Senate committee to take up BPO legislation next week
The Arkansas Senate Committee on Insurance and Commerce will take up SB720 — a bill that has sparked some controversy — on Tuesday morning.
What is SB720? A measure that would essentially regulate broker price opinions (BPOs)– estimates of home values given by real estate agents when a full appraisal is not required. The law allows agents to write BPOs — and accept fees for them — to sellers considering listing real estate, people considering purchasing real estate or third parties related to the potential listing, offering, sale, exchange, option, lease, or acquisition price of real estate. Also, agents would be able to provide BPOs to lienholders in some cases.
Under current law, agents are advised to render opinions on property value only in probate court, when asked by a property owner considering selling his property, for a third-party relocation property provided the agent has a chance of getting a listing or when ordered by a court. Furthermore, agents are advised to disclose in writing on any form presented with the BPO that the estimate is not an appraisal.
In February, Arkansas Appraisers Association Executive Secretary Tom Ferstl took issue with an earlier version of the law that didn’t require the “this is not an appraisal” disclosure. Ferstl raised a number of objections to BPOs, in fact, and many of them hit on the theme that bad things can happen when neutral parties aren’t the ones determining how much real property is worth.
Little Rock Realtor Wally Loveless — a member of the Arkansas Realtors Association Legislative Committee — was quick to point out that SB720 does not allow BPOs in cases of loan originations. A banker looking to write, say, a purchase or refinance mortgage still must rely on an independent appraisal, Loveless said. Appraisers, however, have taken issue with the portion of the law that states:
…a broker’s price opinion prepared for an existing or potential lienholder in conjunction with the purchase of a buyer’s principal residence shall not be used as the primary basis to determine the value of the buyer’s principal residence for the purpose of a loan origination of a residential mortgage loan secured by the buyer’s principal residence.
Bob Balhorn, lobbyist for the Arkansas Appraiser Association, said that language is vague in that it does not make clear whether a BPO will not be allowed when it comes to a refinance mortgage.
Loveless added that BPOs have been par for the course in Arkansas for years and that SB720 codifies and regulates that practice. The group that will oversee BPOs if the bill is made law is the Arkansas Real Estate Commission.
SB720 isn’t the only one of interest to Arkansas Realtors. HB1615 — a bill that would establish minimum services that must be provided by real estate agents — is pending before the state House Committee on Insurance and Commerce.
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.