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Legal IssuesBPO vs. CMA (revisited)
It’s been nearly 10 years since RELRA (Real Estate Licensing and Registration Act) was changed to stop real estate licensees from performing appraisals — but the Legal Hotline still fields questions about whether a licensee can perform a broker price opinion (BPO). Both the Real Estate Commission and the State Board of Certified Appraisers view a BPO as an appraisal. As an appraisal, a BPO must not only meet USPAP (Uniform Standards of Professional Appraisal Practice) ; it must also be performed only by a certified appraiser.
Quite simply, if you are not a certified appraiser, you CANNOT perform a BPO.
Licensees often receive calls from lending institutions to perform BPOs and in the current financial market those calls have only increased. You can’t provide a BPO and you don’t want to turn away potential business, so what can you do? You can provide a lender with a Comparative Market Analysis, or a CMA. A CMA is not an appraisal but there are specific rules that must be followed to comply with RELRA.
A CMA is defined as a “written analysis … relating to the potential sale price of a specified piece of real estate in an identified real estate market at a specified time. . . .” It can be prepared by a buyer’s agent, a seller’s agent or a transaction licensee – or by a potential seller’s agent.
In most calls to the Hotline, the agent (or broker) is not the listing agent for the property. If the agent has an opportunity to secure the listing, then the agent can perform a CMA. In other words, a CMA is a tool that an agent can use to win business. If the lender signs an agreement with the broker, then the agent can charge a fee for the services rendered — nothing in RELRA prohibits that practice. And yes, the fee can be assessed even if the listing is sent elsewhere, provided the lender agreed, in writing and in advance, to pay the fee.
The devil is in the details. Conducting CMAs is not likely to be a stream of revenue for a broker or a salesperson. If the broker (and salesperson) does not represent the lender, then the CMA can only be performed if the broker is attempting to secure the listing.
Performing CMAs on a regular basis and getting listings infrequently or not at all will at some point come to the attention of either the Real Estate Commission or the State Board of Certified Appraisers — or both. Failing to comply with the CMA limitations could lead to prosecution by both boards, so remember: when you perform a CMA, include the limiting language exactly as it is published in RELRA, on the first page of the CMA. Remember to have the client sign some type of fee agreement before you perform the CMA if you expect to get paid. Stay within the limitations.
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Elizabeth Feather, Esq. is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of her practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. She routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline. |
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Good plain English! Who could claim ignorance after reading that?
I think in addition to the items mentioned (an opportunity to secure the listing, a written agreement in advance regarding payment to the Broker and the CMA disclosure on page 1 of a CMA) an Agent/Broker needs a signed Consumer Notice. Also, SEC. 608.1 of RELRA requires a written agreement between a Broker and a Consumer whenever a Consumer may be required to pay a fee. This section contains 7 separate statements / disclosures which must be provided to the consumer.
And, USPAP has issued an opinion that any opinion of value, regardless of how or why it was prepared, e.g. CMA, BPO is an appraisal which must comply to USPAP. Most ‘forms’ for BPOs and CMAs are not at all USPAP compliant; at the very least, if using this form of reporting, the appraiser must have a workfile which supports the Scope of Work, conclusions and methodolgy of the appraisal. (USPAP Instructor chiming in)