B-20 affecting appraisals

B-20 affecting appraisals

B-20 affecting appraisals Investment properties in Vancouver, which feed the supply of rental housing in a city that has a vacancy rate of below 1%, are being afflicted by B-20.

According to Shannon Patterson, a mortgage agent and regional director of Vine Group, appraisers have started asking for Market Rent Letters, and that’s stymied closings on many investment properties.

“A huge amount of my clients are doing investment properties and they rely on Market Rent Letters, where an appraiser gives an estimate of the potential rental income for a new purchase, but now because of B-20 we’re being told by appraisers that they’ll have to do almost a full appraisal with comparables and a range of rents, and that is affecting the qualification of investment properties,” said Patterson.

The domino effect is being felt in the Lower Mainland’s condo rental market, which is where many would-be first-time buyers were believed to dwell.

“It’s going to have a compounding effect on the rental market because it will be harder for people to buy investment properties, which will open up rentals in the Lower Mainland where there’s almost a 0% vacancy rate,” continued Patterson. “The catch-22 is you have these renters who might want to enter the housing market as first-time buyers, but now because of B-20 it’s difficult to qualify for those purchases.”

Patterson believes the ramification of this trickle-down effect is many more young professionals living with their parents for much longer than they intended—and certainly for much longer than any previous generation.

“I think with my first-time homebuyers, the thought of buying a detached home to raise family is farther and farther away from reality, and the other is the supply of housing,” she said. “There’s been a lot of talk, but not a lot of action in the Lower Mainland with reviewing the different municipalities and expediting the approvals process for developers to get more product onto the market.”

Patterson wishes the government consulted the industry before embarking on the latest updates to B-20 because she thinks a lot of what’s ailing Vancouver could have been averted. In spite of the unintended consequences she expects to grow as the year progresses, she isn’t holding out hope for any reversals.

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  • Daniel Jones, AACI, P.App 2018-02-12 10:43:00 AM

    There was a recent article in the recent issue of Mortgagebrokernews.ca that speaks from a Broker point of view to the new changes (B-20 affecting Appraisals) to what was formerly known as a Rental Estimate Letter.
    The broker contends that the need for Rental Letters has “stymied” closings for her, but what is notable is that it is the lenders that have this requirement not the appraiser.

    The Broker goes on to state…..” they’ll have to do almost a full appraisal with comparables and a range of rents, and that is affecting the qualification of investment properties,” said Patterson.”

    I do not understand how the appraiser completing a services ordered by either the lender or the Broker themselves affects the qualification of their client. The appraiser is only completing services ordered by either the Broker or the lender. In fact, I take the opposite point of view and would take a position that the appraiser is a partner with the Broker indirectly and provides a service that is needed by the lender in order to qualify the Broker’s client.

    As an appraiser, working in the Greater Vancouver Market and a National Board of Director for the Appraisal Institute of Canada (Ottawa) representing B.C. , I would like to shed some light on the changes seen from an appraisers perspective.

    Appraisers over the past year (and as at Jan 1,2018) have been many significant changes to the Scope of Analysis and Terms of Reference for appraisers with many new (AIC Professional Standard) rules .

    The changes are to standards, regulations and Professional Standard requirements that appraisers must adhere to as at January 1,2018 (per Appraisal Institute of Canada Directives).

    The most immediate and pressing for appraisers was the (AIC Requirement –Mandatory) conversion to the new 2018 Full Residential Appraisal Form which for the first time became MANDATORY to AIC appraisers all across Canada January 1,2018.

    Also of note was the AIC position on Rental Estimates stated within an appraisal report, stand alone rental estimates and stand alone rentals with a site visit. The AIC (Professional Standards Committee and Insurer) is taking a position that the rental estimates must be treated as an appraisal. Rental estimates have to supported and concluded in the same way that a value estimate is.

    As such the appraiser much match CUSPAP (the Professional Standards) up in every aspect to the same level as a full & complete appraisal report including the addition of three comparable rentals of support within the report.


    Communiques to member Appraisers across Canada informing them of the reasons and logistical turns which end up increasing our scope of work and analysis to the next level have been delivered multiple times during 2016 through to 2018 in preparation of the new changes.

    Note : Communique from the AIC Appraisal Institute of Canada:
    o As of January 1, 2018, AIC Members can no longer use the 0912 or the 0404 form, or any previous version of an AIC form as it is not in compliance with CUSPAP 2018.
    o Failure to utilize the most current version of the AIC Form may be considered willful non-compliance with AIC policies and, by extension, coverage under the AIC Insurance Program may be denied.

    Unfortunately, most of the changes, (that are out of an appraisers hands) now are causing appraisers to take much more time to ensure quality control to complete the same products and services provided to clients and stakeholders prior to January 1st,2018. Appraisers are doing their best to balance service to clients and at the same time by adhering to new standards and procedures demanded by OFSI, AIC and Trisura Professional Liability Insurers.

    Willful non compliance (by the appraiser) to the new changes may trigger non-coverage from the Liability Insurer which in all cases involving financing, is a requirement (appraiser liability insurance) of banks, Credit Unions and all Mono-line Lenders utilized in the Brokerage community.

    Appraisers care deeply about our their services and products and about meeting the highest standards possible on a clients behalf. Therefore appraisers everywhere in Canada have been reviewing appraisal content to confirm full OFSI and CUSPAP 2018 compliance , as well as a review of significantly increased scope of analysis that will is required to meet these requirements for certain services.

    The results of this review is the introduction of a new CUSPAP 2018 compliant “Rental Value Appraisal” FORM (Stand Alone With and Without inspection ).

    The content of this new FORM meets the required scope of analysis for CUSPAP and OFSI, CUSPAP 2018 and AIC New 2018 FORM Requirements.

    The content of the Form (meeting scope of analysis for CUSPAP & OFSI compliance) is significantly greater than any other prior rental letter, Schedule “A”, Rental Addendum or rental form content of the past (used by your appraiser), as it is now a mandatory scope of an appraisers analysis.

    Appraisers recognize that the OFSI Guidelines B-20: Residential Mortgage Underwriting Practices and Procedures, Principle 3: FRFI’s Assessment of Borrowers’ capacity to service debt, requires vigorous income verification for debt service which may include inclusion of rental income into the equation.

    The new Rental Value Appraisal FORM was designed with the OFSI standard and CUSPAP 2018 in mind.

    Further, appraisers in Canada are preparing CUSPAP 2018 content in all their current residential appraisals FORM report formats, on the basis that the newly created AIC Full Residential Appraisal FORM -0118 was to be up and running within the first week of 2018.

    I hope the above explanation clears up the confusion and the reasoning for the sudden changes to a Brokers fees paid and changes that appraisers were faces with just a few short weeks ago.

    Daniel Jones, AACI
    National AIC Board of Director-BC (Appraisal Institute of Canada)
    President-Campbell & Pound Appraisers, Vancouver
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