Requires licensed and certified residential real property appraisers to report appraisals in the city of Buffalo to the office of real property services

Title of bill

An act to amend the executive law and the real property tax law, in relation to requiring licensed and certified real estate appraisers to report on certain appraisals

Purpose or general idea of bill

The purpose of this bill is to implement an appraisal reporting statute in the City of Buffalo for residential real estate in order to combat flipping (the short term ownership of property) which is enabled by illegal and unethical real estate transactions and a significant contributing factor in neighborhood decline.

Summary of specific provisions

The appraisal reporting statute will require all licensed or certified real estate appraisals to be filed with the Office of Real Property Services. At the end of every calendar quarter a report listing the address and appraised value of residential real estate in the City of Buffalo upon which the appraiser performed an appraisal during the calendar quarter shall be filed. The statute will be applicable to one to-four family residential real estate appraised for mortgage underwriting purposes. Furthermore, the report will be open for inspection for investigation of fraudulent practices.

Justification

The introduction of an appraisal reporting statute is meant to combat real estate flipping. Real estate flipping is an unethical, and at times illegal, real estate practice that leads to neighborhood destabilization. Whole communities are devastated by the combined and concentrated impact of illegal and unethical real estate practices.

Property flipping involves the repeated sale of a property at inflated value for profit. Typically in a city with shrinking population such as Buffalo, these homes are vacant, have housing code violations and may be slated for demolition. Usually, little to no rehabilitation has been completed on the property before it is resold. These transactions are often completed with cash but may also involve financing based on inflated appraisal values that constitute fraud.

Property flipping is a cyclical process that results in an escalating pattern of neighborhood decline. Flipping is most likely to occur in distressed neighborhoods where sellers or "investors" are enticed by the low property values. To begin, these "investors", many who are located out of state or out of the country, purchase and quickly resell low priced properties, making significant profits. Next, these properties are left in poor condition and rented, or left vacant and abandoned. Houses which are foreclosed upon or abandoned are left for the City to sell or demolish. In the end, foreclosure and abandonment of these properties contributes to increasingly depressed real estate values in surrounding areas.

In Buffalo the destructive practice that flipping inflicts on city neighborhoods has been criticized by city residents, community groups, City officials, and HUD and has led to the formation of the Mayor's Anti-Flipping Task Force.

This legislation is modeled after the successful legislation in Baltimore, MD. The City of Baltimore was confronted with the problems of real estate flipping. Extensive research and analysis of thousands of real estate transactions was conducted by the Community Law Center in Baltimore, MD. This research on how property flipping and mortgage fraud worked led the way to identify falsely inflated appraised values a major contributor to flipping. An appraisal reporting statute was

enacted in 2003 and led to a significant decrease in flipped property and corresponding increase in neighborhood stability.

Prior legislative history

2006: S.8024/A.11623 No action. 2008: S.2952/A.5434 Referred to Finance.

Fiscal implications

Minimal Cost to state to receive quarterly report.

Effective date

This act shall take effect on the first of January next succeeding, with provisions.