The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian realtors yesterday called upon the Government to pass laws regulating appraisal management companies, with the push by the Canadian-owned banks to foist such a system on the industry branded “a huge game changer”.

David Morley, Morley Realty’s principal, told Tribune Business that unlike Florida and the US, the Bahamas had no statutory laws in place to govern the operations of entities such as NAS Valuations.

That is the Canadian-owned company which Royal Bank of Canada (RBC) has selected to manage its property appraisal/valuations in the Bahamas, with realtor training on the NAS system planned to start today - despite the considerable industry resistance.

Mr Morley yesterday pointed out that President Barack Obama had enacted legislation in the US to regulate appraisal management companies, after they were deemed to be partly responsible for the real estate ‘bubble burst’ in 2008.

And he added that, in Florida, appraisal management companies had to be owned by a Florida-licensed appraiser.

Yet, because the likes of NAS are a new phenomenon in the Bahamas, there are no laws or regulations governing how they operate.

“We’re telling the Government that if they’re going to allow businesses like this to start up in this country, Bahamian-owned or foreign-owned, they’ve got to have laws to regulate it,” the Morley Realty principal told Tribune Business.

A Royal Bank spokesperson yesterday declined to comment, as the Bahamas Real Estate Association (BREA) and its members continued to raise questions over whether it had the necessary licence to conduct an appraisal management operation.

Mr Morley yesterday disclosed to Tribune Business that the Government had given NAS approval to establish a Bahamas-based software supplier to financial institutions, not to act as an appraisal management company on the banks’ behalf.

Bahamas Real Estate Association (BREA) licensed appraisers were initially asked to enter into such agreements with NAS but, after industry opposition, the contract now lists Royal Bank as the counterparty.

However, the agreement makes clear that NAS is standing behind the banks, with realtors having to use its appraisal management systems and software.

Mr Morley, who is a member of BREA’s appraisal committee, questioned whether the contract was designed to “circumvent” the 2012 approvals granted to NAS by the Government.

And he disclosed to Tribune Business that BREA has written to both the Compliance Commission and Securities Commission to ask whether realtors, as a non-financial institution, would be breaking the law by using software designed for banks and trust companies.

Suggesting that the answer might render the dilemma of whether to sign the Royal Bank contract moot, Mr Morley emphasised that BREA and the sector were not being obstructive or combative.

But, given the fundamental change that the Royal Bank/NAS contract promises to usher in, he said it was imperative “not to rush” and instead reach an agreement acceptable to all sides.

“A lot of it stems back to the licence granted to NAS Valuations,” Mr Morley said of the concerns harboured by Bahamian realtors over the banks’ plans.

He read out to Tribune Business a letter from the Bahamas Investment Authority (BIA), which stated that the Government’s National Economic Council (NEC) in 2012 had given NAS approval “to establish a company providing proprietary software for financial institutions”.

NAS, which performs appraisal management services in Barbados for Scotiabank, entered the Bahamian market in 2012, prompting immediate questions over whether it could provide similar services here as a foreign-owned company.

The first draft appraisal contract, between BREA members and NAS, was rejected by the former last year. But it resurfaced this year, the time with Royal Bank as the counterparty, although NAS clearly stands behind the agreement.

“The question really at heart is: ‘Is this a way of circumventing the licence granted to NAS Valuations?’,” Mr Morley asked.

“We’ve written to the Government on several occasions, seeking clarity on this, and as far as we know it has been referred to the Attorney General.”

The letters sent to financial services regulators inquired whether it was legal for realtors to use software designed for financial institutions.

With BREA members hoping for a negative answer, Mr Morley said: “The whole issue of getting into the terms and conditions of the agreement might fall by the wayside, if they come back and say realtors can’t use that software.”

Disclosing how BREA was working on multiple levels to protect appraisers’ interests, Morley Realty’s president said it had contacted the National Association of Realtors (NAR) and its Florida chapter to obtain copies of appraisal management agreements in their jurisdiction.

This, he explained, was for comparison purposes so BREA could “make sure what is contained in ours is common practice in other jurisdictions”.

“We’re not trying to be unreasonable with it,” Mr Morley told Tribune Business. “It’s not that we’re saying we don’t want it because we don’t want to change our ways.

“This is going to be a huge game changer in this jurisdiction for how appraisals are handled for the banks moving forward. We don’t want to rush into it, but instead come up with something that is fair, reasonable and acceptable to all.”

BREA, Mr Morley added,, had taken its own initiative to improve appraisal standards by reaching out to the Royal Institute of Chartered Surveyors (RICS) - an organisation whose standards were accepted throughout the Caribbean.

“We completely understand some of the banks are overlent, or have lent too much on properties,” Mr Morley told Tribune Business, “but it’s not the appraiser’s fault.

“At some point, someone in the banks had to sit down and say: ‘How could you have a $500,000 house in Elizabeth Estates?’ The banks, at some time, have to take responsibility for not vetting some of the appraisals that came in.”