April 2017 Volume 13 Issue 4 Monthly Newsletter of the Georgia Real Estate Commission GREC RENews 2017Calendar Common Violations Class Dates: May 9, 2017 Northeast GA BOR Blairsville, GA 706-781-3030 May 23, 2017 Valdosta BOR Valdosta 229-242-2085 Link to the Georgia Real Estate License Laws, Rules, and Regulations Link to GREC Disciplinary Actions View Current Suspensions and Revocations This Issue New Commissioner GREC EAC Updates Focus on Terminology Instructor CE Opportunities Word Find The Appraisers Page P. 1 P. 2 P. 2 P. 3 P. 3 P. 4-8 Real Estate Commissioner Appointed Governor Nathan Deal nominated Lynn Dempsey as Commissioner of the Georgia Real Estate Commission following the retirement of William L. Rogers Jr. The nomination was approved by the Georgia Real Estate Commission and was effective February 28, 2017. Lynn Dempsey is a second-generation auctioneer and the former president and managing broker of Dempsey Auction Company. He is a past president of the Georgia Auctioneers Association and was named to the Georgia Auctioneers Hall of Fame. Dempsey was a member of the Rome-Floyd County Development Authority and served on the Georgia Auctioneer's Commission. He previously sat on the boards of directors for the Greater Rome Chamber of Commerce and the Georgia Chamber. Dempsey is a graduate and past chairman of Leadership Georgia. He sits on the advisory board for the Exchange Club Family Resource Center for the Prevention of Child Abuse and teaches Sunday School at Rome First United Methodist Church. Dempsey earned a bachelor's degree in Real Estate from the University of Georgia. He and his wife, Katie, have two children and seven grandchildren. They reside in Rome. The Governor also selects and appoints members of the Real Estate Commission to serve five year terms. Each member serves that term and can continue to serve until the Governor names a successor. The law requires the Governor to appoint five persons who have been actively engaged the real estate business for 5 years, and one person who has a recognized interest in consumer affairs and is not a real estate licensee. Link to Proposed Rule Changes Click Here Click here to review a legend of the disciplinary actions the Commission may impose. Page 1 SUBMIT Comments & Suggestions To sign up to receive the GREC RENewsletter Click Here H Online Courses from GREC $10 each 3 Hour CE Course Total of 9 Hours CE Available (Also Approved as Instructor CE, not approved as License Law CE) "Avoiding Trust Account Trouble" "Practicing Real Estate & Staying Out of Trouble" "Being a Broker and Staying Out of Trouble" Click Here Georgia Real Estate Commission Suite 1000 International Tower 229 Peachtree Street NE Atlanta, GA 30303-1605 Phone 404-656-3916 GREC RENews April 2017, Volume 13 Issue 4 Current Members of the Georgia Real Estate Commission Chair Mr. Clayton Foster Flowery Branch Term Expires: 01/29/2022 Vice Chair Mr. Jerry Warshaw Atlanta Term Expires: 01/26/2019 Member Ms. Jodie Shepard Newnan Term Expires: 01/25/2020 Member Mr. Paul Brower Marietta Term Expires: 01/26/2021 Member Ms. Cindy Rampley Fayetteville Term Expires: 01/25/2018 Public Member Mr. David J. Burge Atlanta Term Expires: 10/26/2018 Executive Officers Real Estate Commissioner Deputy Real Estate Commissioner Mr. Lynn Dempsey Mr. Craig Coffee GREC Education Advisory Meeting Updates The Real Estate Education Advisory Committee is made of representatives from various industry classifications including property management, commercial, residential, and appraisal. The committee includes practitioners as well as educators. This committee meets twice per year to provide feedback and input to the Commission regarding educational and practical issues in the Georgia real estate industry. At the last meeting on March 24, 2017, the new Real Estate Commissioner, Lynn Dempsey, met with the committee and the Deputy Commissioner, Craig Coffee, updated the EAC on recent trends in licensing issues and Commission projects. The following is a summary. Licensing: The Commission is issuing an average of 637 new licenses per month. Staff: GREC has 26 Full Time Employees - 13 in Investigations Department, 9 in Licensing Department, 2 in IT and 2 in Administration, and 3 Part Time Employees. Investigative Cases: There are currently 477 Pending Cases. New procedures are speeding up resolution of investigative cases. It was noted that as market activity increases so does the case volume. Projects: A current priority project is the implementation of a new Telephone System and Automated Call Distribution system that will enable callers to reach an Information Specialist much more quickly. Focus on Terminology: "Commission" New Telephone System and Automated Call Distribution You will reach an InTfohrempautiropnosSepoefctihaelisRteFaal sEtsetra!te Commission is two-fold: First, it seeks to protect the public from intentional or unintentional harmful acts of persons acting as real estate licensees by assuring that licensees meet basic levels of competency. Second, it attempts to create a regulatory environment for the real estate industry that is reasonable and allows the licensee to attain economic success. For more information about the purpose and role of the Georgia Real Estate Commission and its members go to http://www.grec.state.ga.us/about/grecroles.html. Page 2 H Online Courses from GREC $10 each 3 Hour CE Course Total of 9 Hours CE Available (Also Approved as Instructor CE, not approved as License Law CE) "Avoiding Trust Account Trouble" "Practicing Real Estate & Staying Out of Trouble" "Being a Broker and Staying Out of Trouble" Click Here Link to the Georgia Real Estate License Laws, Rules, and Regulations Georgia Real Estate Commission Suite 1000 International Tower 229 Peachtree Street NE Atlanta, GA 30303-1605 Phone 404-656-3916 GREC RENews April 2017, Volume 13 Issue 4 The Appraisers OPPORTUNITIES FOR INSTRUCTOR CONTINUING Page EDUCATION FOR REAL ESTATE & APPRAISAL 2017 GREEA Mid-Year Symposium The program will focus on what adult educators need to develop, prepare and master to provide a valuable and relevant education experience for their students. Thursday, April 27, 2017 Approved for 6 hours Real Estate and Instructor Continuing Education and 6 hours of Appraisal and Instructor Continuing Education. Register at http://2017GREEAMidYear.Eventbrite.com Real Estate Educators Association Instructor Development Workshops (IDW) REEA schedules various IDW and a series of Gold Standard Certification Workshops various locations and dates. For more information visit https://www.reea.org/ Other sources for Instructor CE are available from various Georgia Real Estate Schools both as resident classes and online courses in addition to the three GREC courses offered online. Word Find List The Governor appoints the Real Estate Commissioners. The number of hours of required CE per renewal period is thirtysix. Three hours of specific License Law Topics are required per renewal as part of the 36 hours required continuing education. The length of the renewal period is four years. There are five members of the commission in addition to the Real Estate Commissioner and Deputy Commissioner. The Georgia License Laws are clarified by Rules and Regulations. Page 3 The Appraisers Page Georgia Real Estate Appraisers Board April 2017 Useful Links: Different Types of Appraisals GREAB Web Site Appraisal Act GREAB Disciplinary Sanctions By: D. Scott Murphy, SRA For mortgage purposes, there are four basic appraisal types; FHA, VA, USDA and Conventional. All are completed on the same appraisal forms. All are done to arrive at an estimated market value as of the effective date (date of inspection). All consider each of the three approaches to value sales comparison, cost and income. All follow the same appraisal standards USPAP (Uniform Standards of Professional Practice). All must abide by their state's Real Estate Appraisers Act (state licensing regulations). All should arrive at the exact same value for a given property. Meaning, the type of loan has no bearing on the appraised value. The following will outline the subtle differences in each program as it pertains to the appraisal. FHA: What an FHA Appraiser Looks for During an Inspection According to HUD Handbook 4150.2, the home "must be free of all known hazards and adverse conditions that may affect the health and safety of the occupants." Read more: https://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf Certain things will be called out in an FHA appraisal, but due to the unique characteristics of each home, certain items may be subjective to the appraiser's opinion. Overall, FHA appraisals are meant to determine if everything is working as it should, if there are any issues that present a safety or health concern, and if there are any issues that would affect the marketability of the home. Here is a general list* of what an FHA appraiser must inspect during the appraisal of the home: Utilities must be turned on to test the systems and appliances for functionality Proper drainage around the perimeter of the home Adequate water pressure and testing of both hot and cold water Water heater must be in working order and up to local code This article is continued on the next 4 pages. Page 4 Attic must have vents, no damage, no exposed or frayed wires, no signs of water penetration or leaks, adequate insulation Crawlspaces must have no signs of standing water or foundation issues No chipping, peeling or flaking paint on homes built before 1978 for danger of lead-based paint No defective paint or bare wood for homes built after 1978 Electrical outlets must be in working condition with cover plates Active termite infections must be addressed and cured Windows must open and close with no broken panes No dangling wires from missing fixtures Smoke and carbon monoxide detectors must be present and up to local code Roof should not be leaking and must have at least two years of economic life left. The FHA will not accept roofs with over three layers of existing roofing. In 2005 FHA issued a mortgagee letter (Mortgagee Letter 2005-ML-48) to appraisers eliminating the tedious checklist appraisers were using. FHA also changed policy and instructed appraisers to no longer call for items of deferred maintenance so long as those items do not negatively affect the safety, soundness or habitability of the home. Cosmetic repairs include missing handrails that do not pose a threat to safety, holes in window screens, cracked window glass, defective interior paint surfaces in housing constructed after 1978, minor plumbing leaks that do not cause damage (such as a dripping faucet), and other inoperable or damaged components that in the Appraiser's professional judgment do not pose a health and safety issue to the occupants of the house. If an element is functioning well but has not reached the end of its useful life, the Appraiser should not recommend replacement because of age. Who can complete FHA appraisals? Only certified appraisers who have been approved by HUD. Does the appraiser have to have access to the attic and crawl space? Yes, FHA requires the appraiser to make a full inspection of the entire attic and crawl space. If full access is not available or access is restricted, the appraiser is to cancel the appointment and return when full access can be granted. How long is an FHA appraisal good for? The simple answer is 120 days, however, the clock actually starts clicking when the lender orders the case number. Once 120 days passes the case number expires and the appraisal is no longer valid. There can only be one appraisal every 120 days regardless of the borrower or the lender. There is a common misconception that if an appraisal comes in low that the property owner is stuck with that value for 120 days. This is not accurate. Once an appraisal is completed no additional appraisal may be completed, however, the original appraiser is obligated to review any subsequent comparables that occurred between the original appraisal and the new contract for purchase. Can the borrower request a reconsideration of value if the appraised value is lower than the purchase price? Yes, each lender has a specific rebuttal process. Page 5 VA: According to VA Pamphlet 26-7, Chapter 11 VA Reasonable Value: For VA loan guaranty purposes, the "reasonable value" of a property is that figure which represents the amount a reputable and qualified appraiser, unaffected by personal interest, bias, or prejudice, would recommend to a prospective purchaser as a proper price or cost in the light of prevailing conditions. VA considers Reasonable Value and Market Value to be synonymous. Unique VA Appraisal requirements: VA is listed as client "Any Qualified Veteran" is listed as borrower Must conform to supplemental VA standards VA assigns the appraiser Appraiser uploads appraisal to VA portal VA relies exclusively on the sales comparison approach VA appraisal contains only three comparables "the three best comparable sales" Active or pending sales must not be used as comparables What an VA Appraiser Looks for During an Inspection The subject property must meet the Minimum Property Requirements (MPR) as outlined in VA Pamphlet 26-7. These requirements are very similar to FHA. The property must be SAFE, SOUND and HABITABLE. There are specific provisions for proximity to detrimental influences, distances from airports, noise levels, etc. Who can complete VA appraisals? VA very specifically limits the number of approved appraisers in a given county or area. As opposed to FHA where an appraiser can meet the requirements and become approved to complete FHA appraisals. Does the appraiser have to have access to the attic and crawl space? Fee appraisers are required to view, but not enter, any accessible crawl space and/or attic areas of the home and report any significant defective conditions observed. How long is an VA appraisal good for? Per VA rules, for a property to be purchased, a Notice of Value (NOV) must be attached to it. This ensures that the loan issued is for the fair market value of the home. "An appraisal ordered by the US Department of Veteran Affairs is valid for six months." Page 6 Can the borrower request a reconsideration of value if the appraised value is lower than the purchase price? Tidewater Initiative (introduced in Circular 26-03-11) A major change in VA's policy regarding interaction between VA Fee Appraisers and other program participants was introduced in 2003. In brief summary, the Tidewater procedure allows an opportunity for a designated "Point of Contact" to provide market evidence for the appraiser's consideration prior to establishing the final URAR value. The appraiser initiates the procedure by alerting the Contact person that the appraised value appears likely to come in under the sales price. The appraiser should not discuss the appraisal contents except to explain that the comparables located by the appraiser do not adequately support the sales price. The Contact person then has two business days to provide additional sales information in support of the sales price. Verification of closed sales is required. (Pending sales may be offered, but should only be used to support time adjustments.) USDA: USDA follows the same guidelines as FHA. It is not submitted through HUD and there is not a case number. USDA Appraisal Requirements Who can complete FHA appraisals? Only certified appraisers who have been approved by HUD. Does the appraiser have to have access to the attic and crawl space? Yes, FHA requires the appraiser to make a full inspection of the entire attic and crawl space. If full access is not available or access is restricted, the appraiser is to cancel the appointment and return when full access can be granted. How long is an FHA appraisal good for? There is no specified time period Can the borrower request a reconsideration of value if the appraised value is lower than the purchase price? Yes, each lender has a specific rebuttal process Conventional: Who can complete Conventional appraisals? Fannie Mae and Freddie Mac allow registered appraisers (sometimes referred to as trainees) to complete appraisals if supervised by a certified appraiser. They allow licensed appraisers to complete "non-complex" appraisals. Complex properties are those worth more than $1,000,000 and multi-family homes. Certified appraisers can appraise any residential property which they are experienced and competent to appraise. This not only applies to property type but property location. Most lenders have approved appraiser lists. Does the appraiser have to have access to the attic and crawl space? There is not a specific requirement but the appraiser should inspect all areas of the house where there is reasonable access. Page 7 How long is a Conventional appraisal good for? While you may never see an expiration date on a property appraisal, many lenders will not accept an appraisal that is more than 120 days old. Some allow up to 180 days, which matches the typical acceptance age of comparable properties (those sold in past 6 months). Most mortgages are drawn up under Fannie Mae and Freddie Mac underwriting guidelines. The validity period for conventional loan appraisal reports is four months, or 120 days, for existing homes. Proposed constructions or new home appraisals are good for up to 12 months. Can the borrower request a reconsideration of value if the appraised value is lower than the purchase price? Yes, each lender has a specific rebuttal process For more information please visit our website http://www.dsmurphy.com Page 2 Page 8