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  #1  
Old 07-24-2007, 05:50 PM
leelansford leelansford is offline
 
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Default "Analyzing the Contract of Sale"

Many months ago I offered a question to the ASB regarding a clarification as to what is understood as the appraiser's responsibility for "analyzing" the contract of sale (for the Subject property).

Today I received the July 2007 "USPAP Q&A" and the question and response are presented (other questions have to do with Workfile retention and access).

My initial reaction to the answer provided was "this is r-e-a-l vague!". But, after thinking about it a bit more, I conclude that the response is appropriate.

Without repeating everything here, the response includes the acknowledgement that "analyze" does not have a special meaning within the USPAP and that it is a common term as defined in dictionaries.
OK.

Following, the response points out that the "analysis" is a part of the Scope of Work decision making process.
OK. Makes sense to me.

My thoughts:

I can tell you right now that if you enter into discussion with clients (and other Intended Users) as to what they expect of the "analysis", you will receive a blank stare (if done face-to-face).

I believe that it would NOT be ordinary for an appraiser to enter into an analysis that has to do with opinions that cross-over from the legitimate sphere of the appraiser to that of a lawyer (i.e., offering legal opinions).

I believe that the appraiser has to report and "analyze" (here we go again) anything contained in the appraisal that is out of the ordinary.

I believe that there should be reporting and analysis regarding non-realty items included in the contract of sale.

Concessions? This should be fairly obvious.

Named Seller and owner per public record source: This, too, should be fairly routine.

I believe that the appraiser must offer some comment in the report of the appraisal as to exactly what the appraiser has considered to be within the legitimate realm of the "analysis" of the contract of sale.

Other thoughts? I know that there was a long and recent string of discussion on this topic. I offered a couple of postings specific to "let's wait to hear from the ASB" because I was aware that the ASB was addressing this matter.
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Last edited by leelansford : 07-24-2007 at 05:53 PM.
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  #2  
Old 07-24-2007, 08:56 PM
Mike Kennedy's Avatar
Mike Kennedy Mike Kennedy is offline
 
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Default

lee - the "blank stare" is assuredly a physical reaction to the ONLY thought running through the clients' mind "you mean you REALLLLLY don't understand you are to hit the number when we give it to you? you ARE kidding aren't you ???"

USPAP SR2-2 (a)(vii) "
When reporting an opinion of market value, a summary of the results of analyzing the subject sales, options, and listings in accordance with Standards Rule 1-5 is required.

If such information is unobtainable, a statement on the efforts undertaken by the appraiser to obtain the information is required.

*** If such information is irrelevant, a statement acknowledging the existence of the information and citing its LACK OF RELEVANCE is required.

THE ** clearly demonstrates the only reason for the Review/Analysis Requirement is to ensure an Appraiser hits "the number".
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Last edited by Mike Kennedy : 07-24-2007 at 09:10 PM.
  #3  
Old 07-24-2007, 08:58 PM
Carol Ames Carol Ames is offline
 
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Default

Lee

Just my thoughts. From what I have learned this analysis they are asking us to do is basically to determine what the buyer is actually paying after what the seller is "contributing". One thing I learned from a former associate of mine was a cya comment stating basically "I have received from (lender, Realtor, etc) a copy of the purchase agreement which was (# of pages)". The theory is you received a purchase agreement of 12 pages. Oh my they "forgot" to send page 13 which was an addendum that states the seller concessions.
  #4  
Old 07-24-2007, 09:57 PM
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Joyce Potts Joyce Potts is online now
 
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Until concessions, discounts, incentives and the like are verifiable by an independent, third-party, there is NO WAY you can make that determination with a high degree of certainty, IMO.

When appraisers are being asked to 'analyze' the contract, that has nothing to do with the 'legal aspects' of the contract.

Until that time, cite the facts, cite the information you obtain by talking to certain people and then caveat your 'analysis' given the limitations.
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  #5  
Old 07-24-2007, 10:18 PM
xm72mhd xm72mhd is offline
 
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Quote:
Originally Posted by Joyce Potts View Post
Until that time, cite the facts, cite the information you obtain by talking to certain people and then caveat your 'analysis' given the limitations.
I'd go with that. I've asked Lee to post the ASB answer since it isn't on the Foundation site yet. I'm taking some liberties here because I haven't seen what they said, but the part about USPAP embodying the ordinary meaning of analysis bothers me when they apply it to contract.

Read the ordinary meanings of analysis and tell me which one of them precludes arriving at conclusions or meanings. USPAP seems to mean the appraiser should examine the document and then report the relevant portions. Why, we are not told, but I think that is all that is expected.

That seems to be what Lee says is being said, or am I taking unwarranted liberties? I can't figure out what else they want or why. Notwithstanding the usefulness if the subject becomes a comp. That I understand, but that doesn't seem to be the USPAP goal, but then I don't know what the goal is, do I?

Anybody think this is babbel all over again?
  #6  
Old 07-25-2007, 09:15 AM
leelansford leelansford is offline
 
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Default USPAP Q&A, July 2007

"QUESTION: I understand that Standards Rule 1-5(a) requires the appraiser to analyze an agreement of sale (if available in the normal course of business). What constitutes proper 'analysis'?

RESPONSE: The term 'analyze' is not defined in USPAP because it does not have a special meaning within the document or in Standards Rule 1-5. The term is used based on its English language meaining as found in common dictionaries.
The extent of the analysis performed to comply with the requirements of Standards Rule 1-5(a) is part of the scope of work decision. The acceptability of the appraiser's analysis is judged in the same way that any scope of work decision is judged. For more information, please see the SCOPE OF WORK RULE, Advisory Opinion 28, 'Scope of Work Decision, Performance, and Disclosure', and Advisory Opinion 29, 'An Acceptable Scope of Work'."

That's it!
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  #7  
Old 07-25-2007, 09:34 AM
Restrain Restrain is offline
 
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True life example why an examination of the contract is warranted. Wife got an appraisal order, $XXXXXX sale price. After much hemming and hawing, finally got a copy of the contract. Hidden in the contract was an $80,000 kickback from the seller to the buyer.
  #8  
Old 07-25-2007, 01:19 PM
Mike Kennedy's Avatar
Mike Kennedy Mike Kennedy is offline
 
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Quote:
Originally Posted by RStrahan View Post
True life example why an examination of the contract is warranted. Wife got an appraisal order, $XXXXXX sale price. After much hemming and hawing, finally got a copy of the contract. Hidden in the contract was an $80,000 kickback from the seller to the buyer.
__________________________________________________ ___________
WHICH has absolutely no bearing on the markets' indication of MARKET Value. It is an UW concern. Whether a contract exists or not - Market Value is what Market Value is.
__________________________________________________ ___________

USPAP DEFINITION:
PRICE: the amount asked, offered, or paid for a property.
Comment: Once stated, price is a fact, whether it is publicly disclosed or retained in private. Because of the financial capabilities, motivations, or special interests of a given buyer or seller, the price paid for a property may or may not have any relation to the value that might be ascribed to that property by others.
__________________________________________________ ____________
One Buyer, One Seller, One Contract, One Price do not demonstrate the local Market. The Market does.
__________________________________________________ ____________

Standards Rule 1-2
In developing a real property appraisal, an appraiser must:
(a) identify the client and other intended users; 5
(b) identify the intended use of the appraisers opinions and conclusions; 6

***
Comment: An appraiser must not allow the intended use of an assignment or a clients objectives to cause the assignment results to be biased.
----------------------------------------------------------------------

AO-22
"General Comment on Market Value Definitions

Market value appraisals are distinct from appraisals using other types of value because market value appraisals are based on a market perspective and on a normal or typical premise. These criteria are illustrated in the following definition of Market Value*, provided here only as an example.

Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
  1. buyer and seller are typically motivated; both parties are well informed or well advised and acting in what they consider their own best interests;
    1. a reasonable time is allowed for exposure in the open market;
    2. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
    3. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
* This example definition is from regulations published by federal regulatory agencies pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989 between July 5, 1990, and August 24, 1990, by the Federal Reserve System (FRS), National Credit Union Administration (NCUA), Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), and the Office of Comptroller of the Currency (OCC). This definition is also referenced in regulations jointly published by the OCC, OTS, FRS, and FDIC on June 7, 1994, and in the Interagency Appraisal and Evaluation Guidelines, dated October 27, 1994.
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Last edited by Mike Kennedy : 07-25-2007 at 01:36 PM.
  #9  
Old 07-25-2007, 02:17 PM
leelansford leelansford is offline
 
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Quote:
Originally Posted by RStrahan View Post
True life example why an examination of the contract is warranted. Wife got an appraisal order, $XXXXXX sale price. After much hemming and hawing, finally got a copy of the contract. Hidden in the contract was an $80,000 kickback from the seller to the buyer.
And, guessing that the opinon of value may be lower than the contract price, this reporting and "analysis" will provide some incite as to why there may be a difference between the two numbers.
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  #10  
Old 07-25-2007, 06:34 PM
sunnycal sunnycal is offline
 
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Default

Quote:
Originally Posted by RStrahan View Post
True life example why an examination of the contract is warranted. Wife got an appraisal order, $XXXXXX sale price. After much hemming and hawing, finally got a copy of the contract. Hidden in the contract was an $80,000 kickback from the seller to the buyer.
Regardless of what Mike thinks it helps keep things honest, helps the appraiser explain a discrepancy between the sales price and what the actual market value is and it helps the appraiser make sense of what would otherwise be conflicting market data. Despite all the differences of opinion on here I for one like having access to the information.
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