With the new year comes new changes in real estate regulations at a local, state and federal level. In Georgia, the changes are few in number and will mainly be focusing on the way appraisals are handled within the state.
Craig Coffee, deputy commissioner of the Georgia Real Estate Commission and Georgia Real Estate Appraisers Board, is working with the board on new appraisal statutes for the coming year.
“Since the federal government is also involved in appraisal regulation, we are focusing on updating appraisal management,” Coffee says.
The board’s proposed legislation for appraisal management companies (AMCs) requires the state of Georgia to adopt the AMC minimum requirements established by the Final Rules, including changing its regulations to support a National Registry of AMCs, similar to the national registry currently in place for appraisers.
While states are not required to establish an AMC registration and supervision program, Georgia decided to begin regulating AMCs in 2010, even though there were no federal regulations at that time. Signed by the governor in June 2010, Georgia House Bill 1050 required AMCs in Georgia to register with the Georgia Real Estate Appraisers Board.
Bringing balance to the appraisal process
The new proposed legislation for 2018 calls for an Appraisal Subcommittee (ASC), which will collect fees from AMCs and compile AMC information. The ASC is also responsible for administering the National Registry of AMCs and overseeing state AMC programs. If Georgia does not amend its statutes to meet the AMC minimum requirements, AMCs would be prohibited from providing appraisal management services in Georgia for many federally related transactions.
According to the board’s drafted talking points, the need for separation of appraisers and lenders originally arose out of concerns that lenders had too much power over appraisers and appraisal results.
“Certainly a decade ago I think lenders having an influence over appraisers was a general issue with appraisers over appraising properties,” says Jana Hufham, an agent at Keller Williams Realty Atlanta Perimeter. “I still find on equity lines that the appraisers are often fibbing about what the home is actually worth.”
The solution for this imbalance of power was the creation of AMCs, which act as a third-party mediator between appraisers and lenders. There are pros and cons to having a third-party intermediary involved in the process, says Hufham. “Having a third-party look at appraisals can be beneficial when it comes to fraud; however, it can be detrimental when you are talking about school districts, certain locations being hot pockets, and appraisers not giving it credit appropriately.”
Hufham also points out that location and schools do impact property value, but out-of-state third-party companies may not be familiar with the area — similar to how an appraiser having extensive knowledge about a specific market can impact his or her perception of value.
Hufham had a contentious situation with an inexperienced appraiser in the past. The appraiser refused to use the square footage of both the foyer and the interior staircase. “I was dumbfounded,” she says. “His lack of professionalism ultimately cost my client $10,000 in profit because the appraiser and the management company refused to follow normal guidelines.”