Intended use

[vanguard]

I have used "Value Inquiry" as an intended use on assignments of this type.

 

[CANative]

The purpose of the appraisal is to provide an opinion of market value for the subject property. The intended use is evaluating the subject property as collateral for a proposed loan being considered by a private, third party.

 

[DWiley]

Some thoughts -

(1) How could an appraiser possibly comply with the other obligations in USPAP if the appraiser is identifying an unknown party as an intended user?

The purpose of identifying the intended user is to set the bar for report content. The report must be meaningful and not misleading to the intended users. If the appraiser does not know who the intended users are, how can an appraiser provide report content that is meaningful?

(2) The "intent" part of intended user is the appraiser's intent. The fact that someone intends to use a report does NOT make them an intended user, even if an appraiser knows of their intent.

We run into this almost daily in the residential appraisal world. Many buyers and sellers intend to use appraisal reports done for lenders to satisfy clauses in sales contracts. As appraisers, we know this, but that does not make the buyer/seller an intended user. They are only intended users if they are identified as such in the appraisal report.

In the assignment described, the appraiser is under no obligation to identify the lender as an intended user. A "Private Lender" could mean anything from the owner's uncle who has never made a loan in his life to someone with significant experience. Unless I knew the knowledge level of that private lender, I would NEVER name them as an intended user.

(3) The language issue would be a big consideration for me in the assignment described in the OP. If the client does not speak English, and I don't speak (or write) Spanish, I don't know how I could provide the client an appraisal report with meaningful content.

 

[David Mescon]

I have had numerous similar experiences through the years. It is not unheard of for hard money lenders to ask a borrower to select an appraiser. In most instances, however, I have also been vetted by the lender or the lender's agent prior to my acceptance.

 

[hastalavista]

Danny-

Some questions:

(1) How could an appraiser possibly comply with the other obligations in USPAP if the appraiser is identifying an unknown party as an intended user?

The purpose of identifying the intended user is to set the bar for report content. The report must be meaningful and not misleading to the intended users. If the appraiser does not know who the intended users are, how can an appraiser provide report content that is meaningful?

Cannot the intended user be identified by "type" such as " a lender"?

(2) The "intent" part of intended user is the appraiser's intent. The fact that someone intends to use a report does NOT make them an intended user, even if an appraiser knows of their intent.

We run into this almost daily in the residential appraisal world. Many buyers and sellers intend to use appraisal reports done for lenders to satisfy clauses in sales contracts. As appraisers, we know this, but that does not make the buyer/seller an intended user. They are only intended users if they are identified as such in the appraisal report.

In the assignment described, the appraiser is under no obligation to identify the lender as an intended user. A "Private Lender" could mean anything from the owner's uncle who has never made a loan in his life to someone with significant experience. Unless I knew the knowledge level of that private lender, I would NEVER name them as an intended user.

I understand your point but I wouldn't equate the example of a buyer/seller in a typical purchase transaction to be the same as a borrower/lender in a loan transaction. In the residential world we do run into borrower/lender relationships; and in the residential world for a mortgage finance transaction, the lender is always an intended user (no?).

However, here's the dilemma as I see it:
A client asks the appraiser for an appraisal. The appraiser asks what do you want it for? The client says
"I'm going to get a private money loan; the lender is asking for an appraisal so he can use it to decide how much of a loan to make."

Given the above and considering that the typical John Q. Public does not understand the nuances of intended use or intended user, do you think the appraiser can complete the assignment, given the intended use and the knowledge/wherewithal of the client, without:
A. Stating the private-money lender is an intended user, or
B. Informing the client that the private-money lender is not an intended user of the report (and explaining in plain language what that means).

In my opinion, I don't see how the appraiser can accept the assignment without completing A or B. Because (in my mind) if I don't do A or B how am I promoting the public good by providing something to a non-expert member of the general public that I know (or strongly suspect) conflicts with his reason for asking for the appraisal (having a lender rely upon it to make a lending decision)?

Now if he agrees and understands that "B" choice means that the lender cannot hold me responsible for the content of the report, that's fine.
But in the real world, don't you think the general public client wants the lender to be able to use and rely upon the report? :new_smile-l:

 

[DWiley]

Cannot the intended user be identified by "type" such as " a lender"?

Yes, the intended users may be identified by type. What "type" of lender is a "private lender?" I have no idea what that means.

As I said before, that could be a group of wealthy individuals who make private loans, or it coud be the owner's uncle or 3rd cousin. Without more info, it would not be MY intent for a private lender to use my appraisal report - and I would not name them as an intended user.

...how am I promoting the public good by providing something to a non-expert member of the general public that I know (or strongly suspect) conflicts with his reason for asking for the appraisal (having a lender rely upon it to make a lending decision)?

So you are uneasy about providing the appraisal to John Q. Public. I understand. My question would be - why are you not equally uneasy about providing a report to an unknown party (the private lender)? At least you can talk with the property owner and gauge their level of knowledge. You cannot do that with this unknown private lender. You seem to be assuming a certain level of knowledge or expertise by the "private lender." I would not do that.

Assuming I could overcome the language issue I noted earlier, and assuming I do not know who the private lender is, I would name the owner as the client and the sole intended user. My intended use would be to assist the owner in analyzing his/her current equity postion.

If I say that the lender is an intended user, then I must also identify any assignment conditions that might be attached to such an identification. I could not possibly do that if I don't even know who the lender is or what kind of loan is being contemplated.

 

[hastalavista]

So you are uneasy about providing the appraisal to John Q. Public. I understand. My question would be - why are you not equally uneasy about providinga report to an unknown party (the private lender)? At least you can talk with the property owner and gauge their level of knowledge. You cannot do that with this unknown private lender. You seem to be assuming a certain level of knowledge or expertise by the "private lender." I would not do that.

(my bold)

Because I can describe the client by type and state what the profile of such a lender is. This is effectively the same that is done in the 1004.
But, I think you raise a valid point about obtaining more information about the lender before naming it (specifically or even generally) as an intended user; given your feedback, if I were the appraiser this would cause me to call and contact the specific "private party" to find determine what their lending-competence was.

I'm still uncomfortable with providing a service to the general public (m client) when I'm not confident the client is receiving what it really wants or needs. I'd rather decline the assignment than complete something that was not meaningful or useful.

I think this is an excellent question to ask John Brennan (not that your comments don't carry considerable weight; they do! :new_smile-l. But, I'll wait until after St. Patty's day to do so. :laugh:

 

[Vetteman]

The purpose of the appraisal is to provide an opinion of market value for the subject property. The intended use is evaluating the subject property as collateral for a proposed loan being considered by a private, third party.

Greg
I agree with your wording for intended use. It mentions that there may (or may not?) be a private, third party involved. The way I look at it, the as yet identified third party should have ordered the appraisal. By not doing so, they have relinquished any rights as a client/potential user and are relying upon the borrower to obtain the report. By the way, during the inspection I was informed the third party lender wants "either a 1004 or a 2055 Desktop Underwriter." Because they mention FNMA forms, do you suppose this private lender wants the Market Conditions Addendum as well? Guess what, ex post facto that will be an additional charge. Re-assign the report to the "lender" at a later date? No way, order a new appraisal...pricing subject to any discounts in effect at the time.

 

[hastalavista]

Greg
I agree with your wording for intended use. It mentions that there may (or may not?) be a private, third party involved. The way I look at it, the as yet identified third party should have ordered the appraisal. By not doing so, they have relinquished any rights as a client/potential user and are relying upon the borrower to obtain the report. By the way, during the inspection I was informed the third party lender wants "either a 1004 or a 2055 Desktop Underwriter." Because they mention FNMA forms, do you suppose this private lender wants the Market Conditions Addendum as well? Guess what, ex post facto that will be an additional charge. Re-assign the report to the "lender" at a later date? No way, order a new appraisal...pricing subject to any discounts in effect at the time.

Vetteman-

You may want to take the rest of my comments with a grain of salt (since D. Wiley and I see things differently and I'd rely on his view vs. mine without any other back-up) but now it sounds like the private investor has just stepped-up in its level of sophistication.

BTW, I have worked for private investors (hard-money lenders) before and they require the appraisal report to conform to GSE standards. But, the difference is the private-lenders I work for always pick the appraiser.

 

[DWiley]

I think this is an excellent question to ask John Brennan (not that your comments don't carry considerable weight; they do! :new_smile-l.

This topic sparked many a spirited debate during my ASB days.

If you contact JB it should not take long for him to respond. The answer is presented very clearly in the response to FAQ 100.

Have a good evening