A new law passed by the Connecticut General Assembly which took effect on July 1st seeks to end the undue influencing of real estate appraisals. House Bill 5577 (An Act Concerning Responsible Lending and Economic Security) was passed during the February 2008 legislative session and means that mortgage brokers, lenders and real estate agents can no longer attempt to influence an appraiser's property valuation, and also makes it illegal for an appraiser to allow such influence to happen. The bill in its entirety can be found here.
According to the state Department of Consumer Protection, which oversees realtors and appraisers, and the state Department of Banking, any such attempt at influencing an aprraiser's valuation can be punished by a fine up to $1,000, suspension of the offending party's license, or both. Advocates of the new law say it is long overdue because they feel the practice of influencing appraisers is greatly responsible for artificially high housing prices and also the market correction we are now in. Without this type of deterrent and enforcement, it became commonplace for lenders to ask appraisers to value a property at certain amounts to facilitate home financing and sales. If an appraiser did not comply, it was often their future business that suffered.
Jerry Farrell, commissioner of the state Department of Consumer Protection (and Wallingford native!) says that out-of-state lenders are particularly troublesome and would be better off if they were more familiar with the state laws. Rob Clermont, owner of ValueQuest Appraisal, would like to see more laws requiring out-of-state brokers to be licensed in Connecticut before doing business here. Amen to that.
From the Realtor point of view, the law will likely put an end to the practice of providing an appraiser with comparable properties ("comps") to substantiate how the agent arrived at the listing price.
While certainly a step in the right direction, only time will tell if the new law will be effective or if, as is often the case, ways will be found to circumvent it. Stay tuned.
