HD5 - The Study of the Desirability of Regulating the Profession of Real Estate Appraisers

  • Published: 1988
  • Author: Department of Commerce and Board of Commerce
  • Enabling Authority: House Joint Resolution 198 (Regular Session, 1987)

Executive Summary:
A. Study Overview

This study attempts to determine the most appropriate level of regulation for real estate appraisers in the Commonwealth of Virginia.

Through survey data and public hearings, the Board of Commerce reviewed the nature of the occupation, its unregulated effect on the public, the public's need for assurance of competence, the alternatives to state regulation and the effectiveness of other state regulatory programs.

The level of regulation recommended by the Board is based on an extensive analysis of this information.

B. Key Findings

1. The complaint search revealed little evidence of complaints and abuses. The Better Business Bureaus responding to the Board of Commerce survey perceive problems as NONEXISTENT while the Consumer Affairs Offices described the seriousness of the problems as either NONEXISTENT OR MODERATE. Neither the hearing process nor the surveys documented excessive complaints and when improprieties did occur, misconduct of ethics was usually considered the cause.

2. The public is offered a means of selecting a competent real estate appraiser through the use of professional credentials granted by the national trade associations.

3. Legislation is expected to be introduced in the U.S. House of Representatives to establish regulatory standards for the real estate appraisal industry. As an alternative to this legislation, the eight major trade associations are recommending a self-regulatory system which would establish standards for national qualification and give states the responsibility for the voluntary certification program.

4. The Virginia Chapters of the major professional associations recognize potential problems in the appraisal industry, but urge the Board not to recommend state regulation until self-regulatory provisions can be adopted.

5. The states which now regulate real estate appraisers and/or appraisals have been successful only to the point of establishing requirements for licensure, but have done little to restrict or exclude fraudulent or incompetent appraisers from practicing.

C. Conclusions

Four major conclusions have been drawn as a result of this study:

1) There is not sufficient evidence of incompetent, fraudulent, and/or inflated real estate appraisals in the Commonwealth of Virginia to justify regulation to protect public health, safety and welfare.

2) Appraisal impropriety, or the potential for such impropriety, is more frequently attributed to a lack of ethics rather than a lack of skills.

3) A state regulatory program would be premature in light of the proposed federal legislation and the self-regulatory system proposed by the professional trade associations.

4) Other state regulatory programs have either (a) not been in effect long enough to judge their effectiveness or (b) ineffectual to the point that states are considering new stronger regulations for real estate appraisals/appraisers.

D. Recommendation

The Board of Commerce recommends that state regulatory action of real estate appraisers be deferred until the national professional associations have had an opportunity to enact a self-regulatory program and/or the U. S. Congress enacts legislation.