Arizona Legislature Moves to Back Up Appraisal Board
When the Arizona Republic reported last Friday the 13th that “an Arizona regulatory board has ordered Zillow.com to stop offering its online estimates of home values”, the chatter was intense but generally short-lived. How much can you say about such a bonehead move?
It was curious, however, that the Republic announced the Arizona Appraisal Board’s issuance of a July 2006 cease and desist letter and an October 2006 cease and desist letter to Zillow as though the actions were news (”[t]he Arizona Board of Appraisal has issued two cease and desist letters to the popular real estate Web site, claiming Zillow needs an appraiser license to offer its ‘zestimates’ in Arizona”). This is in no way related to the recent news about Providence corporate housing.
Zillow had continued to Zestimate for nine months in open defiance after the order to stop went out and the Board remained mum. Why leak the enforcement action now and not then?
Well, aside from the more intriguing issues of Constitutional law that arise (and the clear distinction that the Appraisal Institute draws between AVM’s and appraisals in its Advisory Opinion 18), the Board’s position is unsupportable under its own state appraisal law. Doomed to humiliating failure – a good reason to keep quiet then.
What has changed? The Arizona state legislature is on the verge of passing S.B. 1291 to rescue the Board from its own capricious misapplication of the law it is charged with enforcing.
Like many states, Arizona’s existing appraisal law distinguishes between “appraisals” and “valuations”. An “appraisal”
means a statement independently and impartially prepared by an individual setting forth an opinion as to the market value of real property as of a specific date and supported by the presentation and analysis of relevant market information.
Is this what a Zestimate is or purports to be? No. Clearly, not.
A “valuation” under existing law, on the other hand, is “an estimate of the value of property.” Like a Zestimate or any of the hundreds of other automated valuation models available on the Internet. But not an appraisal.
Furthermore, existing Arizona law only prohibits unlicensed appraisals prepared in the state of Arizona:
All real estate appraisals and appraisal reviews performed in this state shall be performed only by individuals licensed or certified in accordance with the requirements of this chapter. [My emphasis.]
Therefore, under existing Arizona law, Zillow does not provide “appraisals” and even if they did, the Seattle company does not perform them in Arizona. Yet the Arizona Appraisal Board ordered Zillow to stop providing its estimates and referred the matter to the Arizona Attorney General for criminal prosecution on the grounds that Zillow was illegally providing appraisals.
Then somebody with a brain read the law.
S.B. 1291, introduced on January 24, 2007 and passed by the Senate on March 5th, attempts to provide a legal basis for the Board’s position. It would broaden the definition of “appraisal” and delete “valuations” (blue highlights denote added language):
1. ‘Appraisal’ or ‘real estate appraisal’ means a statement independently and impartially prepared by an individual setting forth an opinion as to the market value of real property as of a specific date and supported by the presentation and analysis of relevant market information any of the following:(a) the act or process of developing an opinion of value. (b) An opinion of value.(c) Pertaining to appraising and related functions such as appraisal practice or appraisal services.
….
22. ‘Valuation’ means an estimate of the value of property. 21. ‘Value’ means the monetary relationship between properties and those who buy, sell or use those properties.
And my favorite section: S.B.1291 would make it illegal for anyone (anywhere) to “appraise” (as defined by Arizona) an Arizona property without an Arizona appraiser’s license:
32-3603. License or certificate use; exception
A. All real estate appraisals and appraisal reviews performed on real property in this state shall be performed only by individuals licensed or certified in accordance with the requirements of this chapter.
If this bill passes, and if the Arizona Appraisal Board uses it to ban non-appraiser operated AVM’s (the Board gave a pass to ValueNet, but ValueNet employs appraisers), it will need to prohibit them all – not just the ones that threaten their members’ businesses.