Senate Bill Report — EHB 1797 on Residential Real Estate Appraisers and Property Evaluations (as of March 12, 2023)

Summary

Senate Bill Report on EHB 1797, as of March 12, 2023, for the Senate Committee on Business, Financial Services, Gaming & Trade, on an act relating to residential real estate appraisers being allowed to complete real property evaluations. The bill requires the Department of Licensing to adopt rules requiring education on valuation bias and fair housing laws and regulations for real estate appraisers, and permits a state-licensed or state-certified appraiser to perform evaluations of real estate for financial institutions as long as a disclaimer is provided. Applicants must complete a seven hour course beginning January 1, 2024, and holders of certifications, licenses or registration must complete a four hour course beginning January 1, 2026. The bill contains several effective dates.

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Full text

SENATE BILL REPORT
EHB 1797

As of March 12, 2023

Title: An act relating to residential real estate appraisers being allowed to complete real
property evaluations.

Brief Description: Concerning residential real estate appraisers being allowed to complete real
property evaluations.

Sponsors: Representatives Cheney, Goodman, Hutchins and Graham.

Brief History: Passed House: 2/27/23, 95-0.
Committee Activity: Business, Financial Services, Gaming & Trade: 3/14/23.

Brief Summary of Bill

¢ Requires the Department of Licensing to adopt rules to require education
on valuation bias and fair housing laws and regulations as a part of both
initial registration and licensure and continuing education standards for
real estate appraisers.

¢ Permits a_ state-licensed or state-certified appraiser to perform
evaluations of real estate for financial institutions as long as a disclaimer
is provided.

SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES, GAMING & TRADE
Staff: Clinton McCarthy (786-7319)

Background: Federal Oversight of Real Estate Appraisals. In 1989, Congress enacted the
Financial Institutions Reform, Recovery, and Enforcement Act, which set a dollar threshold
value to require an appraisal and create the Appraisal Subcommittee to coordinate appraisal
regulation. This legislation also mandated that property appraisers meet qualifications
established by the Appraisal Foundation's Appraisal Qualification Board. The Appraisal

This analysis was prepared by non-partisan legislative staff for the use of legislative
members in their deliberations. This analysis is not part of the legislation nor does it
constitute a statement of legislative intent.

Senate Bill Report -l- EHB 1797
Foundation maintains the Uniform Standards of Professional Appraisal Practice (USPAP).
USPAP is the generally recognized ethical and performance standard for the appraisal
profession in the United States.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 established the
Consumer Financial Protection Bureau (CFPB) and provided this new entity with
rulemaking authority for residential mortgage appraisals by removing residential mortgage
appraisals from the Appraisal Subcommittee. The Appraisal Subcommittee continues to
have the authority to coordinate the regulation of commercial real estate appraisals.

Both the Appraisal Subcommittee and the CFPB rely on states to monitor and enforce
compliance with federal standards.

State Oversight of Real Estate Appraisals. The Certified Real Estate Appraiser Act
provides a regulatory framework to certify and license real estate appraisers in the state of
Washington. A state-certified general real estate appraiser is certified to develop and
communicate real estate appraisals of all types of property. A state certified residential real
estate appraiser is certified to develop and communicate real estate appraisals of all types of
residential property of one to four units. A state-licensed real estate appraiser is licensed to
develop and communicate real estate appraisals of noncomplex one to four residential units,
and complex one to four residential units and non residential property having transaction
values specified in rules by the director.

The director of the Department of Licensing (DOL) has the authority to adopt rules,
approve or deny application for certification or licensure. The Real Estate Appraiser
Commission serves as a liaison between appraisal practitioners, the public, and DOL.

Prerequisite _and Continuing Education Requirements for Licensure and Certification of
Appraisers. As a prerequisite for licensure, an applicant is required to provide evidence to

DOL they have completed the education requirements adopted by DOL by rule. Under
existing rules, courses for pre-examination must be a minimum of 15 hours in length,
directly related to real estate appraising, and include a proctored examination. Continuing
education requirements for appraisers under existing DOL rules require 28 hours of
instruction in courses or seminars. These courses must be completed within the term of
certification, licensure, or registration. Courses or seminars that active or inactive appraisers
can take include, but are not limited to:

¢ ad valorem taxation;

* arbitrations, dispute resolution;

* business courses related to practice of real estate appraisal and consulting;

* construction estimating;

¢ ethics and standards of professional practice, USPAP;

¢ land use planning, zoning, and taxation;

* management, leasing, brokerage, timesharing;

* property development, partial interests;

Senate Bill Report -2- EHB 1797
* real estate appraisal—valuations/evaluations;

¢ real estate financing and investment;

* real estate law, easements and legal interests;

¢ real estate litigation, damages and condemnation;

* real estate related computer applications;

* real estate securities and syndication;

* real property exchange;

* appraisal and consulting report writing;

* green buildings;

° seller concessions;

¢ developing opinions of real property value in appraisals that also include personal
property, or business value, or both; and

* other presentations approved by the director.

Fair Housing Continuing Education Requirements for Real Estate Brokers. In 2021, the
Legislature directed real estate brokers to take specific course instruction on fair housing
and consumer protection issues within existing continuing education requirements related to
obtaining and maintaining real estate brokers licenses. DOL was directed to provide more
specific training concepts after receiving input from select stakeholder groups.

Summary of Bill: Disclaimer for Real Property Evaluations. An appraiser performing
evaluations is not engaged in real estate appraisal activity when the appraiser includes a
disclaimer and is therefore not subject to the jurisdiction of DOL or the Real Estate
Appraiser Commission. The disclaimer must be located immediately above the appraiser's
signature and include the following in at least 10-point boldface type: "I am a state-licensed
appraiser or a state-certified appraiser. This evaluation was not prepared in my capacity as
a real estate appraiser and might not comply with the Uniform Standards of Professional
Appraisal Practice."

Education Requirements for Licensure or Certification. DOL is directed to adopt rules as of
specific dates which require:

¢ beginning January 1, 2024, all applicants for licensure or certification of appraisers
are required to complete a seven hour course that covers the topics of valuation bias
and fair housing laws;

* prior to January 1, 2025, all holders of active or inactive certifications, licenses, or
registration must complete a seven hour course that covers the topics of valuation bias
and fair housing laws as part of the continuing education requirements developed by
the director; and

* beginning January 1, 2026, all holders of an active or inactive certification, licensure,
or registration must complete a four hour course that covers the topics of valuation
bias and fair housing laws as part of the continuing education requirements developed
by the director.

Evaluation is defined as an opinion of the market value of real property or real estate

Senate Bill Report -3- EHB 1797
provided to a financial institution in conformance with the interagency appraisal and
evaluation guidelines adopted jointly by the federal financial institution's regulatory
agencies for use in real estate-related financial transactions that do not require an appraisal.
Appropriation: None.

Fiscal Note: Requested on March 1, 2023.

Creates Committee/Commission/Task Force that includes Legislative members: No.

Effective Date: The bill contains several effective dates. Please refer to the bill.

Senate Bill Report -4- EHB 1797

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