PROPOSED RULEMAKING
STATE REAL ESTATE COMMISSION
[ 49 PA. CODE CH. 35]
Broker Price Opinions
[54 Pa.B. 2806]
[Saturday, May 18, 2024]The State Real Estate Commission (Commission) proposes to amend Chapter 35 (relating to State Real Estate Commission) by deleting the current temporary regulations in Subchapter I (relating to broker price opinions—temporary regulations) and adding permanent regulations in Subchapter J (relating to broker price opinions). The proposed permanent regulations are set forth in Annex A.
Effective Date
This proposed rulemaking will be effective upon publication of the final-form rulemaking in the Pennsylvania Bulletin.
Statutory Authority
The act of June 29, 2018 (P.L. 500, No. 75) (Act 75 of 2018) amended the Real Estate Licensing and Registration Act (act) (63 P.S. §§ 455.101—455.902) and authorizes the Commission to promulgate regulations for the implementation of section 608.6 of the act (63 P.S. § 455.608f) regarding broker price opinions. Section 404 of the act (63 P.S. § 455.404) also authorizes the Commission to promulgate rules or regulations to administer and effectuate the purposes of the act.
Background and Need for the Amendment
Act 75 of 2018 made two major changes to the act. It increased the minimum amount of education necessary for licensure as a salesperson and it allowed for broker price opinions to be performed by licensed brokers, associate brokers and salespersons. Broker price opinions are considered another form of valuation for a property. Act 75 of 2018 amended section 201 of the act (63 P.S. § 455.201) to define a broker price opinion as ''[a]n estimate prepared by a broker, associate broker or salesperson that details the probable selling price of a particular parcel of real property and provides a varying level of detail about the property's condition, market and neighborhood, and information on comparable sales, but does not include an automated valuation model. . . .'' Until the amendments were made to the act, a broker price opinion was considered an appraisal under Pennsylvania law which could be performed only by a certified real estate appraiser. Broker price opinions are most frequently used by banks to determine an approximate value of the bank's real estate inventory. Prior to Act 75 of 2018, banks would have to either obtain a formal appraisal or a comparative market analysis. Banks find it cost prohibitive to pay for a full appraisal when they only want a quick opinion as to the value. The purpose of a comparative market analysis is for a real estate licensee to give an opinion of value for the purpose of listing a property for sale or aiding a buyer to determine the offering price. A comparative market analysis would not help a bank for its needs concerning valuation of its inventory. A broker price opinion creates a viable alternative for those consumers that would just like an estimate of value for their property without having to pay for an expensive appraisal or to have the property listed for sale. The trend across the country is to allow broker price opinions. The amendments to the act keep this Commonwealth current with practices in other states.
Act 75 of 2018 also authorized the Commission to promulgate temporary regulations to facilitate the prompt implementation of the practice of broker price opinions by brokers, associate brokers and salespersons. This proposed rulemaking will make the temporary regulations permanent.
Description of the Proposed Amendments
This proposed rulemaking replaces Subchapter I with Subchapter J which proposes limitations and requirements for broker price opinions, including required disclosures, signature requirements, permissible uses and required experience and education for brokers, associate brokers and salespersons.
Definitions
The Commission proposes to amend § 35.201 (relating to definitions) to add the following terms, which are defined in the act: ''broker price opinion'' and ''short sale.'' The definition of ''comparative market analysis'' is proposed to be amended to comport with the act. In addition, ''automated valuation model'' is defined in accordance with section 1125(d) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. § 3354(d)). The definitions for ''broker price opinion,'' ''short sale'' and ''automated valuation model'' are identical to the definitions provided in § 35.401 of the temporary regulations. The amended definition of ''comparative market analysis'' was not included in the temporary regulations. For the sake of clarity, all of the foregoing definitions have been consolidated in § 35.201 rather than defining terms separately in Subchapter J. Section 35.401 of the temporary regulations is proposed to be reserved.
Broker price opinion
Section 35.501 (relating to broker price opinion) lists the requirements of a broker price opinion. Under subsection (a), a broker price opinion is required to have a specific statement displayed indicating that the broker price opinion was not prepared in accordance with the Uniform Standards of Professional Appraisal Practice and that it is not to be construed as an appraisal. Subsection (b) requires a signature by the person who prepares the broker price opinion and lists the information that must be on every broker price opinion, as required by section 608.6(c) of the act. Based on the suggestion of one of the comments received from stakeholders during the drafting of the temporary regulations, the Commission added ''cost data'' to subsection (b)(4) as another way of basing a conclusion as to price. Subsection (b)(9) requires the license numbers of the preparer and any broker or associate broker reviewing the broker price opinion because the Commission believes it is important to identify all licensees involved with a broker price opinion.
Consistent with the act, subsection (c) requires that any compensation for preparing a broker price opinion be paid directly to the employing broker of the licensee who prepared the broker price opinion. This mirrors section 608.6(d) of the act but adds the word ''employing'' in front of broker. The Commission believes that adding the word ''employing'' in front of broker clarifies that only the broker can be compensated by a consumer and is consistent with section 604(a)(12) of the act (63 P.S. § 455.604(a)(12)), which prohibits an associate broker or salesperson from accepting a commission or other valuable consideration from anyone other than the employing broker. Subsections (d) and (e) set forth the minimum requirements for a salesperson to prepare a broker price opinion, which includes experience, education and required review and signature by the employing broker or designated associate broker as set forth in section 608.6(j) of the act.
Section 35.501 is nearly identical to § 35.402 of the temporary regulations. The lone differences are proposed amended subsection (c) begins ''[a]ny fee . . .'' rather than ''[a] fee . . .''; and the cross-reference in subsection (d) to ''§ 35.404'' is proposed to be amended to ''35.503.''
Use of broker price opinions
Section 35.502 (relating to use of broker price opinion) is identical to § 35.403 of the temporary regulations. Subsection (a) lists the permissible uses of a broker price opinion as set forth in section 608.6(e) of the act. Subsection (b) lists the prohibited uses of a broker price opinion as set forth in section 608.6(f) of the act.
Broker price opinion education
Section 35.503 (relating to broker price opinion education) sets forth the educational requirements a licensee must complete prior to preparing a broker price opinion. Subsection (a) requires brokers, associate brokers and salespersons to complete a Commission-approved initial education course in the preparation of broker price opinions. Subsection (b) requires a broker or associate broker to complete the Commission-approved initial education course in the preparation of broker price opinions prior to signing a broker price opinion prepared by a salesperson. Subsection (c) requires brokers, associate brokers and salespersons to complete at least 3 hours of Commission-approved continuing education in broker price opinion topics prior to preparing a broker price opinion. Subsection (d) requires brokers, associate brokers and salespersons to retain the transcript or certificate of instruction and provide a copy to the Commission upon request. Under subsection (e), the Commission pre-approves four broker prelicensure courses in the topics of valuation of residential property, valuation of income-producing property, basic appraisal principles and basic appraisal procedures for the initial educational requirement.
Section 35.503 is substantially similar to § 35.404 of the temporary regulations. Amended subsection (d) in this proposed rulemaking deletes the language ''who has completed a Commission-approved initial education course, a broker prelicensure course listed in subsection (e) or continuing education referenced in subsection (c)'' from the temporary regulation and adds ''for all required broker price opinion courses.'' The phrase ''Commission has approved the'' is proposed to be added to subsection (e).
Fiscal Impact and Paperwork Requirements
This proposed rulemaking should have no adverse fiscal impact on the Commonwealth or its political subdivisions. The Commission will not incur any additional costs due to the review and approval of the educational courses because those costs are paid for through application fees paid by the education providers. Those brokers, associate brokers and salespersons who want to perform broker price opinions will incur minimal costs associated with obtaining the necessary initial education if they have not already done so. On average, education providers are charging approximately $10 per credit hour for broker price opinion education. These costs are minimal and not prohibitive to obtain the education to perform a broker price opinion. This proposed rulemaking does not increase the initial education or continuing education hour requirements. Costs to the licensee are included in what is already required for licensure and retention of the license. Also, licensees who complete the initial education requirement will be required to retain the transcript or certificate of instruction for as long as the licensees are performing broker price opinions.
Sunset Date
The Commission continuously monitors the effectiveness of its regulations. Therefore, no sunset date has been assigned.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P.S. § 745.5(a)), on May 7, 2024, the Commission submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to the Independent Regulatory Review Commission (IRRC) and to the chairperson of the Consumer Protection and Professional Licensure Committee of the Senate and the chairperson of the Professional Licensure Committee of the House of Representatives. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey comments, recommendations, or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections shall specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Commission, the General Assembly and the Governor.
Public Comment
Interested persons are invited to submit written comments, suggestions or objections regarding this proposed rulemaking to Marc Farrell, Counsel, State Real Estate Commission, P.O. Box 69523, Harrisburg, PA 17106-9523, RA-STRegulatoryCounsel@pa.gov, within 30 days following publication of this proposed rulemaking in the Pennsylvania Bulletin. Reference ''No. 16A-5626 (Broker Price Opinions)'' when submitting comments.
GAETANO PICCIRILLI,
ChairpersonFiscal Note: 16A-5626. No fiscal impact; recommends adoption.
Annex A
TITLE 49. PROFESSIONAL AND VOCATIONAL STANDARDS
PART I. DEPARTMENT OF STATE
Subpart A. PROFESSIONAL AND OCCUPATIONAL AFFAIRS
CHAPTER 35. STATE REAL ESTATE COMMISSION
Subchapter B. GENERAL PROVISIONS § 35.201. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
* * * * * Associate broker—An individual broker who is employed by another broker.
Automated valuation model—A computerized model used by mortgage originators and secondary market issuers to determine the collateral worth of a mortgage secured by a consumer's principal dwelling.
Branch office—Any fixed location in this Commonwealth, other than the main office, maintained by a broker or cemetery broker, devoted to the transaction of real estate business.
* * * * * Broker of record—The individual broker responsible for the real estate transactions of a partnership, association or corporation that holds a broker's license.
Broker—An individual or entity holding either a standard or reciprocal license, that, for another and for a fee, commission or other valuable consideration, does one or more of the following:
(i) Negotiates with or aids a person in locating or obtaining for purchase, lease or acquisition of interest in real estate.
(ii) Negotiates the listing, sale, purchase, exchange, lease, time share and similarly designated interests, financing or option for real estate.
(iii) Manages real estate.
(iv) Represents himself or itself as a real estate consultant, counsellor or house finder.
(v) Undertakes to promote the sale, exchange, purchase or rental of real estate. This subparagraph does not apply to an individual or entity whose main business is that of advertising, promotion or public relations.
(vi) Undertakes to perform a comparative market analysis.
(vii) Attempts to perform one of the actions listed in subparagraphs (i)—(vi).
Builder-owner salesperson—An individual holding either a standard or reciprocal license, who is a full-time employee of a builder-owner of single-family and multi-family dwellings located in this Commonwealth and who is authorized, for and on behalf of, the builder-owner, to do one or more of the following:
(i) List for sale, sell or offer for sale real estate of the builder-owner.
(ii) Negotiate the sale or exchange of real estate of the builder-owner.
(iii) Lease or rent, or offer to lease, rent or place for rent, real estate of the builder-owner.
(iv) Collect or offer, or attempt to collect, rent for real estate of the builder-owner.
* * * * * Comparative market analysis—A written analysis, opinion or conclusion by a [contracted buyer's agent, transactional licensee or an actual or potential seller's agent] broker, associate broker or salesperson relating to the probable sale or rental price of a specified [piece of real estate] parcel of real property in an identified real estate market at a specified time, [offered either for the purpose of determining the asking/offering price for the property by a specific actual or potential consumer or for the purpose of securing a listing agreement with a seller] which is prepared for any of the following:
(i) An existing or potential seller, buyer, lessor or lessee of the parcel of real property.
(ii) A person making decisions or performing due diligence related to the potential listing, offering, sale, option, lease or acquisition price of the parcel of real property.
Consumer—An individual or entity who is the recipient of any real estate service.
* * * * * Seller agent—A licensee who enters into an agency relationship with a seller/landlord.
Short sale—A sale of real property in which the seller's proceeds are less than the amount required to pay off all liens secured by the property.
Standard license—A license, other than a reciprocal license, issued to an individual or entity who has fulfilled the education/experience and examination requirements of the act.
* * * * *
Subchapter I. [BROKER PRICE OPINIONS—TEMPORARY REGULATIONS] [Reserved.] §§ 35.401—35.404. [Reserved].
(Editor's Note: The following subchapter is proposed to be added and is printed in regular type to enhance readability.)
Subchapter J. BROKER PRICE OPINIONS Sec.
35.501. Broker price opinion. 35.502. Use of broker price opinion. 35.503. Broker price opinion education. § 35.501. Broker price opinion.
(a) A broker price opinion must contain the following statement displayed conspicuously and without change:
This analysis has not been prepared in accordance with the Uniform Standards of Professional Appraisal Practice which require valuers to act as unbiased, disinterested third parties with impartiality, objectivity and independence and without accommodation of personal interest. It is not to be construed as an appraisal and may not be used as such for any purpose.(b) A broker price opinion must be signed manually or electronically by the person who prepared it and must contain all of the following information:
(1) An identification of the intended users and intended uses of the broker price opinion, if known.
(2) A brief description of the subject property.
(3) A brief description of the property interest to be priced.
(4) The basis for the conclusion as to the price, including applicable market data, cost data or capitalization computation.
(5) Each assumption or limiting condition.
(6) Each existing or contemplated interest of the licensee who prepared the broker price opinion.
(7) The effective date of the broker price opinion.
(8) The date that the document is signed.
(9) The real estate license number of the preparer and, if applicable, the reviewing broker or associate broker.
(c) A fee or valuable consideration for a broker price opinion, if any, shall be paid directly to the employing broker.
(d) A salesperson may not prepare a broker price opinion unless the salesperson has held an active license for the 3 years immediately preceding the effective date of the broker price opinion and has satisfied the educational requirements in § 35.503 (relating to broker price opinion education).
(e) A broker price opinion prepared by a salesperson must be signed by the salesperson and reviewed and signed by the employing broker or a designated associate broker.
§ 35.502. Use of broker price opinion.
(a) A broker price opinion may be prepared by a broker, associate broker or salesperson only for use in conjunction with any of the following:
(1) A property owned by a lender after an unsuccessful sale at a foreclosure auction.
(2) A modification of a first or junior mortgage or equity line of credit.
(3) A short sale of a property.
(4) An evaluation or monitoring of a portfolio of properties.
(b) A broker price opinion may not be prepared by a broker, associate broker or salesperson for use:
(1) As the basis to determine the value of a parcel of real property for a mortgage loan origination, including a first or junior mortgage, refinancing or equity line of credit.
(2) In connection with any of the following:
(i) An eminent domain proceeding.
(ii) A Federal, State or local tax appeal.
(iii) A bankruptcy or insolvency proceeding.
(iv) An action or proceeding involving divorce or equitable distribution of property.
(v) Any other action or proceeding before a court of record.
(vi) The distribution of a decedent's estate.
§ 35.503. Broker price opinion education.
(a) A broker, associate broker or salesperson may not prepare a broker price opinion unless the broker, associate broker or salesperson has completed a Commission-approved initial education course in the preparation of broker price opinions.
(b) A broker or associate broker may not sign a broker price opinion prepared by a salesperson unless the broker or associate broker has completed a Commission-approved initial education course in the preparation of broker price opinions.
(c) A broker, associate broker or salesperson may not prepare a broker price opinion unless the broker, associate broker or salesperson has completed at least 3 hours of Commission-approved continuing education in broker price opinion topics during the current or immediately preceding 2-year license period.
(d) A broker, associate broker or salesperson shall retain the transcript or certificate of instruction for all required broker price opinion courses and shall provide a copy to the Commission upon request.
(e) The Commission has approved the following broker prelicensure courses to satisfy the initial education requirement in subsections (a) and (b):
(1) Valuation of residential property.
(2) Valuation of income-producing property.
(3) Basic appraisal principles.
(4) Basic appraisal procedures.
[Pa.B. Doc. No. 24-724. Filed for public inspection May 17, 2024, 9:00 a.m.]
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