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Hybrid and Desktop Appraisals

Louisiana REALTORS • Jun 03, 2022

The Intersection of Louisiana Real Estate Law and the Technological Evolution of Appraisals

Written By: Kristin Oglesby 

In the ever-evolving technological era two types of appraisals have emerged: hybrid appraisals and desktop appraisals—appraisal methods that intend to utilize technology to make the appraisal process faster and more efficient.


A hybrid appraisal involves two people in the appraisal process, and results in a type of report in which a third party (usually another appraiser or a real estate agent) completes the in-person review of both the interior and exterior of the subject property, after which the third party reports his or her findings to the appraiser. The appraiser then gathers data necessary to complete the appraisal and render an opinion on the property’s value.


Though a desktop appraisal utilizes technology much like a hybrid appraisal, it is typically done exclusively in a remote fashion such that no physical inspection of the property occurs. To render a valuation using the desktop method, appraisers use all available data on a property to formulate their opinion of value.


Because both methods involve the collection of data to render the appraisal, companies who do this type of work are looking to real estate licensees to aid in data collection.


This leads to a host of questions for Louisiana real estate licensees, including whether a licensee can do this for a fee without running afoul of real estate license law or appraisal licensing law, whether the licensee can collect data on a home that the licensee is actively involved in buying or selling, what is considered data collection versus actual rendering of an appraisal, how consumers are protected, and what legal exposure data collectors have. This article addresses these specific issues in turn.


  • 1. Can a real estate licensee collect data for a hybrid or desktop appraisal?

    Short Answer:  It appears as if no violation of Louisiana law occurs if a real estate licensee — who lacks a real estate appraisal license — engages in data collection for hybrid or desktop appraisals.  However, should the real estate licensee participate in any rendering of an analysis, conclusion or opinion related to the value of the property, the licensee could be said to participating in the appraisal process which requires one to be licensed by the Louisiana Real Estate Appraisal law.


    The Louisiana Real Estate Appraisers Law provides that no person shall perform an appraisal without the appropriate state license.  The statute further provides, however, that “[n]othing in this Chapter shall preclude a licensed real estate broker or salesperson from performing a broker price opinion/comparative market analysis in the ordinary course of the practice of real estate, provided that the broker or salesperson does not represent himself as being a state licensed real estate appraiser. ” 


    It is no surprise that the statutory regime omits any reference to hybrid or desktop appraisals, as these are relatively new methods of appraising. However, the statute is very clear on what is and is not permitted by non-licensees: appraisals must be done by a licensed real estate appraiser, and all other activities are impliedly permissible. 


    An “appraisal” is statutorily defined as “means an analysis, opinion, or conclusion relating to the nature, quality, value, or utility of specified interests in, or aspects, including energy efficiency, of, identified real estate, for or in expectation of compensation. ” 


    Mere data collection certainly falls short of this definition because the hybrid or desktop data collector, who may in fact be an appraiser, will turn over the data collected to the actual appraiser for the property, who then completes the valuation on the property, and as such it is the author’s opinion that such data collection may occur without violating the Louisiana Real Estate Appraisal Law. If the data collector also participates in any rendering of an analysis, conclusion or opinion related to the value of the property, the data collector has participated in the appraisal process and is subject to Louisiana Real Estate Appraisal Law. 


    Additionally, there is no provision in the Louisiana Real Estate Law that would prohibit such data collection. Louisiana Real Estate Law regulates “real estate activity,” which is statutorily defined to include any portion of the buy/sell process.  The statute’s definition of 

    “real estate activity” focuses on actions taken in an effort to procure a sale of property, and therefore appears to exempt from the definition any data collection that is part of the appraisal process unrelated to active involvement in a buy/sell transaction. To the extent a real estate licensee — who lacks a real estate appraisal license — engages in data collection for hybrid or desktop appraisals, Louisiana law gives rise to no violation. 



  • 2. Does a conflict of interest arise if a real estate licensee collects data for a desktop or hybrid appraisal? What if the real estate licensee represents the buyer or seller collects AND collects data for the hybrid or desktop appraisal for the property that is the subject of the transaction?

    Short Answer:  Maybe or maybe not.  If a REALTOR® represents the buyer or seller in a transaction and collects data for the appraisal, he or she should disclose to all parties that he or she is collecting data that will be used in the appraisal.


    The potential for a conflict of interest arises when a real estate licensee or REALTOR® engages in data collection on a property that the individual is also assisting in the buy/sell process. A conflict of interest arises when the circumstances are such that the exercise of the requisite professional judgment is undermined.

     

    Neither the Louisiana Real Estate Appraisers Law nor the Louisiana Real Estate License Law provide mandates or guidance on potential conflicts of interest, and therefore seem to permit the licensee to collect data on a property that the licensee will then be involved as a participant in the buy/sell transaction. 


    Licensees who are also members of Louisiana REALTORS® must, however, adhere to a higher standard pursuant to the National Association of REALTORS® Code of Ethics (“Ethics Code”). REALTORS® have an obligation to each client, and each client expects that his or her interests will be served as first priority. 


    Just as acting a dual agent may present a conflict of interest, participating in the appraisal process as a data collector may run afoul of obligations owed to a buyer or seller of the same property. Any data collector would be strongly advised to disclose to his or her buy/sell client that the agent also participated in the data collection process. 


    Ethics Code Standard of Practice 11-1 provides that “[w]hen REALTORS® prepare opinions of real property value or price they must…[disclose] whether the REALTOR® has any conflicts of interest.” As discussed above, the process of data collection is separate from rendering an appraisal on the property, but extreme caution is urged, and the REALTOR® who operates in both roles should err on the side of disclosure. 


  • 3. As a licensed REALTOR®, can I be liable and required to pay damages in a lawsuit if I collect data for an appraisal?

    Short Answer:  There simply is not enough information or instances available for examination to determine the scope of what liability may exist for a real estate licensee who collects data for an appraisal.  Therefore, to minimize exposure in any potential lawsuit, it is encouraged that a real estate licensee who participates in the data collection for an appraisal make sure the arrangement with the appraiser or appraisal management company includes an indemnity clause or some form of protection for the licensee collecting and providing the data.


    Although there do not appear to have been any instances of liability against a data collector being held liable for either breach of information or use of inaccurate information, both do create potential for exposure. 


    There is less risk for liability for collecting inaccurate data in a hybrid appraisal because an individual steps foot on and inside of the property. But, in a desktop appraisal, the property never feels the physical touch of any type of inspection related to the appraisal process, and room for fraud and error grows and therefore so does the risk for liability for any real estate licensee who collects data for this type of appraisal. 


    For example, desktop appraisals will often involve photographic data collection of the interior of the property. There is always risk that the photographs provided are not accurate and therefore lead to an inaccurate appraisal. In this instance, a real estate licensee who provides the inaccurate data may face liability to the appraiser if the appraisal ends up deficient and a loss is incurred. This would be governed by whatever agreement or contract is in place by and between the real estate licensee data collector and the appraiser or appraisal management company. For example, the relationship between the appraiser and the data collector may be that of an “independent contractor.” An independent contractor is a self-employed person or entity contracted to perform work for—or provide services to—another entity as a nonemployee. These relationships are typically created pursuant to a contract or agreement where the data collector—as the independent contractor—agrees to perform a service (data collection) for the appraiser. The terms of the specific contract may state that the data collector is liable to the appraiser for any incomplete or inaccurate work. 


    Likewise, there is the possibility that data is leaked and consumer information is exposed. Fortunately, there the law does not provide that a licensee is automatically liable if this occurs. But, if sensitive data is leaked and an a loss, such as theft or disruption occurs, the person whose data was leaked may sue any party involved in the appraisal.  Depending on the circumstances of the case, this could result in a court requiring any party involved in the appraisal, including the real estate licensee who collected the data, to pay monetary damages to the person who suffered a loss because of the leak.


    Therefore, to minimize exposure in any potential lawsuit whether it be for providing inaccurate data or a leak, it is encouraged that a real estate licensee who participates in data collection for an appraisal make sure the arrangement with the appraiser or appraisal management company include an indemnity clause or some form of protection for the licensee collecting and providing the data for the appraisal.


By Louisiana REALTORS® 29 Apr, 2024
Bill Tracking Report as of 4/26/2024
By Louisiana REALTORS® 26 Apr, 2024
From REALTOR® Magazine by Stacey Moncrieff Don’t talk about business as usual to this group: NAR’s culture transformation commissioners and new leadership are helping to usher in big changes for the nation’s largest real estate organization. When the National Association of REALTORS® named its Culture Transformation Commission—a group of more than 70 members; state and local association staff; and NAR staff selected through a collaborative process—the aim was to identify and break down impediments to being an inclusive, welcoming and respectful organization for all. NAR’s Leadership Team announced the Commission in October 2023 as an essential step in putting the organization on a new path forward. NAR continued down that path the following month with the appointment of Interim CEO Nykia Wright and again in December with the appointment of Chief Marketing & Communications Officer Suzanne Bouhia. In February, Wright engaged Karyn Detje to lead NAR’s human resources transformation. Along with the staff changes have come shifts in NAR leadership. Kevin Sears, a broker from Springfield, Mass., stepped into the presidency in January, making a commitment to help return the organization to stable ground, get back to the business of helping members succeed, and eliminate distractions from the job. Shortly after taking office, Sears announced that two former NAR presidents, Vince Malta and Sharon Millett, would fill vacancies in the 2024 NAR Leadership Team. Malta is a broker from San Francisco and was NAR’s 2020 president. Millett, a broker from Auburn, Maine, was NAR’s 1999 president. “The real story [of NAR] is progress,” Wright said in a letter to members in February, calling out the CTC’s role. The group’s recommendations, she said, will shape the association’s progress into the future. “We’ve reached out directly, and the overwhelming majority of our members have told us they trust in what we are doing to transform the organization,” Wright says. “We are not taking their trust lightly but are working every day to earn their continued confidence.” Under the new staff and member leadership, NAR is communicating more deliberately, sharpening its focus on the core mission of serving its members, and moving toward becoming a nimble organization. Four Areas of Focus Part of that comes with the delivery of the CTC’s recommendations, some of which are expected in the fall, according to Ryan Davis, NAR’s vice president of diversity, equity and inclusion. “This is a ripe opportunity for change,” says Davis, who serves as co-lead on the project. “While some of the work will likely spill over into 2025, we expect to see formal recommendations in November [at NAR NXT(link is external), Nov. 8–10, Boston].” Under the leadership of its tri-chairs, the CTC has completed two of four phases of its work—information and data gathering and aligning on priorities. In the information-gathering phase, commissioners heard from thousands of association members and staff via interviews, focus groups, open forums and informal conversations. In the second phase, they aligned the findings into four common themes and identified opportunities for culture transformation within each theme. Theme 1: Mission and Values Opportunities: Clearly define our real estate–driven mission; appreciate and understand the work that NAR staffers, members, and state and local association staff perform; set expectations around how members and staff treat one another; and embed change throughout NAR. Theme 2: Leadership Opportunities: Set clear expectations and standards for those who lead across NAR—members, state and local association staff, and NAR staff. Review the entire leadership process—from the selection, training and evaluation of senior staff to the election, appointment and training and expectations of member leaders. Theme 3: Governance Opportunities: Rethink the association’s governance structure, its focus, and how it operates to enable members and staff to do their best work. Theme 4: Compliance Opportunities: Provide a safe space for all and promote accountability. To guide the next two phases of the work—developing implementation plans and final review, adoption and implementation—the group recently engaged McKinley Advisors, a firm with deep roots and expertise in association management and transformation. Working in parallel with the CTC, a Policies and Procedures Task Force is creating recommendations to improve NAR’s policies, procedures, trainings and systems to prevent inappropriate member behavior, encourage reporting of alleged misconduct, and promote an environment of transparency and accountability. “Culture change takes time,” says Detje, who has led staff transformations within large organizations and is co-leading the project with Davis, “but I see an incredible commitment among the members and staff to make it happen. One thing I’ve found really remarkable is that, despite having been through an incredibly challenging 18 months, people are passionate about this organization and the work they do.” The commission continues to welcome feedback from members and association staff. Want to share your ideas on transforming the culture of NAR and the REALTOR® organization? Email culture@nar.realtor .
By Louisiana REALTORS® 23 Apr, 2024
Last week, NAR President Kevin Sears checked in from the NAR Broker Summit, where he learned new tools to strengthen his business alongside several hundred fellow brokers. Next stop, Washington, DC for the REALTORS® Legislative Meetings, where we’ll show Congress our grassroots strength in action. We encourage you to watch Kevin’s video here to learn more about what NAR is advocating for this year at RLM. As always, the overarching theme is increasing access to homeownership. This video is also in the video section of our website. Stay tuned for Kevin’s next update.
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