BPO, CMA - - a rose by any other name? One of the more contentious issues in the New Jersey real estate community is one that has pitted licensed appraisers against real estate brokers. It involves the preparation by brokers of “broker price opinions”, also known as BPOs. Under current New Jersey law, a broker, broker-salesperson or salesperson is only permitted to provide what is known as a “comparative market analysis”, or CMA, in the normal course of business, which offers an opinion as to the price of property to a potential seller or buyer. The regulations do not permit a real estate licensee to prepare a CMA for any other party, such as a bank or a mortgage servicer, for any other purpose, such as a loan transaction or portfolio valuation.
Enter the BPO. The term “broker price opinion” does not appear in the relevant statutes or regulations. And the appraisal community has long taken the position that real estate licensees do not have authorization to perform BPOs in New Jersey, for any purpose. Tension over the issue notched up during the real estate bust, as lenders in foreclosure and short-sale scenarios increasingly turned to brokers in order to save costs. That left licensed appraisers feeling rather aggrieved. They pointed to the Real Estate Appraisers Act, N.J.S.A. 45:14F-1 et seq., which mandates that, with few exceptions, appraisals of New Jersey real property be performed by State licensed or certified appraisers.
The appraisers took their case to the New Jersey Appraisal Board, which issued an Advisory Opinion in November of 2012. The opinion is available at http://www.njconsumeraffairs.gov/real/realbpo.pdf . The crux of the opinion was that a real estate broker who prepares a BPO for any reason other than to assist a seller or buyer with the sale or purchase of a property (or in connection with certain “federally related transactions” involving state or federally chartered lenders) is engaged in the unlicensed practice of appraising and subject to a fine of up to $10,000 for the first violation and $20,000 for each subsequent violation.
The response from the broker community, principally represented by the New Jersey Association of Realtors, was swift and determined. The result was S-2551, approved by the Senate on March 18, 2013. The bill is available at http://legiscan.com/NJ/text/S2551 . It would permit real estate brokers, broker-salespersons and salespersons licensed in New Jersey to prepare BPOs, as well as CMAs. The bill treats the CMA and the BPO interchangeably, defining both as an estimate prepared by a real estate broker, broker-salesperson or salesperson that details the probable selling price of a particular piece of real property and provides a varying level of detail about the property's condition, market and neighborhood, and information on comparable sales, but does not include an automated valuation model. S-2551 specifies that nothing in the Real Estate Appraisers Act shall be construed to preclude a real estate broker, broker-salesperson or salesperson licensed in New Jersey who is not licensed or certified pursuant to the Act from preparing a BPO or a CMA.
Licensed appraisers are concerned that the bill will greatly augment the ability of real estate brokers to provide BPOs and CMAs outside of the traditional real estate brokerage context, for purposes such as litigation, tax appeals, eminent domain, title insurance settlements, estate administration and divorce proceedings. These are areas that have traditionally been bread-and -butter for appraisers. The Appraisal Institute, the preeminent trade association for appraisers, is currently advocating on their behalf.
S-2551 must still be approved by the General Assembly (see A-3718) before it can reach the Governor's desk. In the meantime, The Appraisal Institute is urging the Assembly to pass legislation similar to the Advisory Opinion issued by the New Jersey Real Estate Appraisers Board, limiting the preparation of BPOs to real estate sales and transactions involving state or federally regulated institutions. The AI is also asking that the Assembly prohibit the use of BPOs in mortgage loan origination transactions and prescribe additional requirements for the preparation of BPOs.