Bill Explores Agent Roles in Assigning Home Values
A bill before the Minnesota Legislature aims to clarify the role of real estate agents in assigning values to homes within the state.
The proposed legislation comes at a time when agents are increasingly being asked to conduct “broker price opinions”-often for out-of-state lenders trying to sell distressed properties.
Such opinions concern some appraisers, who argue that real estate agents aren't properly trained to evaluate home values; doing so also represents a conflict of interest because agents represent the very parties that could purchase the homes they have valued, some appraisers contend.
According to the Star Tribune, an estimated 120,000 broker price opinions were conducted for lender-mediated transactions in 2010-and that figure doesn't include opinions given for routine home sales.
Minnesota law and the recently passed federal Dodd-Frank consumer protection act both prohibit broker price opinions from being used to secure a mortgage-but legislators are looking at amending current statutes to add some clarity to agents' roles and responsibilities when it comes to broker price opinions.
Under the proposed bill, which is now in the House, broker price opinions would need to contain a statement of the intended purpose, a description of the property being priced, the reasoning used to reach the opinion about the price-including applicable market data, a disclosure of any “existing or contemplated interest of the broker or salesperson issuing the opinion,” and a disclaimer stating that the opinion isn't an appraisal of the property's market value and can't be used in lieu of an appraisal.
Appraisers undergo rigorous training and must comply with numerous regulations, including the Home Valuation Code of Conduct. Their appraisals are typically far more expensive and extensive than broker price opinions-which agents sometimes use to build relationships with lenders in hopes that those lenders might eventually hire them to list homes.
For more information about the proposed legislation and/or to hear comments from parties representing both appraisers and real estate agents, check out Thursday's story in the Star Tribune.