Analysis of sales contract

[Darrel Clark]

At the risk that this topic may have been beaten to death with previous posts – let me ask this question. WHY does USPAP require that we analyze all agreements of sale as of the effective date of the appraisal, if such information is available in the normal course of business? In addition, HUD requires the analysis, without exception. If on the other hand, the appraiser was prohibited from knowing anything about the current agreement of sale, wouldn’t that solve much of the problem of advocacy?

 

[Mike Garrett RAA]

Analyzing the sales contract does not create advocacy. The primary purpose of such analysis to determine if any concessions or personal property is included in the sale. There are those who would say..."knowing the sale or contract price could bias the appraiser"...and they could be right.

 

[Mr Rex]

USPAP requires the analysis of the contract under the assumption that an appraiser will adhere to all USPAP requirements including all of the Ethics Rule.

 

[Darrel Clark]

Mike,
Our appraisal should not include any personal property, so why do we need to know about it unless it affects market value. Same with concessions -- do they affect market value??

 

[TJSum]

Analyzing the sales contract does not create advocacy. The primary purpose of such analysis to determine if any concessions or personal property is included in the sale. There are those who would say..."knowing the sale or contract price could bias the appraiser"...and they could be right.

Wouldn't there be similar bias concerns after checking for concessions or personal property? The final value opinion should be the same no matter the contract price, concessions or personal property involved.

 

[Mike Garrett RAA]

See above....because it is a requirement of USPAP. I didn't write it, just adhere to it!

 

[TJSum]

See above....because it is a requirement of USPAP. I didn't write it, just adhere to it!

Agreed. Sometimes on a slow day we like to debate the "why" questions, and try to get a peek behind the curtain...

 

[Smokey Bear]

Because USPAP was written for the lenders, and the lenders can't be bothered with analyzing the contract themselves, so they want us to do it for them, and take on the liability for it as well.

 

[Mike Garrett RAA]

Slow day? Did an inspection this morning, doing a reconsideration on a VA sale...Builder had another sale the agent didn't bother to tell me about and wasn't on MLS. Probably will change my value conclusion.

Received an FHA assignment at 9:00am $375 fee
Received an ERC assignment at 1:00pm $675 fee
Receiving a VA assignment right now $350 fee

Sure is slow around here!

 

[Darrel Clark]

As to the WHY, I see several possible reasons. 1) Sales price and concessions do affect market value. 2) Sales price and concessions may reflect market value. Assuming that the buyer has looked at comparable properties and offered a reasonable price. 3) The authors of the USPAP document want the lenders to make a many deals as possible, but they still want someone to blame if anything goes wrong. This way we have a target value to work towards. 4) Maybe it has always been done that way and they didn’t want a change.

I am not intimating that any of these reasons are correct – just possibilities.

Any other ideas??