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Draft Reports

Discussion in 'Illinois' started by PL1957, Jun 2, 2011.

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  1. PL1957

    PL1957 Senior Member

    10
    Jul 19, 2004
    Professional Status:
    Certified General Appraiser
    State:
    Illinois
    Brian, first of all, I think it's great that you are addressing the issue of draft reports. I think it's critical that people understand what they are and what they are not. They are a wonderfully useful tool when used properly, but have a phenomenal capacity for abuse when they are used improperly.

    There are a couple of things from the article that I'd like to comment on:

    "I was scanning an engagement letter wherein the client, holding a large portfolio of hotels, agreed to pay an appraisal firm nearly $100,000 upon the delivery of draft reports. This amounted to about 25% of what the total fee would be for the finished products. This is a fairly standard arrangement."

    I don't know of anybody who would have this as a fairly standard arrangement, other than a tax appeal appraiser who is issuing prelim letters under the guise of drafts. In our practice, the entire fee has been earned upon delivery of a draft report. Our engagement letter clearly so state. IMO, the issue of prelim letters is something that needs to be separated from a discussion of drafts as they are more commonly used.

    "Why would a sophisticated user pay $100,000 for something that they cannot ultimately use? The answer is, of course they wouldn’t. The first thing to do is to figure out what users are doing with these drafts."

    The sophisticated user IS using the draft report in the way an appraisal report is intended to be used - as part of a decision making process. If the decision is not to proceed with the investment, the loan, the tax appeal, etc., a final report may not be needed, depending on other requirements.

    "Doesn’t the very fact that an appraiser is submitting a draft report to a client suggest that the client has some input on the final version? Doesn’t this create a partnership between the client and the impartial appraiser? ... Appraisals are not a tag‐team effort with the client."

    IMO, appraisal, at least on the commercial side that I work on, is not a "take it or leave it" business. My clients have input into my reports. I strive to give my clients a feeling of partnership with me in the process. The process is very much a tag-team effort - I can't do my job without input from the client.

    I take full ownership and responsibility for what's in my report, but I have no problem whatsoever with the client providing input and feedback based on my draft report. Sometimes the client can point out things that aren't readily apparent, sometimes the client is aware of a piece of data that I didn't have, sometimes the client catches a mistake. All of these things are valuable because they go toward the common goal that I have with my clients - producing a credible and supportable estimate of the market value of the property.
     
  2. Brian Weaver

    Brian Weaver Senior Member

    1
    Apr 16, 2005
    Professional Status:
    Gvmt Agency, FNMA, HUD, VA etc.
    State:
    Illinois
    Just trying to stir some discussion and get the ASB to put some real thought into the communication aspect of reporting.
     
  3. Marion Rhodes

    Marion Rhodes Elite Member

    Top Poster Of the Month

    212
    Feb 26, 2006
    Professional Status:
    Certified General Appraiser
    State:
    Pennsylvania
    Hello Mr Weaver,

    Didn't they attempt that with exposure drafts 1, 2 and 3 of the upcoming USPAP? I believe they got a flood of letters concerning those exposure drafts that attempted to create "other opinions of the appraiser" reports as USPAP compliant reports with intended use, users, certifications and pretty much everything in Standard 2.
     
  4. AnonApprsr

    AnonApprsr Elite Member

    0
    Jan 21, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Massachusetts
    I am such an "out-of-state" groupie of yours Brian Weaver *SWOON* and I want you to retire from Illinois and came over to the colonies, come to Massachusetts.
     
  5. Mike Kennedy

    Mike Kennedy Elite Member

    62
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    Ok, I'll stir a bit more: "Complete" Reports at "full fee" based on a SOW which requires one or more "Draft" reports at less than "full fee" subject to client "approval to complete the assignment" inherently create an unacceptable assignment condition i.e. Contingency in violation of the Management Section of the Ethics Rule. "Made as Instructed". :new_smile-l:

    http://www.uspap.org/USPAP/frwrd/ETHICS_RULE.htm
     
  6. Kevin Mc

    Kevin Mc Elite Member

    0
    Jun 7, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    They most certainly did. Legalizing comp checks in my book. In commercial work, draft reports are common. Residential?....com'on.
     
  7. Pittsburgh Pete

    Pittsburgh Pete Elite Member

    36
    May 6, 2008
    Professional Status:
    Certified General Appraiser
    State:
    Pennsylvania
    The only real beef I have with USPAP--it's one size fits all. Commercial and residential, while not signficantly different in the valuation process, have different considerations that USPAP needs to address individually.

    Right now I'm getting set to send out a "draft" rent analysis to an attorney client. I suspect he'll have some issues with portions of the report but I don't anticipate changing much--perhaps factual mistakes additional supporting data requests, etc. It is a fairly common occurence.
     
  8. leelansford

    leelansford Elite Member

    44
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois


    Yeah, 'back-in-the-day' I have to imagine that there were quite a few 'draft reports' (though not so identified) between appraisers and their mortgage broker clients.
     
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