Appraisal for the purchase without the purchase contract.

[moh malekpour]

I got an appraisal order for the purchase from a client and when I asked about the purchase contract, I was told there was none. I could do the appraisal and say in the report that the purchase contract was not available but I found out that it was a family transaction and they wanted to get the appraisal value first and based on that appraisal value, they wanted to make their minds about the purchase price. I said I can appraise it for the buyer or the seller if they want to know what is the market value of that property but if it is for the lender, and they haven’t decided what is going to be the purchase price, then I cannot call it an appraisal for loan transaction purpose while they haven’t decided on their purchase price. It is like putting the cart before the horse. By the way the loan agent is also a family member of the buyer and the seller.
I thought it would be better to have a different sow in which the client and intended users would be the buyer or the seller or both of them and. the intended use would be to help them to make a decision on the property market value for the purpose of purchase and after they made their minds base on that appraisal or not, they send me the purchase contract or whatever they have and I would do a new appraisal report with a new SOW with a discount. Is there any other way to do it?

 

[Hal Mann]

I don't understand. In what way does the lack of a contract, or a price even, inhibit the development of an opinion of market value? It seems that all is required is to state that the client has not provided a contract and furthermore, the client is unsure of the price.

On the other hand, appraising the property for the buyer could cause problems for the lender from an appraiser independence standpoint.

 

[Pamela Biggers]

Your intended use is for a mortgage finance transaction. Your client is the lender. The property is being purchased. There is a verbal agreement for purchase: not everthing must be written, though it helps if there is ever any dispute. I don't see ANY problem with SOW. Disclose that the buyer and seller are family witha verbal contract and that the purchase price is to be baised on the appraisal so there is no agreed price at the time of the appraisal. This is not what is considered an arms length transation. Don't complicate this.

What's the difference between someone getting financing baised on your appraisal and someone getting financancing for a purchase baised on your appraisal?

 

[Marcia Langley]

Moh,

I agree with you that the question goes to intended use and intended user.

The LO has informed you that the borrower and/or seller intend to use the appraisal to make a decision on the offering price. I don't see how that fact can be ignored.

This is a little different than ordering a mortgage appraisal for a purchase and refusing to provide the contract.

 

[hastalavista]

Is there any other way to do it?

I think so.
Assignment is for a purchase transaction, purpose and intended use is for mortgage finance, sale price to be finalized after appraisal is complete.
Buyer and seller have entered into the transaction agreement with the final purchase price not finalized as of the effective date of the report.

But, here's where I've run into a practical problem with this type of assignment: After the report is finished, they'll ask me to then put in the purchase price as the appraised value (or, something else, usually lower). To that I say, "no can do". So, were I to get one like this, I'd explain to the clients the potential problem that a lender may have.
I think you leaning toward doing a private-party appraisal first so they can establish the purchase price, and then doing the mortgage finance transaction appraisal second for the lending purpose is logical and makes the most sense from our side of the fence. However, I think it can be done as a purchase appraisal with purchase price not determined as of the effective date. It may not fly, but at least you told them so; and, if it doesn't fly, it isn't an appraisal issue but rather a lender/UW issue.

 

[Tudor]

If the purchase price is going to be whatever you appraise the property for, why not just state that in the report and then put that amount down as the purchase price?

 

[Kevin Mc]

That is what I would do....

If the purchase price is going to be whatever you appraise the property for, why not just state that in the report and then put that amount down as the purchase price?

state that you didn't see the contract, state the pruchase price as the appraised value and thats is it. I'm sure you are going to have to make some changes after the fact(when the lender insists you see the contract) but as long as everything is disclosed(viewing contract after the fact etc....) it should be no problem.

 

[Marcia Langley]

John,

The purchase price is a fact that does not exist until there is a signed contract.

 

[moh malekpour]

I don’t think I said that the lack of purchase contract would inhibit the appraiser from developing the appraisal for the market value. If you read my statement, I said that I could do the appraisal and say that the purchase contract was not available. Problem is that the assignment is to do the appraisal for the purchase and it also has a purchase price. In the URAR form, the assignment type has to be purchase, refinance or other. If I check the purchase box as my assignment shows, then the SOW would be for the intended use of loan transaction for that purchase and the client/intended user would be the lender. But they tell me there is no purchase yet and they want to get the appraisal first to initiate the purchase. It seems to me there are two different intended use and intended users for this assignment. May be I should make my SOW with two intended use and intended users. The first intended user would be the buyer and intended use would be a decision on the purchase price and the second intended user would be the lender and the intended use would be the loan on that purchase contract. I don’t know if that is the correct way to go.
I don’t want to make the client to pay for another appraisal if they don’t have to but I want to know how others do in similar situation. I don’t think this is a difficult case but I think there is a fine line there but I am not sure about it.

 

[Tudor]

Marcia,

True, such a fine line and seems like a waste of time and money to turn this into 2 assignments.

Maybe this is another option that would work and cover all the bases. What if they wrote up a purchase contract that stated the sales price would be the appraised value?