By NEIL HARTNELL
Tribune Business Editor
Realtors yesterday questioned why Royal Bank of Canada (RBC) was putting them under “so much pressure” to sign a controversial appraisal services management agreement, fearing it was adopting “divide and conquer” tactics.
Carla Sweeting, the Bahamas Real Estate Association’s (BREA) president, told Tribune Business the agreement proposed by Royal Bank was a third version of the contract initially offered by NAS Valuations Inc, the Canadian-headquartered firm that will really run the bank’s Bahamian appraisal management system.
The initial NAS proposal was roundly rejected by Bahamian realtors and appraisers earlier this year, but Royal Bank is now pushing for them to sign up, with the first training session on the new system scheduled for this coming Tuesday.
Nathaniel Beneby, Royal Bank’s Bahamas’ managing director, told realtors/appraisers yesterday that the lender was “now ready to proceed with formalising” the contract.
While Royal Bank is replacing NAS as the counterparty that Bahamian appraisers will sign with, the contract - a copy of which has been obtained by Tribune Business - is largely the original deal.
Mr Beneby’s letter, also seen by this newspaper, says Royal Bank is inviting all realtors on its ‘approved appraisers’ list to sign the contract.
But he then warned: “Only those appraisers with whom the bank has a signed agreement will be invited to provide appraisal services to us.......
“Training on the new appraisal process will be scheduled with you based upon receipt of the contract, with first sessions to begin on June 24, 2014.”
Then, in a concluding paragraph that has attracted Ms Sweeting’s ire, Mr Beneby said Royal Bank had not received any appraiser feedback, as promised in a May 23 meeting, via BREA.
Ms Sweeting yesterday told Tribune Business that following that meeting, she took the issue to the BREA Board, who “instructed” her and the Association to seek a legal opinion on the proposed agreement from Callenders & Co.
She added that this was communicated to Mr Beneby, along with BREA’s hope to work with him and Royal Bank - suggesting his “no feedback” assertion was incorrect.
While she “totally gets” the commercial banks’ desire to perfect security for their residential mortgage lending, Ms Sweeting told Tribune Business there were four aspects in the proposed Royal Bank agreement that were “really concerning to me”.
Apart from intellectual property rights/ownership of an appraiser’s report, the BREA president said other issues involved Royal Bank/NAS’s ability to “dictate” the appraiser’s fee and who was selected to carry out the valuation.
“This is the second round of coming back to the Bahamas to try and move forward with a new appraisal system,” Ms Sweeting said of NAS.
Two versions of the agreement have previously been rejected by the Bahamian real estate industry, and she added: “Now, they’ve come back to the table and done a third agreement. They’ve changed the words around, but it’s still a NAS agreement.
“They’re not signing with BREA; it’s an individual approach. It’s going after individual appraisers; it’s divide and conquer.”
Recalling the May 23 meeting between Royal Bank and the appraisers, Ms Sweeting said the institution and NAS “very abruptly” brought the question and answer session to an end.
“They wanted us to sign the agreement. and said they’d take into consideration whatever the questions were,” the BREA chief said. “We told them to give us until June 1, and we’d get back to them with our issues and concerns.”
BREA only met with Callenders & Co on this Tuesday, though, and Ms Sweeting told Tribune Business: “It’s so frustrating. I don’t know why they’re putting so much pressure on us when they know how hard we’re working on it. We don’t want to rush it; we want to get this right.”
BREA, she added, had reached out to the National Association of Realtors (NAR) Florida chapter for advice on “how to handle these service agreements”, noting that the US had long experience of software companies “coming in and dictating to them”.
Ms Sweeting said BREA had also written to Prime Minister Perry Christie on the matter last week, as well as the Attorney General’s Office and his Cabinet ministers, Khaalis Rolle and Ryan Pinder,
She explained that BREA was questioning NAS’s permit to operate in the Bahamas, given that it was understood to have been licensed as a financial institution. Real estate is also a sector supposedly reserved for Bahamians and foreign permanent residents with the right to work, and Bahamian ownership, only.
Ms Sweeting said the only area in the contract that appeared to have been altered was “the indemnity”, with Royal Bank/NAS now willing “to take responsibility should an appraisal conducted on their behalf be subject to court action.
Besides ownership of a realtor’s appraisal, and Royal Bank’s ability to determine the fees they charged, Ms Sweeting said the contract’s use of a “rotating list” acted against consumer choice. A home owner/buyer would not be able to select their preferred appraiser, even if approved by Royal Bank, if he/she was not next up on the list.
A major factor as to why Royal Bank is so attracted to the NAS system is the fact it, and other Bahamian commercial banks, have had “their fingers burned” by inexperienced appraisers in the recent past, exacerbating their problems in selling distressed, previously over-valued properties, in the current market.
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.
“I totally get where they’re coming from,” Ms Sweeting told Tribune Business of the banks. “I met with Scotiabank and encouraged them that we have the Multiple Listings System (MLS),
“It’s growing, and one day we hope it’s the only way to list properties.”
The BREA president said she urged Scotiabank to only use appraisers who were MLS members, as this would provide access to price comparisons with similar properties.
“We have said this to both banks [Royal Bank and Scotiabank],” Ms Sweeting told Tribune Business. “You need to accept some responsibility for the foreclosure problems you are now facing, as you have incentivised mortgage officers who don’t know how to read appraisals.”
Acknowledging that the banks had the right to reject appraisals, and certain appraisers, Ms Sweeting said BREA was aiming to bring in the Royal Institute of Chartered Surveyors to conduct certified appraisal training in the Bahamas.
Appraisals, which assess the value of Bahamian real estate, have formed a vital income stream for many in the industry.
And with Royal Bank among the three largest commercial bank lenders in the Bahamas, a loss of its appraisal business would represent a much income reduction for many in the field.
Ms Sweeting expressed particular concerns for realtors and their firms who were heavily reliant on appraisals, warning that their business model might “drastically change”.