Individual State Agency Fiscal Note: EHB 1797 (Real estate appraisers/evaluations)

Summary

An Individual State Agency Fiscal Note from the Department of Licensing (agency 240) on EHB 1797, concerning residential real estate appraisers being allowed to complete real property evaluations, with OFM review dated March 8, 2023. It estimates cash receipts and operating expenditures from the Real Estate Commission Account of 231,000 in FY 2024 and 77,000 in FY 2025, totaling 308,000 for 2023-25, with 1.0 FTE in FY 2024 for a Management Analyst 4. The attached narrative summarizes the bill's four sections, including a new 7-hour qualifying course on valuation bias and fair housing laws beginning 1/1/2024. It describes a one-time assessment on licenses to fund the costs, information system changes, and a list of possible rule revisions under Part 5.

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Full text

Individual State Agency Fiscal Note

BillNumber: 1797 EHB Title: Real estate appraisers/eval. Agency: 240-Department of Licensing
Part I: Estimates
[| No Fiscal Impact
Estimated Cash Receipts to:
ACCOUNT FY 2024 FY 2025 2023-25 2025-27 2027-29
Real Estate Commission Account-State 231,000 77,000 308,000
026-1
Total $ 231,000 77,000 308,000
Estimated Operating Expenditures from:
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 1.0 0.5 0.8 0.0 0.0
Account
Real Estate Commission Account-State 231,000 77,000 308,000 0 0
026-1
Total $ 231,000 77,000 308,000 0 0

Estimated Capital Budget Impact:

NONE

The cash receipts and expenditure estimates on this page represent the most likely fiscal impact. Factors impacting the precision of these estimates,
and alternate ranges (if appropriate), are explained in Part II.

Check applicable boxes and follow corresponding instructions:

Ly | If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note
— form Parts I-V.
|__| If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).
|__| Capital budget impact, complete Part IV.
| X | Requires new rule making, complete Part V.
Legislative Contact: Clinton McCarthy Phone: 360-786-7319 Date: 03/01/2023
Agency Preparation: Gina Rogers Phone: 360-634-5036 Date: 03/08/2023
Agency Approval: Gerrit Eades Phone: (360)902-3863 Date: 03/08/2023
OFM Review: Kyle Siefering Phone: (360) 995-3825 Date: 03/08/2023

Form FN (Rev 1/00) 185,989.00
FNS063 Individual State Agency Fiscal Note

Request # EHB 1797-3

Bill # 1797 E HB

Part II: Narrative Explanation

II. A - Brief Description Of What The Measure Does That Has Fiscal Impact

Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.

Please see attached fiscal note.

II. B - Cash receipts Impact

Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate, the
detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived. Explanation
of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.

Please see attached fiscal note.

II. C - Expenditures

Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.

Please see attached fiscal note.

Part II: Expenditure Detail
III. A - Operating Budget Expenditures

Account |Account Title Type FY 2024 FY 2025 2023-25 2025-27 2027-29
026-1 Real Estate State 231,000 77,000 308,000 0 0
Commission Account
Total $ 231,000 77,000 308,000 0 0
Ill. B - Expenditures by Object Or Purpose
FY 2024 FY 2025 2023-25 2020-2/ 2027-29
FTE Staff Years 1.0 0.5 0.8
A-Salaries and Wages 83,000 41,000 124,000
B-Employee Benefits 29,000 14,000 43,000
C-Professional Service Contracts
E-Goods and Other Services 119,000 22,000 141,000
G-Travel
J-Capital Outlays
M-Inter Agency/Fund Transfers
N-Grants, Benefits & Client Services
P-Debt Service
S-Interagency Reimbursements
T-Intra-Agency Reimbursements
9-
Total $ 231,000 77,000 308,000 0 0
Ill. C - Operating FTE Detail: List FTEs by classification and corresponding annual compensation. Totals need to agree with total FTEs in
Part I and Part IITA
Job Classification Salary FY 2024 FY 2025 2023-25 2025-27 2027-29
Management Analyst 4 82,896 1.0 0.5 0.8
Total FTEs 1.0 0.5 0.8 0.0
Real estate appraisers/eval. 240-Department of Licensing
Form FN (Rev 1/00) 185,989.00 Request # EHB 1797-3

FNS063 Individual State Agency Fiscal Note 2 Bill # 1797 E HB
Ill. D - Expenditures By Program (optional)
NONE

Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE

IV. B - Expenditures by Object Or Purpose
NONE

IV. C - Capital Budget Breakout

Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.

NONE

IV. D - Capital FTE Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part IVB.

NONE
Part V: New Rule Making Required

Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.

See attached fiscal note

Real estate appraisers/eval. 240-Department of Licensing
Form FN (Rev 1/00) 185,989.00 Request # EHB 1797-3
FNS063 Individual State Agency Fiscal Note 3 Bill # 1797 E HB
Individual State Agency Fiscal Note

Agency 240 — Department of Licensing

Bill Number: EHB 1797

to complete real property evaluations

Part 1: Estimates
C1 No Fiscal Impact

Estimated Cash Receipts:

Revenue

Bill Title: Concerning residential real estate appraisers being allowed

FY 25

23-25 Total

25-27 Total

27-29 Total

Real Estate Commission 026 231,000 77,000 308,000 - -
Account Totals 231,000 77,000 308,000 - -
Estimated Expenditures:
FY 24 FY 25 23-25 Total 25-27 Total 27-29 Total

FTE Staff Years

Operating Expenditures

pO] Es] sf ET

FY 25

23-25 Total

25-27 Total

27-29 Total

026

Real Estate Commission

231,000

77,000

308,000

Account Totals

231,000

77,000

308,000

The revenue and expenditure estimates on this page representthe most likely fisca/ impact. Factors impacting the
precision ofthese estimates and alternate ranges (if appropriate), are explained in Part Il.

Check applicable boxes and follow corresponding instructions.

LI If the fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent
biennia, complete this page only (Part I).

If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent
biennia, complete entire fiscal note form Parts I-V.

C1 Capital budget impact, complete Part IV.

Requires new rule making, complete Part V.

Legislative Contact: Clinton McCarthy Phone: (360) 786-7319 | Date:
Agency Preparation: Gina Rogers Phone: (360) 634-5036 | Date: 3-6-2023
Agency Approval: Gerrit Eades Phone: (360) 902-3931 | Date:

Request # 1
Bill # 1971 EHB

Page 1 of 5
Part 2 — Explanation

This bill allows appraisers to conduct real property evaluations and sets new education
requirements.

2.A — Brief Description Of What The Measure Does That Has Fiscal Impact
Sec. 1 — Adds a new section to chapter 18.140 RCW

e Allows state-licensed or certified appraiser to perform evaluations for financial institutions

© These are not considered appraisal activity when a disclaimer is included

o These are not subject to DOL or Appraiser Commission regulation

o Appraisers may choose to comply with USPAP

e The disclaimer should include the following language:

o “lama 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.”

e “Evaluation” means an opinon of real property or real estate market value, provided to a
financial institution that conforms with the interagency appraisal and evaluation guidelines
adopted by the federal financial institution’s regulatory agencies for use in real estate-related
financial transactions that don’t require an appraisal

Sec. 2 — Amends RCW 18.140.030
e (15) updates exceptions

Sec. 3 — Adds a new section to chapter 18.140 RCW
e Requires DOL to adopt the following rules:

o Beginning 1/1/2024 require all initial applicants to complete a 7 hour qualifying course
with an exam that includes valuation bias and fair housing laws and regulations as part
of the core modules required for licensure

=" Applies to state-registered appraiser trainees, state-licensed real estate
appraisers, state-certified residential real estate appraisers, and state-certified
general real estate appraiser certifications

o Before 1/1/2025 require all holders of an active or inactive certification, license, or
registration to complete a 7-hour course (described above)

o Beginning 1/1/2026 require all holders of an active or inactive certification, license, or
registration to complete a 4-hour continued education course on the topics above

Sec. 4— New Section
e Provides an effective date based on adoption of administrative rules by DOL

e Requires DOL to provide written notice of the effective date to affected parties and the
legislature

Effective Date: This act takes effect upon the adoption of the administrative rules. A start date of July 1,
2023, is needed to prepare the requirements and complete rulemaking prior to the January 1, 2024,
when applicants are required to have completed a seven-hour qualifying course that includes valuation
bias and fair housing laws and regulations for licensure.

Page 2 of 5
2.B - Cash receipts Impact

To implement this legislation, a one-time assessment would need to be added to licenses that are
funded with dedicated funds, equal to the costs contained in the expenditure section of this fiscal note.
The cost allocation model applied to current expenditures is used to establish the revenue breakdown.
For efficiency purposes, the department will add inclusion of this one-time assessment per license, to a
planned fee rulemaking process in the spring of 2024, with any fee proposed increases to go into effect
in June 2024.

Revenue FY 25 23-25 Total 25-27 Total 27-29 Total
Real Estate Commission 026 231,000 77,000 308,000 - -
Account Totals 231,000 77,000 308,000 - -

2.C — Expenditures

1 Management Analyst 4 (MA4) to coordinate and conduct rulemaking to implement new changes;
support stakeholder outreach; and assist with process and policy development (18-month project
starting July 1, 2023.)

DOL estimates printing and mailing costs to send written notices= $3500

Information Services:

The agency will use appropriated funds to hire contract programmers to accomplish this work or to
support current staff implementing this legislation within the required timeline. Appropriated funds may
also be used to hire agency temporary staff to support permanent staff assigned to this legislative effort.

Any change requires a process to ensure changes are correctly applied to the system. This involves
Project Managers that manage the team that completes the update, business analyst that documents
and reviews the system changes, architect services that analyzes how the update could have an effect
on other systems or DOL processes, developers who create the change, and testers and quality
assurance teams that ensure the update is working correctly.

Page 3 of 5
Cost Category Description Rate 2024 2025 2026 2027 2028 2029 _— Total Cost

TESTER

Test to verify individual components meet
requirements; ensure that other business transactions | $ 22,620 - - - - - 18,100
have not been impacted.

BUSINESS ANALYST $ 16,530 - - - - - 5,000

Determine business requirements; translate
requirements into what changes are needed to various
systems including account codes, inventory codes,
testing considerations, etc.

PROJECT MANAGER Manage schedule and contracts S 28,710 - - - - - 5,700

SECURITY AND
ARCHITECT SERVICES

Create the conceptual model that defines the
structure, behavior and framework of a computerized
system including a breakdown of the system into
components, the component interactions and S 16,530 - - - - - 3,300
interfaces (including with the environment, especially
the user), and the technologies and resources to be
used in the design.

Trains business partners and employees in new system

Trainer aa S 22,620 - - - - - 6,800
processes and capabilities.
Office of the Chief Information Officer designated rate
Project Contingency 8 $ 25,474 - - - - - 3,900
of 10%
Totals 42,800 - - - - - 42,800

What IS Will Implement:

e Update system to allow staff to approve valuation bias and fair housing law course curricula.

e Include new courses in standard notifications, letter templates, and reports.

e Modify Appraiser Course Search on the public portal to include valuation bias and fair housing
law courses.

e Add ability for applicants and licensees to upload proof of course completion document.

Assumptions:

e No fees will be collected for Appraiser Course approval.

e DOLwill not be approving Fair Housing appraiser course providers.

e Fair Housing Continuing Education will need to be included in any future state inactive renewal
processes.

e Licensees will be required to provide completed courses at renewal.

e Fair Housing Courses must be approved and available at least four months prior to
implementation date of January 1, 2024, to allow enough time for applicants to complete
courses.

e IT work can begin prior to completion of rulemaking.

Project Duration: 3 months

Support Services:

Agency Administrative Overhead is included at a rate of 23.4 percent of the direct program costs. This
funding received covers agency-wide functions such as vendor payments, contract administration,
financial management, mail processing, equipment management, help desk support, and technical
assistance to DOL employees.

Part 3 — Expenditure Detail

Page 4 of 5
3.A — Operating Budget Expenditures

Operating Expenditures FY 24 FY 25 23-25 Total 25-27 Total 27-29 Total
Real Estate Commission 026 231,000 77,000 308,000 - -
Account Totals 231,000 77,000 308,000 - -

3.B — Expenditures by Object or Purpose

Object of Expenditure FY 24 FY 25 23-25 Total 25-27 Total 27-29 Total
FTE Staff Years 1.0 0.5 0.8 0.0 0.0
Salaries and Wages 83,000 41,000 124,000 - -
Employee Benefits 29,000 14,000 43,000 - -
Goods and Services 119,000 22,000 141,000 - -
Total By Object Type 231,000 77,000 308,000 - -
3.C — FTE Detail
Staffing FY 25 23-25 Total 25-27 Total 27-29 Total
Management Analyst 4 82,896 1.0 0.5 0.8 0.0 0.0
Total FTE 1.0 0.5 0.8 0.0 0.0

Part 4 — Capital Budget Impact

None.

Part 5 — New Rule Making Required

Possible rule revisions:

e 308-125-025 Application process to register as a real estate appraiser trainee.
308-125-030 Examination prerequisite general classification.
308-125-040 Examination prerequisite state-certified residential classification.
308-125-045 Examination prerequisite state-licensed classification.
308-125-050 Educational courses—Preexamination.
e 308-125-075 Allowed credits for appraisal experience.
e 308-125-090 Continuing education required.
e 308-125-250 Inactive licenses.

To implement this legislation, a one-time assessment would need to be added to licenses that are
funded with dedicated funds, equal to the costs contained in the expenditure section of this fiscal note.
The cost allocation model applied to current expenditures is used to establish the revenue breakdown.
For efficiency purposes, the department will add inclusion of this one-time assessment per license, to a
planned fee rulemaking process in the spring of 2024, with any fee proposed increases to go into effect
in June 2024.

Page 5 of 5

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