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  #1  
Old 06-02-2011, 12:31 PM
PL1957 PL1957 is offline
 
Join Date: Jul 2004
State: Illinois
Professional Status: Certified General Appraiser
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Default Draft Reports

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.
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Old 06-02-2011, 10:06 PM
Brian Weaver Brian Weaver is offline
 
Join Date: Apr 2005
Location: Chicago area
State: Illinois
Professional Status: Gvmt Agency, FNMA, HUD, VA etc.
Posts: 2,516
Default

Just trying to stir some discussion and get the ASB to put some real thought into the communication aspect of reporting.
  #3  
Old 06-03-2011, 03:04 AM
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Marion Rhodes Marion Rhodes is offline
 
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Location: Poconos
State: Pennsylvania
Professional Status: Certified General Appraiser
Posts: 11,270
Default

Quote:
Just trying to stir some discussion and get the ASB to put some real thought into the communication aspect of reporting.
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  
Old 06-03-2011, 04:12 AM
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AnonApprsr AnonApprsr is offline
 
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State: Massachusetts
Professional Status: Certified Residential Appraiser
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Default

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.
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  #5  
Old 06-03-2011, 07:33 AM
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Mike Kennedy Mike Kennedy is offline
 
Join Date: Sep 2003
Location: Southern Hudson Valley
State: New York
Professional Status: Certified Residential Appraiser
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Quote:
Originally Posted by Brian Weaver View Post
Just trying to stir some discussion and get the ASB to put some real thought into the communication aspect of reporting.
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".

http://www.uspap.org/USPAP/frwrd/ETHICS_RULE.htm
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  #6  
Old 06-03-2011, 08:59 AM
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Kevin Mc Kevin Mc is offline
 
Join Date: Jun 2004
Location: Metropolis
State: New York
Professional Status: Certified Residential Appraiser
Posts: 9,638
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Quote:
Originally Posted by Marion Rhodes View Post
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.
They most certainly did. Legalizing comp checks in my book. In commercial work, draft reports are common. Residential?....com'on.
  #7  
Old 06-03-2011, 09:10 AM
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Pittsburgh Pete Pittsburgh Pete is offline
 
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State: Pennsylvania
Professional Status: Certified General Appraiser
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Quote:
Originally Posted by Kevin Mc View Post
They most certainly did. Legalizing comp checks in my book. In commercial work, draft reports are common. Residential?....com'on.
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.
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  #8  
Old 06-03-2011, 09:41 AM
leelansford leelansford is offline
 
Join Date: Mar 2002
State: Illinois
Professional Status: Certified Residential Appraiser
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Quote:
Originally Posted by Kevin Mc View Post
They most certainly did. Legalizing comp checks in my book. In commercial work, draft reports are common. Residential?....com'on.


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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