Obligations of Real Estate Appraisal Customers Supervised by SAMA
| No: 371000061185 | Date(g): 6/3/2016 | Date(h): 28/5/1437 | Status: In-Force |
Translated Document
Based on the powers granted to SAMA under the provisions of the Banking Control Law issued by the Royal Decree No. M/5 dated 22/2/1386H, and Cooperative insurance companies control law under Royal Decree No. M/32 dated 6/2/1424H, and The finance companies control law under the Royal Decree No. M/51 dated 13/8/1433H, and in reference to the Accredited Valuers Law issued by Royal Decree No. M/43 dated 9/7/1433H and its Implementing regulations—Real Estate Branch—issued by the Minister of Commerce and Industry Decision No. 531 dated 3/6/1435H*, and considering that banks, real estate finance companies, and insurance companies operating in the Kingdom and licensed by SAMA to engage in real estate financing or insurance are considered customers of real estate appraisal.
Accordingly, SAMA emphasizes that banks, finance companies, and insurance companies must adhere to the following:
| 1. | Banks, finance companies, and insurance companies must engage with certified real estate appraisers who hold a valid license to practice appraisal.** | ||
| 2. | Banks, finance companies, and insurance companies must govern the appraisal process by establishing mechanisms and guarantees to separate the financing or insurance procedures and the staff involved in granting or issuing from the appraisal process, starting from the selection of appraisers to the receipt of reports, including the following: | ||
| - | Establish a written internal policy for selecting accredited real estate appraisers whose services will be utilized. | ||
| - | Ensure that employees responsible for granting financing or insurance are not allowed to make any substantial contact with the appraiser, appraisal company, or the company managing the appraisal, which could affect or influence the appraisal or the information provided about the asset being appraised. This is to ensure complete independence of the appraisal work and to guarantee the absence of any conflict of interest or increased risk | ||
| 3. | Banks, finance companies, and insurance companies involved in the appraisal process, as well as their representatives, agents, financiers, insurance applicants, or any other third parties, or partners acting on behalf of the financier or insurance company, must refrain from influencing or attempting to influence the drafting, revision, or review of reports and results through coercion, collusion, inducement, intimidation, or any other way, including but not limited to the following examples: | ||
| A. | Refraining from or threatening to refrain from paying appraisal report preparation fees on time, or from providing future business to the appraiser, or threatening to exercise authority to demote or dismiss the appraiser or threatening to add the appraiser to a list of appraisers excluded by the bank, finance company, or insurance company. | ||
| B. | Explicitly or implicitly promising continued contracting or using authority to assist the appraiser in obtaining promotions, financial or non-financial compensation, with the aim of influencing the appraiser or the appraisal company to achieve the desired initial valuation result. | ||
| C. | Requesting the appraiser or appraisal company to provide a predetermined report or demanding a specific value during the preparation of the appraisal report or asking for estimated values or comparable sales at any time before the appraiser completes the appraisal report. | ||
| D. | Providing the appraiser with the expected, estimated, encouraged, or required value of the property being appraised, or the proposed amount, or the amount intended to be financed for the beneficiary. | ||
| E. | Any action or practice that conflicts with the appraiser's independence and impartiality, or any violation of the Accredited Valuers Law or its Implementing regulations (Real Estate Appraisal Branch)* | ||
| F. | Failing to provide a sufficient timeframe by the bank, finance company, or insurance company for completing the property appraisal, such that it aligns with the scope of work required according to international appraisal standards and requirements, without compromising the quality and accuracy of the results. | ||
| 4. | Banks, finance companies, and insurance companies must provide sufficient information and documentation about the asset being appraised. | ||
| 5. | Banks, finance companies, and insurance companies must refrain from requiring the appraiser to use specific appraisal methods. | ||
| 6. | Banks, finance companies, and insurance companies must refrain from requesting a bank guarantee letter for amounts exceeding the scope of work assigned to the appraiser. | ||
| 7. | Banks, finance companies, and insurance companies must establish procedures and conditions for accepting properties eligible for financing or insurance. These should include a mechanism for verifying ownership and ensuring the structural integrity of the building, with the bank, finance company, and insurance company bearing full responsibility and costs. | ||
| 8. | Banks, finance companies, and insurance companies must not tie appraisal fees to the scope or quantity of work when contracting with the appraiser. This ensures the independence and impartiality of the appraiser, the appraisal company, or the company managing the appraisal. | ||
| 9. | Insurance companies must refrain from issuing a professional liability insurance policy to the same real estate appraiser they are dealing with for the appraisal of any real estate asset during the term of the policy, to avoid any conflict of interest. | ||
| 10. | Banks, finance companies, and insurance companies that become aware that an appraiser or appraisal company is violating applicable regulations and procedures, engaging in illegal behavior, breaching international appraisal standards, or not adhering to the Code of Ethics, Conduct, and Professional Practice issued by the authority, or delivering substandard performance, or engaging in inappropriate or unprofessional conduct, or any other substantial reason, must notify the Saudi Authority for Accredited Valuers in writing within a maximum of 30 days, providing evidence of the violation, with a copy sent to both SAMA and the appraiser. | ||
| 11. | Banks, finance companies, and insurance companies must provide the customer with a copy of the property appraisal report.*** | ||
* The Implementing regulations—Real Estate Branch—issued by the decision of the Minister of Commerce and Industry No. 531 dated 3/6/1435H, have been replaced by the Implementing regulations of the Accredited Valuers Law, issued by Ministerial Decision No. (107), Dated 28/01/1445H.
** This section was amended based on Circular No. 65768/99 and dated 25/10/1439H.
***This section was added based on Circular No. 65768/99 and dated 25/10/1439H.