Appraiser Regulation Hits Snag

The Office of Real Estate Appraisers is in a quandary.

Officials would like to begin the federally mandated process of regulating the state’s realty appraisal industry, but until 7,400 people are qualified as appraisers, the state’s newest department cannot officially come into existence.

There is no doubt there are more than enough appraisers in California, about 21,000, according to Mary Walters at the Appraisal Institute in Washington, D.C.

And so far, nearly 11,000 people have asked to sit for the California examination that will either license or certify them to appraise real property involving a federally related transaction over $100,000.

The state currently has no control over who may or may not appraise real property. However, when enough people pass their appraisal examination a state law will go into effect and require this type of appraisal to be performed by a state-licensed or certified appraiser.

Not everyone who applies is allowed to take the test. The office has approved 8,308 to sit for the exam and although 5,741 have passed, only 3,708 have actually paid the fee and requested their certificates as of May 26. That means there are 2,567 more who have been approved but have failed to enter a testing center.

An additional 2,033 people have already passed the test, but have not asked the Office of Appraisers to send them their diplomas.

It is unclear if the appraisers are disinterested, don’t feel up to taking an examination or if the fee structure is keeping them away. Many may be taking review courses and do not yet feel prepared, officials speculated.

“Some folks are busy and haven’t gotten around to taking it,” observed deputy director Loretta Maxwell. “And there are some who are afraid of tests in general, are anxious about taking an exam. Once they get past the test, I think either they don’t want to send in their fees until the last possible moment or they think it will somehow extend the term of their license certificate.”

Licensing is good for four years, although legislation is being considered that would make the initial term last five years.

But until the ones who have already passed come forward and an additional 82% of those who are currently eligible, 1,659, actually pass, California’s newest office within the Business, Transportation and Housing Agency will be unable to implement state law mandated by the federal savings and loan bailout. “We are trying to implement the law by July 1,” said Rose Mary Swart, administrative programs manager. “But until we have 7,400 people who have passed the examinations, language in the statute limits our doing so.”

There are several reasons why eligible people should request their license or certification right away, officials said.

“We’re going to announce the deadline at some point,” Maxwell said. “And we anticipate we will be overloaded with issuance requests. Any time you have an overload, it takes a while to get through the pipeline. The way to assure that you have your certificate or license in hand when the deadline goes into effect is to send in your issuance request as soon as you can.”

So far the testing centers have not been full, although that could change if all eligible appraisers begin to arrive at the same time.

“They’ve been reviewed, they’ve been through our screening process and are holding the test admit letter, but have not gone in and taken the exam,” said Swart. “What we are concerned about is gridlock. They might experience a wait, there won’t be enough seats readily available when they do go in.”

In August, 1989, Congress approved the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which originally required the states to license and certify appraisers by July 1, 1991. The bill allowed the states to extend the time in which licensing and certification was required until Dec. 31, 1992.

By Aug. 19, 1990, the California Legislature had created the appraisal office in conformity with federal law. The bill originally made appraiser licensing and certification effective in January of this year.

“Through emergency administration regulations we have extended that deadline to July 1, 1992,” Maxwell explained. “Adding to the confusion is the fact the federal government has a mandatory deadline of Dec. 31, 1991, but states are free to implement sooner and many states have their datelines in place.”

There are four levels of appraiser licensing and certification. Only the General Certification carries no limitations on the type of property to be appraised and no dollar value limit, although it is subject to a competency provision.

If an appraiser passes the examination for General Certification, it will cost just over $900 to receive a certificate from the state.