Can brokers advertise a “Free Home Valuation”?
QUESTION: I am a broker-in-charge. Recently, I met with some appraisers who expressed concerns about a service that is being offered on the websites of several brokers in my firm. These websites include a link that says “What is your home worth?” or “Free Home Valuation”. If a user clicks on the link, the user is directed to a separate website where the user is invited to fill in an address in a box under the words “How much is your home worth?” Upon doing so, the user instantly receives an estimate of the value of the property. No fee is charged for this service. My brokers are not licensed appraisers. Is it legal for them to advertise and provide this type of “valuation” service?
ANSWER: We believe that the both the advertising and the service you describe are legal. However, we have a suggestion about how any future advertising should be handled.
The Real Estate Commission has acknowledged that while most appraisals of real property must be performed by licensed or certified appraisers, the North Carolina Appraisers Act has an exception which allows real estate licensees to perform a “comparative market analysis (CMA)” as long as the licensee does not represent himself or herself as a licensed or certified appraiser. The Act defined a CMA as “the analysis of similar recently sold properties in order to derive an indication of the probable sales price of a particular property by a licensed real estate broker.” The term “broker price opinion (BPO)” is considered synonymous with the term CMA.
In 2012, the North Carolina General Assembly enacted amendments to the Real Estate License Law and the Appraisers Act. One of those amendments reads as follows: “A BPO or CMA that estimates the value or worth of a parcel of real estate rather than sales price shall be deemed to be an appraisal and may not be prepared by a licensed broker.” While this language would seem to bar the service you have described, another section of the License Law states that the requirements relating to CMAs and BPOs do not apply to those CMAs and BPOs performed for no fee. Furthermore, the License Law’s definition of a BPO/CMA expressly excludes an “automated valuation model (AVM)”.
In February 2015, the Real Estate Commission published an article defining an AVM as a computer software program that analyzes data from various sources and uses automated processes to produce a value or range of values for a particular property. The estimate of value that you have described almost certainly falls within the Commission’s definition of an AVM. As such, brokers advertising that estimate do not need to follow the guidelines governing the preparation and issuance of CMAs and BPOs.
Our advice to brokers advertising AVMs is to avoid using terms that suggest what is being provided is a home’s “value” and to instead use words that suggest that what is being provided is the probable selling price. While the concepts of value and probable selling price are similar, appraisers and the Commission are more likely to have a problem with the former. In our view, they have no grounds to complain about the latter.
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