case) estimating the listing or pur- chase price of a property but they can never call it an “appraisal.” Real estate regulators routinely require plainly-written CMA dis- closure statements so that no one misses the point. Maryland, for example, says real estate licensees “may prepare a competitive market analysis of a specific property for a client, prospective client, or cus- tomer. The analysis shall include the following statement printed conspicuously and without change on the first page:”

No matter how well done, lenders will not substitute a CMA prepared by a real estate licensee for an ap- praisal. That’s because the CMA is produced with the intent of help- ing someone buy or sell property, actions from which the broker hopes to gain a fee. Appraisers, in con- trast, are paid for the act of apprais- ing, regardless of the final number. BROKER PRICE OPINION (BPO) Another potential appraisal sub- stitute is the broker price opinion (BPO), a form of home value report provided by local real estate bro- kers. A drive-by BPO, one where the interior of the home is not checked, is frequently used to es- tablish that a property in a foreclo- sure or short sale simply exists. Drive-by valuations have their pros and cons. They’re certainly quick and cheap when compared with a full-blown appraisal. Proper- ty owners do not need to fix interior


A real estate appraiser who submits an appraisal that is under the contract price knows the potential consequences. In addition to pressure and harassment from homeowners, agents and Appraisal Management Companies (AMCs), appraisers also run the risk of being branded ‘deal killers’ and losing both lender and AMC clients; a high price for simply doing one’s job - performing accurate, unbiased appraisals." ISAAC PECK











This analysis is not an appraisal. It is intended only for the purpose of assisting buyers or sellers or prospective buyers or sellers in deciding the listing, offering, or sale price of the real property.



spaces. There’s no need for an ap- pointment. Alternatively, the extra value created by a new kitchen or bath can’t be seen, hurting owners. The rules for BPOs vary by state. In some jurisdictions real estate licensees are allowed to provide a BPO but cannot charge for it. In still others, brokers may both do BPOs and get a fee for the service. DODD-FRANK At the federal level, the use of appraisal alternatives is restricted – but hardly banned. Dodd-Frank says, “In conjunction with the purchase of a consumer’s principal dwelling, broker price opinions may not be used as the primary basis to determine the value of a piece of property for the purpose of a loan origination of a residential mortgage loan secured by such piece of property.”

evaluation because, among other things, it does not provide a proper- ty's market value.”

The Dodd-Frank language in- cludes an impressive number of BPO loopholes. The wording applies to the “purchase of a consumer’s principal dwelling.” Does this mean a BPO can be used for refinancing a principal residence or the purchase of a second home? What about commercial properties? If BPOs seem poised to compete with appraisals in some areas under Dodd-Frank, that’s not the whole story. In 2010, federal regulators issued their Interagency Appraisal and Evaluation Guidelines which built on the Dodd-Frank standards. The guidelines state, “A valuation method that does not provide a property's market value or sufficient information and analysis to support the value conclusion is not accept- able as an evaluation. For example, a valuation method that provides a sales or list price, such as a broker price opinion, cannot be used as an




AUTOMATED VALUATION MODELS (AVMS) Dodd-Frank defines the term “automated valuation model” (AVM) to mean, “any computerized model used by mortgage originators and secondary market issuers to determine the collateral worth of a mortgage secured by a consumer’s principal dwelling.” This language doesn’t prevent or limit the use of AVMs for principal residences while being silent on sec- ond homes and commercial property. In case the point is missed, Dodd-Frank also creates a huge AVM loophole in its definition of a “broker price opinion.” A BPO, says Dodd-Frank, is “an estimate prepared by a real estate



















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