The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Furious realtors have been urged to “boycott” plans by two Canadian-owned banks to impose an appraisal management intermediary upon them, one telling Tribune Business: “I might as well pack my bags and head for the retirement home.”

The Bahamas Real Estate Association (BREA) is holding an emergency Board meeting today to determine how the industry should respond to demands by Royal Bank of Canada (RBC) and Scotiabank for all appraisers to sign up to a new appraisal system to be run by another Canadian company, NAS.

The situation is thus set to come to a head, with realtors complaining that RBC and Scotiabank are both employing ‘strong arm’ tactics to force appraisers to sign up with NAS.

This newspaper has been informed that Royal Bank has orally warned BREA members that unless appraisers sign the NAS contract by tomorrow (Tuesday), they will no longer receive any work from the bank.

Robin Brownrigg, Bahamas Realty’s president and a leading appraiser, told Tribune Business that BREA - and the industry as a whole - was carefully assessing its response to the banks, and NAS’s, demands.

Describing them as a ‘game changer’ for the way Bahamian appraisers did business, he said: “At this stage of the game, our professions are in jeopardy and our livelihoods, to a great degree, are in jeopardy.

“If I lose the appraisal base for Bahamas Realty, we may as well close up and call it a day. We can’t take any more in this economic climate. It’s got us hugely, hugely concerned.”

Plugging the bank’s demands into the overall business climate, Mr Brownrigg added: “This and VAT, I’m 62, and thinking as a businessman: ‘I can go home now’.

“This is going to start to make me think: ‘Is it worth running a business in this country in a recessionary environment?’”

Mr Brownrigg was backed by fellow top appraiser, Wilshire Bethell, who described the banks’ plans to impose NAS, and its appraisal management system, on the Bahamian real estate industry as 
“ridiculous”.

Mr Bethell said the system, as presently designed, would result in Bahamian appraisers losing ownership of their work to NAS.

And he added that Royal Bank and Scotiabank, together with NAS, were seeking to impose a flawed, large developed country model on a Bahamian market that it was patently unsuitable for.

“What I’m hoping for is that the appraisers in town can collectively get together, boycott it, protest and refuse to be part of it,” Mr Bethell told Tribune Business.

“Who’d have thought that in the Bahamas in 2014, the banks can get away with something like that.”

Tribune Business revealed the concerns realtors harboured over the NAS system in late November last year, especially the terms of the contract they were being requested to sign.

The contracts were said to be heavily slanted in NAS’s favour, as these completely “indemnify” NAS Valuations Inc against claims and lawsuits initiated by both realtors and appraisal clients.

Real estate sources said other objectionable clauses in the contract included those that required the Bahamian realtor/appraiser to pay all its legal costs should homeowners (any third parties) file a lawsuit against it.

One source said both Royal Bank and Scotiabank were bringing “every kind of pressure to bear” on the real estate industry, and added: “I have never seen BREA members more united on a matter than this.”

Appraisals, which assess the value of Bahamian real estate, have formed a vital income stream for many in the industry, Mr Brownrigg suggesting it had been key in helping Bahamas Realty to retain all its staff at the recession’s height.

Therefore, with Royal Bank and Scotiabank both among the three largest commercial bank lenders in the Bahamas, a loss of their appraisal business would represent a much income reduction for many in the field.

Banks use appraisals to help perfect security for mortgage loans, ensuring they both have enough collateral and that the subject property is not over-valued - a situation that will make it more difficult to recover their loan in event of default.

Mr Brownrigg acknowledged that many Bahamas-based banks “had their fingers burned” by inexperienced appraisers in the recent past, which had exacerbated their problems in selling distressed, previously over-valued properties, in the current market.

He suggested, however, that Royal Bank and Scotiabank instead follow the model established by its fellow Canadian bank, CIBC FirstCaribbean International Bank (Bahamas).

Rather than impose a foreign system and manager on the industry, Mr Brownrigg said CIBC FirstCaribbean had imposed “strict standards and guidelines” on all those conducting appraisal work for it.

Describing the NAS contract situation as 
“disturbing”, the Bahamas Realty president added: “All I can say is that BREA has sought legal counsel, and legal counsel came back and advised that there is so much wrong about it, and so much unfair, we have to approach it really carefully in terms of going forwards.

“The issue is, if BREA took NAS to court, what would our chances of success be? We’re being advised that our chances of success would be 50/50.

“Right now, from a real estate appraisal perspective, it [the NAS system] is going to change the whole climate of doing business,” Mr Brownrigg said. “It is no longer business as usual.”

Noting that he had been in the real estate business for 35-40 years, and had established a strong professional reputation for excellence, Mr Brownrigg said the NAS system threatened to “take all that away and level the playing field. It will be wiped out”.

Rather than own his intellectual property, in the form of the appraisals he did, Mr Brownrigg said his - and all those performed by others - would be openly shared, and accessed, via the NAS system.

“If this kind of situation is what it is, I might as well pack up my bags and head for the retirement home,’ Mr Brownrigg told Tribune Business.

Contrasting the high cost of indemnity insurance that he had to pay with the paltry $10 that NAS will incur, Mr Brownrigg said the appraisal manager would have the right to come to his office, and inspect and access his appraisal data.

“I’m president of Bahamas Realty and they can do that?” he asked. “They’ve got my back against the wall. They will own every appraisal I do for them.

“They’re going to start dictating what the fee structures are, beating it down, and when they ask you to do an appraisal, you will have 24 hours to accept or reject it.

“I work a week in advance. How do I get into that system? I’m going to have to say no.”

Tribune Business sources have previously expressed concern about whether Bahamian law and regulations allowed NAS to even operate in this nation, given that the Real Estate Act says only Bahamian nationals and foreign permanent residents with a right to work can be licensed as realtors.

Tribune Business was also told that when NAS first applied for a Business Licence in the Bahamas, it held itself out as a computer software/services company, rather than an appraisals management firm.

Now, rather than Bahamian appraisers dealing directly with Scotiabank and Royal Bank of Canada on property appraisals, they will interface with NAS, who will collect their work, submit it to the bank and be responsible for paying them.

In addition, Tribune Business was told NAS will also seek to ‘categorise’ Bahamian appraisers according to their expertise and specialisation, dividing them into those who will do high, mid and low-end residential valuations respectively.

Suggesting that NAS’s involvement indicated Bahamian appraisers were not “respected”, Mr Brownrigg said: “I empathise with what the issue is with these foreclosures, but to me this is pushing us around.”

Apart from the ‘anti-competitiveness’ and ‘restraint of trade’ issues raised by the NAS plan, Mr Brownrigg described the issue as one of “standing up for the rights of Bahamians”.

Backing the CIBC FirstCaribbean approach for protecting appraisers’ client bases, he added of NAS: “How can a foreign entity come in and take control of the marketplace, period.

“I understand that Royal Bank is saying that on Tuesday, the game has changed. Either you line up to do business with us, or forget it. This is a foreign firm [NAS} doing business with the banks, getting paid by the banks and changing the industry. I’m not sure where this plays out.”

NAS is understood to be Barbados incorporated but Canadian owned. Tribune Business sources suggested the company was first brought in to manage Scotiabank’s appraisal business in Barbados, but a similar move in Jamaica was abandoned after resistance from that country’s realtors.

Describing the market as “soft”, with many Bahamian realtors having “a tough time selling real estate”, Mr Brownrigg said he had been performing “a serious volumes of appraisals” - an income stream that had kept many realtors afloat.

Speaking to Bahamas Realty’s own situation, Mr Brownrigg said: “We haven’t increased salaries in our office since the recession began.

“We’re five years into it. We’re hanging on just to keep this staff going when we know sales are off, and now we have this international company getting involved.”

Mr Bethell, meanwhile, told Tribune Business: “The most important concern I have, and I’ve shared it with the majority of the appraisers, is that the position NAS is taking is one whereby they are assuming ownership of the appraiser’s product.

“Once the document is completed, it belongs to the system and not the appraisers. The question of ownership is key. Once you have written the report, they own it. There’s got to be something wrong with that.”

And he added: “The system is geared where they, in fact, can come in any time and audit your books. They can make demands for you to open your books to satisfy any demands they have.

“What they have done, in effect, is take the onus away from the appraiser to make the determination of what fair market value is, and are almost dictating what the appraiser must do. It’s ridiculous.”

Mr Bethell said NAS, and its bank clients, appeared to be adopting the ‘sales approach to value’ technique, an approach he described as “flawed” in the Bahamian market.

This, he explained, was more suited to the US, Canadian and European markets, which all had a national register of every property constructed.

No such equivalent existed in the Bahamas, and Mr Bethell pointed out that “no two homes are alike” in any subdivision. Therefore, it was impossible to determine one property’s market value using that for another, even though they may be on the same street.

Mr Bethell said appraisers were needed to visit subject properties to determine “the quality of finishes” on the interior, as this often determined differences in valuations.

“The NAS system is of great concern because they are trying to force this down the throats of the appraiser,” he told Tribune Business. “They can do practically anything they please. They will determine if you get any work, and how much you’ll get. Something has to be wrong wrong with that.

“No one has sent me a single piece of correspondence to advise me what this system is about, when it will be implemented.”

Mr Bethell said he was investigating who NAS and its principals were, as they would now “determine what happens to the livelihoods of the Bahamian appraiser”.

And he questioned whether decisions about NAS, and its system, were being made locally in the Bahamas, or if Royal Bank and Scotiabank were deferring to regional head office in Barbados, or headquarters in Toronto.

Confirming today’s BREA meeting, Franon Wilson, its president, said it would bring the issue “to a head”.

“The Board is well connected to the pulse of the appraisers in our organisation, and their views of that [NAS} agreement,” he added.

The situation is also attracting attention outside the real estate industry. Chester Cooper, the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) chairman, when contacted by Tribune Business, said: “We are aware that there is an issue brewing and will be speaking shortly with the respective parties and the president of BREA.

“Until then, I would only say that I would be concerned about any initiative that would stifle entrepreneurship”.

Spokespersons for Royal Bank and Scotiabank, contacted before this article went to press, said they would respond to the issue today.