO Interstate Cooperation Committee Report, only 16 states currently impose any requirements on real estate appraisers or appraisals. In ten of these states, licensure as a real estate broker or salesman is the only requirement; four states (Delaware, Nebraska, Oregon, and South Dakota) issue appraiser licenses; Louisiana certifies appraisers; and California certifies appraisals.