If you are an Illinois real estate licensee, you should care! Public Act 98-1109, which became effective January 1, 2015 added BPOs and CMAs as licensed activities under the Illinois Real Estate License Act.
What is a BPO? According to Section 1-10 of the Illinois Real Estate License Act, a BPO is defined as "estimate or analysis of the probable selling price of a particular interest in real estate, which may provide a varying level of detail about the property's condition, market, and neighborhood and information on comparable sales." This activity will only be considered to be a licensed activity if it is paid for as a distinct professional service and not as a part of the usual process of listing property where compensation is paid at the conclusion of the sale or rental transaction.
A CMA is defined as "analysis or opinion regarding pricing, marketing, or financial aspects relating to a specified interest or interests in real estate that may be based upon an analysis of comparative market data, the expertise of the real estate broker, or managing broker, and other such factors as the broker or managing broker may deem appropriate in developing or preparing such analysis or opinion." (Section 1-10, Illinois Real Estate License Act) Once again, is only considered to be a CMA if paid for outside the course of the real estate transaction as explained above.
"Why is this important ?", you might ask. The major reason involves compensation. Under the Illinois Real Estate License Act, compensation for a licensed activity must be paid to the sponsoring broker who in turn compensates the sponsored licensee.
If you are a sponsored licensee, and have been doing BPOs and CMAs as defined above and been paid by your client, your compensation for this licensed activity must now be passed through your sponsoring broker. You can no longer be paid for this service directly.
'In what instances could I prepare a CMA/BPO?" you may be asking yourself. Typically, it would be for a third party doing "due diligence" or a potential or existing lienholder seeking to determine the value of the real property such as an REO asset manager.
There are now established requirements for specific items that must be included in the BPO/CMA: In writing on paper or electronically and must include the purpose for which it is being performed, a brief description of the interest in the real property that is the subject of the BPO/CMA, a brief description of the method used in determining the estimated value, assumptions and limiting conditions, disclosure of any licensee interest in the subject property, name and license number of the preparer, a statement that the BPO/CMA is not an appraisal, and any other relevant information deemed appropriate by the licensee. [Section 10-45(b) of the Illinois Real Estate License Act]
This could also be important to you as a source of additional business. The Illinois Real Estate Appraiser Licensing Act was also amended with the same definitions.
An Illinois licensed Appraiser needs a broker or managing broker license in order to do BPOs/CMAs for compensation creating new opportunities for the Illinois real estate licensee.
Be aware, a real estate broker or managing broker needs an Appraiser's license in order to appraise real property for compensation.
Posted on Wed, January 7, 2015
by Mike Fair filed under