Appraisal for the purchase without the purchase contract.

[hastalavista]

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.

Moh-

This is a little different from what I read in your original post, which was

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.

At first, they had a purchase agreement but no price. Now, they are not sure if they are going to purchase the property or not. This is a difference with a distinction.

IMO, if they have the intent to purchase the property and need an appraisal for a mortgage finance loan, then I stand by my first post's suggestions- the only atypical thing in this assignment is that the purchase price isn't agreed to prior to the appraisal.
If they are not sure they want to buy the property to begin with, then I agree with you in that they are putting the cart before the horse.

 

[Marcia Langley]

Moh,

I think Denis made a good suggestion:

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.

You could ask the client if an appraisal that states "the purchace price and final signed contract were not in effect as of the effective date of the appraisal" will be acceptable to them and impress upon them the fact that it could not be added later.

This may change their mind about the assignment conditions.

 

[moh malekpour]

Moh,

I think Denis made a good suggestion:



You could ask the client if an appraisal that states "the purchace price and final signed contract were not in effect as of the effective date of the appraisal" will be acceptable to them and impress upon them the fact that it could not be added later.

This may change their mind about the assignment conditions.

I agree with you guys. I guess, I need to contact my client and clear things out. I think they have already decided to purchase but undecided about the price. It is hard to read poepl's intention. I just don't want them to pay extra for something that they don't need. I have already told them about the possibility of two appraisals and they don't mind but I don't like to do two if it is not needed.
It seems that there is not going to be a typical purchase contract. They may sign a hand written contract and take it to the escrow company or they just walk in there and ask the agent to draw the escrow instruction. I usually get the escrow instruction as a signed and valid contract in situation like FSBOS but in this situation if they agreed with what Denis is suggesting, that contract would be available after the appraisal is done and delivered. I am not sure, if the lender is going to ask me to review the contract after the fact that the appraisal is done but I am going to tell my client in advance that I am not going to change anything after they got the appraisal.

 

[Mister Ed]

Moh,

I think Denis made a good suggestion:



You could ask the client if an appraisal that states "the purchace price and final signed contract were not in effect as of the effective date of the appraisal" will be acceptable to them and impress upon them the fact that it could not be added later.

This may change their mind about the assignment conditions.

I do agree that the original appraisal cannot be changed after the fact to reflect a changed to the purchase price (in this case change from "We have not decided" to "$xx,zzz).

In cases like this, I have a boilerplate piece that I keep in a MS Word doc file that reads (I fill in the blanks after I paste it onto a new addendum attached to the end of the original appraisal report):

After completion and delivery of this appraisal report, this appraiser was notified by the client of a change in the purchase agreement price.

The purchase agreement price as of the effective date of this appraisal report is $-----.

The amended purchase agreement (dated -----) indicates that the new purchase price is $-----.

No other changes have been made to the original report than the addition of this addendum and the new signature date for this report.

I paste this onto a blank addendum page that has a signature block. When I create the PDF, that page is signed. I have never had a problem with this from a lender point of view.

I do agree that this change of purchase price has no bearing on the original appraisal report and do not understand why a lender needs me to acknowledge the change. I will do it this way as one of those "service after the sale" things. It keeps goodwill with my banking clients strong.

Since I created that simple template, it takes maybe 5 minutes of my time. Also, it happens in probably 1 out of 50 of the purchase appraisals I perform. There is no skin off my nose for that little bit of time.

Just my thoughts on the subject. YMMV

-ed-

 

[Frederick R. Ruffell]

ED,

Yup that is what I do, but I like you short and sweet Verbage. May I use it ?

 

[jdbiggers]

Don't involve yourself in the transaction. If no contract exists: state so. If they are relying upon your appraisal to determine a contract price, they do so at their own risk.

YOUR INTENDED USE IS FOR FINANCING PURPOSES, not determining the purchase price AND, since you state this, all other users, even those covered under item 23, should not rely upon it for any other purpose and they may, in fact, be violating your intellectual property by doing so.

If you can get them to admit the buyer and seller are also going to use your appriasal to determine purchase price, record it and demand a second fee for the additional unauthorized use.

Clearly state in the appraiser the intended use (if using the new FNMA form, it MUST only be for financing purposes, the "other" box is also to refer to other types of financing decisions, including PMI removal and partial lien releases) and CLEARLY STATE that the appraisal is NOT intended to be used to determine a purchase price.

State that at the time of the appriasal, no formal contract exists between the buyer and seller and, as such, no contract can bve anlayzed.

JD

JD

 

[moh malekpour]

Ed,
Your point is about the purchase price as of the date of appraisal and the new purchase price after the delivery of the appraisal. In my situation, there hasn't been a purchase price or purchase contract as of the date of appraisal. The purchase price is to be determined after the delivery of the appraisal but the assignment is for the purchase and the sales price is only tentative but not decided yet as there is no contract nor the meeting of the minds yet.

 

[Mister Ed]

Frederick,

Feel free to borrow anything that I post if you believe it can help you.

Moh,

I understand your situation. I have been there a time or two.

I would appraise the property to MV for lending purposes as hired by my client. Within that I would:

1. State that no formal purchase agreement had been written as of the effective date of the appraisal.
2. State that no purchase price has been agreed upon as of the effective date of the appraisal.
3. I have a strong statement in my Scope of Work addendum concerning the intended use and inherent dangers of trying to apply the appraisal for other uses. I would leave it where it is in the SOW and copy/paste it to the Additional Comments Section of the URAR and make it bold print.
4. If they wish to set the purchase price based on the results of my report, they can and will (whether I like it or not). I will remind my client that such is not an intended use of the appraisal report and that such uses are disclaimed within the report.
5. Finally, I will deliver the completed report.

What I shared with this thread earlier is how I would handle the request to "change" the contract price when that comes back later. Sorry if I was not clear on that.

Oh yeah... for using that form, the price as of the effective date of the report would be listed as "undetermined." I would put that in the purchase price section of the URAR as well. I would then, of course, have to explain (I use that Additional Comments section on page 3 of URAR) why "undetermined" is in that box.

Yes, USPAP says that we have to analye any known contracts (SR1-2(e)(iii). You know that there is not a contract as of the time of inspection. Document your knowledge of this fact for your workfile, and, in my opinion (as humble as it may or may not be), you are in compliance with USPAP.

 

[Beth Stevens]

Once upon a time, I included the following in a report in my Text Addendum, where my client was pulling the same stunt. In all honesty, I've learned a lot since then and I would probably be a little "feistier" now in the way I stated it. My client was a federally-insured financial institution, and I expected them to call me and gripe, but they never said a word and the purchase went through. I fully disclosed the situation as it was, so I think I covered my behind. I would love to hear from anyone that thinks this was a really BAD idea, or if you've done something similar. Best of luck!!


The property being appraised is known to be the subject of a pending Purchase and Sale Agreement, but the appraiser was not provided with the agreement for analysis. Therefore, the appraiser can not verify that the sales price reported by the client is accurate, or that the current property owner is the seller. The appraiser also has no method with which to identify any sales concessions which may be included in the pending agreement, and is unable to provide comment in the appropriate portion of the attached appraisal report form.

 

[Mike Kennedy]

"never the twain shall meet"........ based on original posting ....

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.

Assignment at hand - Private Party Client - to establish a potential Offer/"purchase price". Do NOT use FANNIE FORM.

Stipulate in advance, and in writing IN THE SCOPE of the report.......the ONLY intended use (above)......and the ONLY CLIENT (party/parties who ordered the PRIVATE appraisal).

Should they come to terms.............and wish to pursue Lender Financing...........the LENDER must order the Appraisal.........

do not mix apples with oranges.