RULES AND REGULATIONS
Title 49—PROFESSIONAL AND VOCATIONAL STANDARDS
STATE REAL ESTATE COMMISSION
[ 49 PA. CODE CH. 35 ]
Broker Price Opinions; Temporary Regulations
[50 Pa.B. 1838]
[Saturday, March 28, 2020]
The State Real Estate Commission (Commission) hereby adopts temporary regulations amending Chapter 35 by adding Subchapter I (relating to broker price opinions—temporary regulations) to read as set forth in Annex A.
The temporary regulations will be effective upon publication in the Pennsylvania Bulletin.
The act of June 29, 2018 (P.L. 500, No. 75) (Act 75 of 2018) amended the Real Estate Licensing and Registration Act (act) (63 P.S. §§ 455.101—455.902) and authorizes the Commission to promulgate temporary regulations for the prompt implementation of section 608.6 of the act (63 P.S. § 455.608f) regarding broker price opinions. Under section 608.6(k) of the act, the adoption of temporary regulations are not subject to sections 201—203 of the act of July 31, 1968 (P.L. 769, No. 240) (45 P.S. §§ 1201—1203), known as the Commonwealth Documents Law, or to the requirements of the Regulatory Review Act (71 P.S. §§ 745.1—745.15). The temporary regulations will expire on August 28, 2021, or upon promulgation of the final-form rulemaking, whichever occurs first.
Background and Need for the Temporary Regulations
Act 75 of 2018 made two major changes to the act. It increased the minimum amount of education necessary for licensure as a salesperson and it allowed for broker price opinions to be performed by licensed brokers, associate brokers and salespersons. Broker price opinions are considered another form of valuation for a property. Act 75 of 2018 amended section 201 of the act (63 P.S. § 455.201) to define a broker price opinion as ''an estimate prepared by a broker, associate broker or salesperson that details the probable selling price of a particular parcel 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. . . .'' Until the amendments were made to the act, a broker price opinion was considered an appraisal under Commonwealth law which may be performed only by a certified real estate appraiser. Broker price opinions are most frequently used by banks to determine an approximate value of the bank's real estate inventory. Prior to Act 75 of 2018, banks would have to either obtain a formal appraisal or a comparative market analysis. Banks find it cost prohibitive to pay for a full appraisal when they only want a quick opinion as to the value. The purpose of a comparative market analysis is for a real estate licensee to give an opinion of value for the purpose of listing a property for sale or aiding a buyer to determine the offering price. A comparative market analysis would not help a bank for its needs concerning valuing its inventory. A broker price opinion creates a viable alternative for those consumers that would just like an estimate of value for their property without having to pay for an expensive appraisal or to have the property listed for sale. The trend across the country is to allow broker price opinions. The amendments to the act keep the Commonwealth current with practices in other states.
Act 75 of 2018 also authorized the Commission to promulgate temporary regulations to facilitate the prompt implementation of the practice of broker price opinions by brokers, associate brokers and salespersons.
Description of the Temporary Regulations
The temporary regulations add a new subchapter which sets forth limitations and requirements for broker price opinions, including required disclosures, signature requirements, permissible uses and required experience and education for brokers, associate brokers and salespersons.
Section 35.401 (relating to definitions) sets forth definitions for terms used in the temporary regulations. The following terms are defined as provided in the act: ''broker price opinion'' and ''short sale.'' In addition, ''automated valuation model'' is defined in accordance with section 1125 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Pub.L. No. 101-73) (12 U.S.C.A. § 3354(d)), which is consistent with the definition in the act.
Broker Price Opinion
Section 35.402 (relating to broker price opinion) lists the requirements of a broker price opinion. Under subsection (a), a broker price opinion is required to have a specific statement displayed indicating that the broker price opinion was not prepared in accordance with the Uniform Standards of Professional Appraisal Practice and that it is not to be construed as an appraisal. Subsection (b) requires a signature by the person who prepares the broker price opinion and lists all of the information that must be on every broker price opinion, as required by section 608.6(c) of the act. Based on the suggestion of one of the comments received from stakeholders during the drafting of the temporary regulations, the Commission added ''cost data'' at paragraph (b)(4) as another way of basing a conclusion as to price. Paragraph (b)(9) requires the license numbers of the preparer and any broker or associate broker reviewing the broker price opinion because the Commission believes it is important to identify all licensees involved with a broker price opinion.
Consistent with the act, subsection (c) requires compensation for preparing a broker price opinion to be paid directly to the employing broker of the licensee who prepared the broker price opinion. This mirrors section 608.6(d) of the act but adds the word ''employing'' in front of broker. The Commission believes that adding the word ''employing'' in front of broker clarifies that only the broker can be compensated by a consumer and is consistent with section 604(a)(12) of the act (63 P.S. § 455.604(a)(12)), which prohibits an associate broker or salesperson from accepting a commission or other valuable consideration from anyone other than the employing broker. Subsections (d) and (e) set forth the minimum requirements for a salesperson to prepare a broker price opinion, which includes experience, education and required review and signature by the employing broker or designated associate broker as set forth in section 608.6(j) of the act.
Use of Broker Price Opinions
Section 35.403(a) (relating to use of broker price opinion) lists the permissible uses of a broker price opinion as set forth in section 608.6(e) of the act. Subsection (b) lists the prohibited uses of a broker price opinion as set forth in section 608.6(f) of the act.
Broker Price Opinion Education
Section 35.404 (relating to broker price opinion education) sets forth the educational requirements a licensee must complete prior to preparing a broker price opinion. Subsection (a) requires brokers, associate brokers and salespersons to complete a Commission-approved initial education course in the preparation of broker price opinions. Subsection (b) requires a broker or associate broker to complete the Commission-approved initial education course in the preparation of broker price opinions prior to signing a broker price opinion prepared by a salesperson. Subsection (c) requires brokers, associate brokers and salespersons to complete at least 3 hours of Commission-approved continuing education in broker price opinion topics prior to preparing a broker price opinion. Subsection (d) requires brokers, associate brokers and salespersons to retain the transcript or certificate of instruction and provide a copy to the Commission upon request. Under subsection (e), the Commission preapproves four broker prelicensure courses in the topics of valuation of residential property, valuation of income-producing property, basic appraisal principles and basic appraisal procedures for the initial educational requirement.
In developing these temporary regulations, the Commission received comments from the Bucks County Real Estate Institute, Vintage Real Estate Academy, Irene P. Richmond, Pennsylvania Association of Realtors, Real Estate Valuation Advocacy Association, Polley Associates, Howard Hanna Real Estate Services, Appraisal Institute, Mid-Atlantic Valuation Group, Inc. and Career Growth Real Estate Academy. The major concern among the commentators was that the proposed educational requirement was not a two-part educational requirement with separate initial education and continuing education requirements. Due to the number of comments received, the Commission revised the temporary regulations to separate the requirements for the initial broker price opinion education and continuing education.
Fiscal Impact and Paperwork Requirements
The temporary regulations should have no adverse fiscal impact on the Commonwealth or its political subdivisions. The Commission will not incur any additional costs due to the review and approval of the educational courses because those costs are paid for through application fees paid by the education providers. Those brokers, associate brokers and salespersons who want to perform broker price opinions will incur minimal costs associated with obtaining the necessary initial education if they have not already done so. On average, education providers are charging approximately $10 per credit hour for broker price opinion education. These costs are minimal and not prohibitive to obtain the education to perform a broker price opinion. Also, licensees who complete the initial education requirement will be required to retain the transcript or certificate of instruction for as long as the licensees are performing broker price opinions.
The temporary regulations will expire no later than August 28, 2021. The Commission will assess the effectiveness of the temporary regulations in formulating proposed and final-form rulemakings on the topic of broker price opinions.
These temporary regulations are statutorily exempt from the process set forth in the Regulatory Review Act (71 P.S. §§ 745.1—745.15).
In accordance with Executive Order 1996-1 (see 4 Pa. Code §§ 1.371—1.382 (relating to Regulatory Review and Promulgation)), in January of 2019, the Commission sent an exposure draft of the temporary regulations to interested parties and stakeholders soliciting comment. The Commission received comments from the public, including stakeholders in the real estate industry and considered them at a public meeting on April 30, 2019. Commentators were primarily concerned that the educational requirements were not clearly separated into initial and continuing education components. As previously discussed, the Commission has separated initial education requirements and continuing education in these temporary regulations in response to those comments. The Commission will solicit additional input when formulating the proposed and final-form rulemakings.
(Editor's Note: Title 49 of the Pennsylvania Code is amended by adding temporary regulations in §§ 35.401—35.404 to read as set forth in Annex A.)
Fiscal Note: 16A-5624. No fiscal impact; (8) recommends adoption.
TITLE 49. PROFESSIONAL AND VOCATIONAL STANDARDS
PART I. DEPARTMENT OF STATE
Subpart A. PROFESSIONAL AND OCCUPATIONAL AFFAIRS
CHAPTER 35. STATE REAL ESTATE COMMISSION
Subchapter I. BROKER PRICE OPINIONS—TEMPORARY REGULATIONS
§ 35.401. Definitions.
The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise:
Automated valuation model—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.
Broker price opinion—An estimate prepared by a broker, associate broker or salesperson that details the probable selling price of a particular parcel 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.
Short sale—A sale of real property in which the seller's proceeds are less than the amount required to pay off all liens secured by the property.
§ 35.402. Broker price opinion.
(a) A broker price opinion must contain the following statement displayed conspicuously and without change:
This analysis has not been prepared in accordance with the Uniform Standards of Professional Appraisal Practice which require valuers to act as unbiased, disinterested third parties with impartiality, objectivity and independence and without accommodation of personal interest. It is not to be construed as an appraisal and may not be used as such for any purpose.
(b) A broker price opinion must be signed manually or electronically by the person who prepared it and must contain all of the following information:
(1) An identification of the intended users and intended uses of the broker price opinion, if known.
(2) A brief description of the subject property.
(3) A brief description of the property interest to be priced.
(4) The basis for the conclusion as to the price, including applicable market data, cost data or capitalization computation.
(5) Any assumption or limiting condition.
(6) Any existing or contemplated interest of the licensee who prepared the broker price opinion.
(7) The effective date of the broker price opinion.
(8) The date that the document is signed.
(9) The real estate license number of the preparer and, if applicable, the reviewing broker or associate broker.
(c) A fee or valuable consideration for a broker price opinion shall be paid directly to the employing broker.
(d) A salesperson may not prepare a broker price opinion unless the salesperson has held an active license for the 3 years immediately preceding the effective date of the broker price opinion and has satisfied the educational requirements in § 35.404 (relating to broker price opinion education).
(e) A broker price opinion prepared by a salesperson must be signed by the salesperson and reviewed and signed by the employing broker or a designated associate broker.
§ 35.403. Use of broker price opinion.
(a) A broker price opinion may be prepared by a broker, associate broker or salesperson only for use in conjunction with any of the following:
(1) A property owned by a lender after an unsuccessful sale at a foreclosure auction.
(2) A modification of a first or junior mortgage or equity line of credit.
(3) A short sale of a property.
(4) An evaluation or monitoring of a portfolio of properties.
(b) A broker price opinion may not be prepared by a broker, associate broker or salesperson for use:
(1) As the basis to determine the value of a parcel of real property for a mortgage loan origination, including a first or junior mortgage, refinancing or equity line of credit.
(2) In connection with any of the following:
(i) An eminent domain proceeding.
(ii) A Federal, State or local tax appeal.
(iii) A bankruptcy or insolvency proceeding.
(iv) An action or proceeding involving divorce or equitable distribution of property.
(v) Any other action or proceeding before a court of record.
(vi) The distribution of a decedent's estate.
§ 35.404. Broker price opinion education.
(a) A broker, associate broker or salesperson may not prepare a broker price opinion unless the broker, associate broker or salesperson has completed a Commission-approved initial education course in the preparation of broker price opinions.
(b) A broker or associate broker may not sign a broker price opinion prepared by a salesperson unless the broker or associate broker has completed a Commission-approved initial education course in the preparation of broker price opinions.
(c) A broker, associate broker or salesperson may not prepare a broker price opinion unless the broker, associate broker or salesperson has completed at least 3 hours of Commission-approved continuing education in broker price opinion topics during the current or immediately preceding 2-year license period.
(d) A broker, associate broker or salesperson who has completed a Commission-approved initial education course, a broker prelicensure course listed in subsection (e) or continuing education referenced in subsection (c) shall retain the transcript or certificate of instruction and provide a copy to the Commission upon request.
(e) The following broker prelicensure courses have been approved to satisfy the initial education requirement in subsections (a) and (b):
(1) Valuation of residential property.
(2) Valuation of income-producing property.
(3) Basic appraisal principles.
(4) Basic appraisal procedures.
[Pa.B. Doc. No. 20-447. Filed for public inspection March 27, 2020, 9:00 a.m.]
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