No. 28031 (Amendment): R162-105. Scope of Authority

DAR File No.: 28031
Filed: 06/15/2005, 05:15
Received by: NL

 

RULE ANALYSIS

Purpose of the rule or reason for the change:

It has come to the attention of Division of Real Estate investigators that unlicensed persons are getting around appraiser licensing requirements by acting as trainees and accepting appraisal assignments (and payment for those assignments), doing the appraisals, and then hiring a properly licensed appraiser to sign their appraisal reports. The correct scenario is the reverse: the properly licensed appraiser accepts the assignment, and then has the trainee assist him in only those portions of the appraisal process that are appropriate for a trainee to perform. The appraiser cannot delegate the entire assignment to a trainee and allow the trainee to complete the assignment independently. Enacting rules stating that trainees cannot solicit or accept assignments on their own behalf should help to control this abuse of the system by trainees. The federal Appraisal Subcommittee requires that trainee education must have been taken within the preceding five years. After January 1, 2008, the Appraisal Subcommittee will not permit supervisors to have more than three trainees. Therefore, a rule change to comply with the federal requirements is proposed. Some trainees who were previously state-registered appraisers do not understand that the rules on inspections by trainees apply to them. Therefore, a rule amendment clarifying this point is proposed. New disclosure requirements are proposed that will make it mandatory to disclose details of the inspection in an appraisal report (see proposed change to Rule R162-106). (DAR NOTE: The proposed amendment to Rule R162-106 is under DAR No. 28030 in this issue.)

 

Summary of the rule or change:

Trainees will be forbidden from soliciting appraisal work on their own behalf. They would only be able to solicit appraisal work on behalf of their supervising appraisers or the supervisor's appraisal firm. Once the assignment has been accepted, the supervisor would then delegate to the trainees those tasks that are appropriate for a trainee to perform, not the entire appraisal assignment. Trainee education must be taken within five years prior to registering trainee status with the Division of Real Estate. Effective January 1, 2008, a supervising appraiser will only be allowed to supervise a maximum of three trainees at one time. In the property inspection subsections, it is made clear that the inspection provisions apply to trainees who were previously state-registered appraisers. All reports in appraisals in which an appraisal trainee participated will have to be written in compliance with a new standard requiring disclosure of details concerning the property inspection.

 

State statutory or constitutional authorization for this rule:

Subsection 61-2b-6(1)(l)

 

Anticipated cost or savings to:

the state budget:

None--State agencies do not employ appraisal trainees and therefore are not affected by rule regulating appraisal trainees. The State budget would not be affected by the portion of this rule change requiring disclosure of inspection details.

 

local governments:

None--Local governments do not solicit appraisal work and therefore are not affected by rules regulating how an appraisal trainee may solicit appraisal business. Local Assessors' offices may employ unlicensed persons and train them to be appraisers, but it is not anticipated that the other changes to this rule will either cost or save local assessors' offices any money. If there are any costs or savings, they would be attributable to the federal requirements, and not these rules implementing the federal requirements. It is not anticipated that the portion of this rule that would require adding a few sentences concerning inspection details to an appraisal report would have any financial impact on local governments.

 

other persons:

The only persons affected by these rule changes would be supervising appraisers and their trainees. The portions of this rule amendment that simply clarify the relationship between supervisor and trainee and that clarify that trainees who were previously state-registered appraisers are bound by the same inspection rules as other trainees should not either cost supervisors or trainees money or save them any money. The trainee is already forbidden by the licensing law from appraising on his own, and therefore the trainee should not be accepting assignments anyway. There may be some cost to a prospective appraisal trainee if he took his education so far in the past that he needs to retake it before he may be employed as a trainee, but those costs would be attributable to the federal requirements, and not this rule amendment implementing the federal requirements. There may be some costs to supervisors once the limitation on how many trainees they may employ goes into effect, since trainees typically perform appraisal-related duties at lower salaries than licensed appraisers, but the limitation on the number of trainees is mandated by the Federal Appraisal Subcommittee. Therefore, any costs would be attributable to the federal requirements, and not these rules implementing the federal requirements. The portion of this rule change requiring the addition of a few sentences concerning inspection details to an appraisal report will neither cost nor save appraisers or their trainees any money.

 

Compliance costs for affected persons:

The portions of this rule amendment that simply clarify the relationship between supervisor and trainee and that clarify that trainees who were previously state-registered appraisers are bound by the same inspection rules as other trainees should not cost supervisors or trainees any money. The trainee is already forbidden by the licensing law to appraise on his own, and therefore the trainee should not be accepting assignments anyway. This rule amendment may cause a prospective appraisal trainee to incur some cost if he took his education so far in the past that he needs to retake it before he may be employed as a trainee, but those costs would be attributable to the federal requirements, and not this rule amendment implementing the federal requirements. There may be some costs to supervisors once the limitation on how many trainees they may employ goes into effect, since trainees typically perform appraisal-related duties at lower salaries than licensed appraisers, but the limitation on the number of trainees is mandated by the Federal Appraisal Subcommittee. Therefore, any costs would be attributable to the federal requirements, and not these rules implementing the federal requirements. The portion of this rule change requiring the addition of a few sentences concerning inspection details to an appraisal report should not cost appraisers or their trainees any money.

 

Comments by the department head on the fiscal impact the rule may have on businesses:

This rule filing clarifies the role of a trainee and the trainee's supervisor, includes requirements for appraiser trainee education and supervisor limits on trainees to comply with federal requirements, and clarifies the application of the rules to trainees who were previously registered appraisers but not yet licensees under the new law. No fiscal impact to businesses is anticipated from such clarifying provisions. Russell C. Skousen, Executive Director, Department of Commerce.

 

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Commerce
Real Estate
HEBER M WELLS BLDG
160 E 300 S
SALT LAKE CITY UT 84111-2316

 

Direct questions regarding this rule to:

Shelley Wismer at the above address, by phone at 801-530-6761, by FAX at 801-530-6749, or by Internet E-mail at [e-mail]

 

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

08/01/2005

 

This rule may become effective on:

08/02/2005

 

Authorized by:

Dexter Bell, Director

 

 

RULE TEXT

R162. Commerce, Real Estate.

R162-105. Scope of Authority.

R162-105-1. Scope of Authority.

105.1 Transaction value. "Transaction value" means:

105.1.1 For loans or other extensions of credit, the amount of the loan or extension of credit;

105.1.2 For sales, leases, purchases, and investments in or exchanges of real property, the market value of the real property interest involved; and

105.1.3 For the pooling of loans or interests in real property for resale or purchase, the amount of the loan or market value of the real property calculated with respect to each such loan or interest in real property.

105.2 State-Licensed Appraisers. In federally-related transactions, the Utah Real Estate Appraiser Licensing Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and related federal regulations allow State-Licensed Appraisers to perform the appraisal of non-complex one to four residential units having a transaction value of less than $1,000,000 and complex one to four residential units having a transaction value of less than $250,000.

105.2.1 Subject to the transaction value limits in Section 105.2, State-Licensed Appraisers may also perform appraisals in federally-related transactions of vacant or unimproved land that is utilized for one to four family purposes, or for which the highest and best use is 1-4 family purposes, so long as net income capitalization analysis is not required by the terms of the assignment.

105.2.2 State-Licensed Appraisers may not perform appraisals of subdivisions in federally-related transactions for which a development analysis/appraisal is necessary or for which discounted cash flow analysis is required by the terms of the assignment.

105.3 Trainees.

105.3.1 For the purposes of these rules, "trainee" means a person who is working under the direct supervision of a State-Licensed or State-Certified Appraiser to earn points for licensure.

105.3.2 Appraisal-related duties by unlicensed persons. Unlicensed persons who have not qualified as trainees as provided in Subsection 105.3.3 may perform only clerical duties in connection with an appraisal. For the purposes of this rule, appraisal-related clerical duties include typing an appraiser's research notes or an appraiser's report, taking photographs of properties, and obtaining copies of public records. Only those persons who have properly qualified as trainees as provided in Subsection 105.3.3 may perform the following appraisal-related duties: participating in property inspections, measuring or assisting in the measurement of properties, performing appraisal-related calculations, participating in the selection of comparables for an appraisal assignment, making adjustments to comparables, and drafting or assisting in the drafting of an appraisal report. The supervising appraiser shall be responsible to determine the point at which a trainee is competent to participate in each of these activities.

105.3.2.1 A trainee may not solicit an assignment or accept an assignment on behalf of anyone other than the trainee's supervisor or the supervisor's appraisal firm. All engagement letters shall be addressed to the supervisor or the supervisor's appraisal firm, not to the trainee. In all appraisal assignments, the supervisor shall delegate only such duties as are appropriate to the trainee and shall directly supervise the trainee in the performance of those duties.

105.3.3 In order to become a trainee, the person must have successfully completed 75 classroom hours of State-approved education in subjects related to real estate appraisal, including the Uniform Standards of Professional Appraisal Practice (USPAP), must have passed the final examination in the USPAP course, and must file a notification with the Division as provided in Subsection 105.3.3.1. The education required by this Subsection must have been completed within the 5 years preceding the filing of the notification required by Subsection 105.3.3.1.

105.3.3.1 Trainee Notification. Prior to performing any of the appraisal-related activities for which points will be claimed toward licensure, a trainee must file with the Division a notification in the form required by the Division. In addition to any identifying information about the trainee required by the Division, the notification shall contain the name and business address of the appraiser(s) who will supervise the trainee in the performance of the appraisal-related duties, and shall be signed by the supervisor. The notification shall also contain the course names, course provider names, and course completion dates for the 75 hours of education required by Subsection 105.3.3. The original course completion certificates shall be submitted to the Division with the notification.

105.3.3.2 Except as provided in Subsection 105.3.3.3, no experience points will be granted toward licensure for trainee experience that is claimed to have been earned prior to the date the notification was filed with the Division.

105.3.3.3 Until five years after the effective date of this rule, points that were earned prior to the effective date of this rule may be claimed and will be awarded to applicants who are able to document those points on the forms required by the Division, notwithstanding the fact that the points were earned prior to the date a trainee notification was filed with the Division.

105.3.4 Supervising Appraisers. A trainee may have more than one supervising appraiser. Effective January 1, 2008, a supervising appraiser may supervise a maximum of three trainees at one time.

105.3.5 Residential Property Inspections. A trainee, including a trainee who was previously a state-registered appraiser, must be accompanied by a supervising State-Licensed Appraiser, State-Certified Residential Appraiser, or State-Certified General Appraiser on all inspections of residential property until the trainee has performed 100 inspections of residential properties in which both the interior and the exterior of the properties are inspected. All reports in appraisals in which a trainee participated in the inspection of the subject property shall comply with the requirements of Section 106.9.

105.3.6 Non-Residential Property Inspections. A trainee, including a trainee who was previously a state-registered appraiser, must be accompanied by a supervising State-Certified General Appraiser on all inspections of non-residential property until the trainee has performed 20 inspections of non-residential properties in which both the interior and the exterior of the properties are inspected. All reports in appraisals in which a trainee participated in the inspection of the subject property shall comply with the requirements of Section 106.9.

105.3.7 Points for Licensure. A trainee may accumulate experience points for each duty listed below at the rate of 33.3% of the total points awarded from the Appraisal Experience Points Schedule under Section 104-18.1 or 104-18.2, not to exceed the maximum number of points awarded for each property. Trainee experience must be earned in at least three of the following categories. No more than one-third of the experience points submitted toward licensure may come from any one of the following categories:

(a) participation in selecting comparables for an appraisal assignment - 33.3% of total points

(b) participation in making adjustments to comparables - 33.3% of total points

(c) drafting appraisal reports - 33.3% of total points

(d) as provided in Sections 105.3.5 and 105.3.6, inspecting a property that is the subject of an appraisal or that may be used as a comparable in an appraisal, and measuring the property - 33.3% of total points as long as both an interior and exterior inspection of the property is performed. No points will be granted for inspections that do not include both an interior and an exterior inspection.

105.3.8 Credit will be given for appraisal experience earned only within five years immediately preceding the licensure or certification application. Applicants who believe the Experience Points Schedules do not adequately reflect their experience may refer to Section 104-17.

105.3.9 All trainees are prohibited from signing an appraisal report or discussing an appraisal assignment with anyone other than the appraiser responsible for the assignment, state enforcement agencies and such third parties as may be authorized by due process of law, or a duly authorized professional peer review committee.

105.3.10 A state-licensed or state-certified appraiser who supervises a trainee shall be responsible for the training and direct supervision of the trainee.

105.3.10.1 Direct supervision shall consist of critical observation and direction of all aspects of the appraisal process and accepting full responsibility for the appraisal and the contents of the appraisal report. The supervising appraiser shall be responsible to personally inspect each residential property that is appraised with a trainee until the trainee has performed 100 residential inspections as provided in Subsection 105.3.5 and 20 non-residential inspections as provided in Subsection 105.3.6. The supervising appraiser must actively supervise those inspections and the resulting appraisals.

105.3.11 A supervising appraiser shall require the trainee to maintain a log in a form satisfactory to the Board which shall contain, at a minimum, the following information for each appraisal.

(a) Type of property;

(b) Address of appraised property;

(c) Description of work performed;

(d) Number of work hours;

(e) Signature and state license/certification number of the supervising appraiser; and

(f) Client name and address.

105.3.12 The trainee shall maintain a separate appraisal log for each supervising appraiser.

105.4. Trainee Status after Revocation, Surrender, or Suspension of License or Certification.

105.4.1 Trainee Status after Revocation or Surrender of License or Certification. Unless otherwise ordered by the Board, an appraiser whose appraiser certification or license has been revoked by the Board, or who has surrendered a certification or license as a result of an investigation by the Division, may not serve as a trainee for a period of five years after the date of the revocation or surrender, nor may a licensed or certified appraiser employ or supervise him during that period in the performance of the activities permitted trainees.

105.4.2 Trainee Status while License or Certification is Suspended. Unless otherwise ordered by the Board, any appraiser whose appraiser license or certificate has been suspended by the Board as a result of an investigation by the Division may not serve as a trainee during the period of suspension, nor may a licensed or certified appraiser employ or supervise him during that period in the performance of the activities permitted trainees.

 

KEY: real estate appraisals

[September 10, 2004]2005

Notice of Continuation January 13, 2004

61-2b-6(1)(l)