Senate Bill 829, recently signed into law, imposes new regulations on Appraisal Management Companies (AMCs) in North Carolina and provides new safeguards to ensure accurate appraisals.  The bill has a long list of requirements for AMCs including new fees and internal oversight mechanisms.  Does the bill go too far or does it balance the need for sensible regulation with the need to encourage small business?  You decide.

The bill requires registration with the North Carolina Appraisal Board to the tune of a fee of up to $3500.  It also requires designation of a Compliance Officer who will ensure that the AMC is meeting the requirements set forth in the new law.

The new law prohibits any act that impairs or attempts to impair the independence, objectivity or impartiality of an appraiser.  For example, one cannot threaten to withhold payment or future business from an appraiser if he doesn’t return a favorable appraisal.   The bill, among other things, also

  • requires owners of 10% or more of an AMC to be of ‘good moral character, as determined by the Board’
  • prohibits requiring a borrower or homeowner to pay the appraisal fee
  • mandates that AMCs pay their independent appraisers within 30 days
  • prohibits using an appraisal for any other transaction other than the transaction for which it was contracted

This bill was supported by the North Carolina Association of Realtors.  It passed the Senate unanimously and the House with only one dissenting vote.

I’m certain that reform of the appraisal industry is needed but the free marketer in me has questions about the requirements of this particular bill.  Some aspects of  are subjective and overreaching.

  • How will the Board define ‘good moral character’?
  • The requirement that an appraisal not be used for any transaction except the one contracted will require new appraisals for refinances even if the re-fi is done within a short period after the initial appraisal.
  • Will it create a barrier of entry for new small businesses into this market?
  • Will it drive small companies out of business due to the high fees and the requirement of a Compliance Officer?
  • How much will it drive up the cost of an appraisal for homeowners?
  • Does this bill balance the need to encourage small business growth while sensibly regulating the industry?
  • Is it comparable to regulations in other states or is too extreme?

What do the folks in our local real estate industry think of this bill?