Obligations of Real Estate Valuation Clients Subject to the Supervision and Monitoring of SAMA
| No: 371000061185 | Date(g): 6/3/2016 | Date(h): 28/5/1437 | Status: In-Force |
Translated Document
Effective from 2016-03-06 - Mar 05 2016
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Based on the regulations issued by SAMA, including the Royal Decree No. M/5 dated 22/2/1386 H, the cooperative insurance companies control law under Royal Decree No. M/32 dated 6/2/1424 H, and the finance companies control law under the Royal Decree No. M/51 dated 13/8/1433 H, in addition to the implementing regulations of the above-mentioned laws and other relevant decisions, including the Ministerial Decree No. M/43 dated 9/7/1433 H and its implementing regulations - Real estate branch- issued by the Minister of Commerce and Industry No. 531 dated 3/6/1435H, where banks, real estate financing companies, and insurance companies operating in the kingdom and licensed by SAMA to engage in real estate financing or insurance are considered clients of real estate appraisal
Accordingly, SAMA emphasizes that banks, financing companies, and insurance companies must adhere to the following:
| 1. | Banks, finance companies, and insurance companies must only deal with accredited real estate valuers who hold a valid license for real estate valuation.* | ||
| 2. | Banks, financing companies, and insurance companies must govern the appraisal process by establishing mechanisms and safeguards 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 do not have 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 prevent any conflict of interest or increased risk | ||
| 3. | Banks, financing companies, and insurance companies, 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 means, 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, financing 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 has completed the 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 Certified Appraisers Law or the Implementing Regulation (Real Estate Appraisal Branch) | ||
| F. | Failing to provide a sufficient time frame by the bank, financing 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, financing companies, and insurance companies must provide sufficient information and documentation about the asset being appraised. | ||
| 5. | Banks, financing companies, and insurance companies must refrain from requiring the appraiser to use specific appraisal methods. | ||
| 6. | Banks, financing 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, financing 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, financing company, and insurance company bearing full responsibility and costs associated with these processes. | ||
| 8. | Banks, financing 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 working with for the appraisal of any real estate asset during the term of the policy, to avoid any conflict of interest. | ||
| 10. | Banks, financing 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, financing companies, and insurance companies must provide the client with a copy of the appraisal report for the property being appraised.** | ||
* This section was modified based on Circular No. 99/65768 and dated 25/10/1439 H.
**This section was added based on Circular No. 99/65768 and dated 25/10/1439 H.