Tighter rules governing appraisers gain support

April 18, 1993|By James M. Woodard | James M. Woodard,Copley News Service

A federal law requires that all states implement an appraise reform program before the end of this year. Most appraisers, as well as property buyers and sellers, support the plan.

State laws must require appraisers who are involved in any federally related real estate transactions to be licensed or certified. That covers about 90 percent of all real estate transactions.

To qualify for a license or certificate, appraisers must meet certain educational and experience criteria. And they must pass a stringent examination.

"I'm in favor of the newly legislated requirement for real estate appraisers to be state licensed or certified," said Beverly Bayer, SRA, president of a California regional chapter of the Appraisal Institute. "But it may result in higher fees and a shortage of appraisers in the future."

In California, where they are more appraisers than in any other state, the new law became effective Nov. 1.

"The law will reduce the number of Saturday appraisers," appraisers who practice part-time and have minimal qualifications, Ms. Bayer said. "They just like to pick up an appraisal fee now and then without taking time to be well educated in the field.

"They often undercut the practices of well qualified appraisers."

The law will raise the competency level of practicing appraisers generally but probably will cut down on the number of people entering the profession, Ms. Bayer believes.

"It will cost over $2,000 in educational and licensing fees just to get into the business," she said.

Accurate appraisals are important in real estate transactions. They directly affect the amount of money that flows from a property buyer to a seller. And they determine the amount of available mortgage financing for the purchase or refinance of properties.

The appraisal also is a key factor in determining whether a buyer qualifies to purchase and finance a property.

"The new regulations have been needed in the appraisal profession for a long time," said James L. Halliburton, MAI, an appraiser for 28 years.

"There are still a lot of bugs to work out, and there will be many recently state-licensed appraisers who will have to tighten up controls of their appraisal practice in order to meet these new federal and state standards of ethical appraisal practice. But this will be a very positive move for both professional appraisers and their clients," Mr. Halliburton said.

In California, 9,334 appraisers have received their license or certificate from the state. A total of 14,586 have applied for one of these designations.

Of those who have received desired authorization, 12 percent have general residential licenses, 13 percent have provisional residential licenses, 41 percent have residential certificates and 34 percent have general certificates.

Each of these categories authorizes the appraiser to participate in different types of property transactions, with varying degrees of complexity. Similar laws have been passed in other states.

All 50 states have passed appraisal legislation and have reported good progress toward implementation. Nationally, more than 64,000 appraisers have obtained state certification or licensing, according to an Appraisal Institute study. Hundreds more are being processed daily.

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